Chinese banking policy may invalidate Chinese loans made to Australian coal projects

Australian coal projects in the Great Barrier Reef may be in violation of a Chinese banking policy that obligates Chinese banks to assess environmental risks and to also suspend, or even terminate, loans to clients when major hazards are identified. The coal projects receive major financing from eight Chinese banks, and our friends at Market Forces and BankTrack have already denounced them as a potential environmental disaster in part because of the Great Barrier Reef’s status as a World Heritage Site.  

This is the first time that Chinese banks are being held accountable to the banking policy, the Green Credit Policy, since it was upgraded to a directive last year.

Given the severe environmental impacts, Market Forces and BankTrack have reached out to Chinese banks and inquired what steps Chinese banks have taken to implement or apply the Chinese banking policy to these projects. In the letter, Chinese banks are notified of how the coal projects would destroy the region’s fragile reef system, accelerate climate change, and transform the region into a toxic coal shipping route. Unfortunately, Chinese banks have not yet issued a response to these environmental concerns.

Not only are these projects a bad deal for the planet, they are also a really bad financial deal. Adani and GVK, the two companies which were given loans by Chinese banks, have been struggling to meet their fiscal goals over the past year. Most recently, Adani’s stock prices have plunged in the past six months, and an energy and economic think tank has even called GVK projects as “stranded in the valley of death.” Should these projects go through, the project may also leave the Great Barrier Reef stranded in its own valley of death by decimating coral and marine life while simultaneously contributing to the continuing global emergency that is climate change.

Given the international trend towards transitioning off coal, the dirtiest of all fossil fuels, it is embarrassing for Chinese banks to be operating under a double standard since China is one of the few countries in the world with innovative, green finance policies like the Green Credit Directive. Within China, domestic authorities are continuing to crack down on environmental hazards and integrating more ways of incentivizing environmental protection among corporations. Without strong regulation from China’s banking regulatory agency, however, Chinese banks, especially when investing overseas, jeopardize much needed efforts to set higher standards for sustainable development and environmental safeguards.