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June 10, 2013

In China, Worsening Pollution or Sustainable Development?
    by Robert Kropp

The 2013 report by the China Greentech Initiative warns that despite increasing investment in cleantech, China continues to be plagued by severe environmental problems. -- China's 12th Five-Year Plan gained international notice by establishing the nation's first binding emissions reduction goals. The recently published China Greentech Report 2013, summarizing the target as reducing carbon intensity to 17% below 2010 levels by 2015, states, "The government is trying to meet these targets through investments in solar, wind, coal, oil and hydro power generation."

However, "Despite its ambitious targets, at the start of 2013, China remains the largest emitter of greenhouse gases, consumes more coal than the rest of the countries of the world combined and is contending with continuing incidents of severe pollution," the report continues. "A new approach is needed to accelerate progress and transition to a more sustainable model of development."

Nevertheless, the China Greentech Initiative (CGTI) finds transformational opportunities for a new approach to sustainability, by combining the emissions reduction targets of the 12th Five-Year Plan with "collaboration along energy value chains to accelerate deployment of cleaner technologies and enhance energy efficiency." The report makes the following recommendations:
Meet or exceed non-fossil fuel targets;
Leverage shale gas resources and global expertise;
Promote efficient energy use;
Accelerate development of a smarter grid; and
Encourage innovation and transparency across energy value chains.

Aware of the fact that in 2012, emerging markets made up more than half of the global gross domestic product (GDP) for the first time, global investors have signed onto an Investor Statement on Sustainability Reporting in Emerging Markets, which calls for "robust sustainability reporting" that "will be correspondingly rewarded by the market." The China Greentech Report devotes a significant portion of its 148 pages to the issue of corporate social responsibility (CSR), observing that risk management is of especial importance since China mandated last year that all government-owned enterprises produce sustainability reports.

A 2012 survey of investors by EIRIS found that the majority of investors in emerging markets focus on Chinese companies, and not only because of the size of the nation's economy; investor confidence has been bolstered by greater attention to sustainability issues by China, as well as the changes to listing rules that encourage better environmental, social, and corporate governance (ESG) disclosure by companies.

And in its final report, the Emerging Markets Disclosure Project (EMDP) of US SIF: The Forum for Sustainable and Responsible Investment observed that global awareness of corporate sustainability reporting in emerging markets had grown considerably since the Project's launch in 2008.

Additional primary drivers for the uptake of sustainability by companies in China are cost reduction and revenue growth, the China Greentech Report continues.

"Investors, in particular global investors, are now frequently taking a company's sustainability strategy into account when making investment decisions," the report adds.

"If China is to achieve its aim of reducing the environmental impact of rapid development, companies must play their part," the report concludes. "Striking the right balance between economic, social and environmental interests is likely to become an increasing preoccupation for China's leadership, citizens and businesses."

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