Is there any future for Green Finance in China?

Abstract

The rising awareness of sustainable issues and the pressing urgency to solve environmental-related problems (e.g. climate change) over the years has set in the capital market a new global trend: the pursuit of sustainable development represents internationally the ultimate goal of governments, institutions, companies and consumers, all jointly contributing to the transition towards a low-carbon and more inclusive economy. The paper aims at verifying to what extent the incorporation of more sustainable measures can influence Chinese companies’ performance and whether it may have positive impacts on it. Starting from an international overview, the first chapter will concentrate on the challenges that society is currently facing, regarding particularly climate change, the different initiatives launched, and the relative reactions of the main players involved in fostering sustainability. The chapter will further examine finance’s role in sustainable development, the gradual evolution towards it and the obstacles holding back the adoption of sustainable measures, eventually ending with the analysis of stock exchanges involvement and the ESG disclosure requirements included in their listing rules. Moving to a closer perspective, the second chapter will discuss China’s contribution to green policies: the chapter will mainly focus on the impacts that environmental issues exert on the world’s second-largest economy and one of the world’s most polluted country, further concentrating on government intervention and engagement in both international and local initiatives, ending with the examination of the effects of these policies on other actors. The examination will continue with the analysis of the country’s engagement in fostering Green Finance and will particularly discuss the role that the collaboration among mainland China (Shanghai and Shenzhen) and Hong Kong Stock Exchanges have in boosting green finance through the disclosure required to the listed companies. The paper will finally compare the efforts made by Chinese listed companies in the Hong Kong Stock Exchange, to assess to what extent the internalisation of environmental externalities impact companies’ financial performance.