The World Bank Directors have approved a loan of $300 million for China to foster green agriculture investments, development of standards, and technological innovation in Henan Province.
“This project will support the development of a green agriculture financing mechanism that can leverage commercial investments and boost the adoption of innovative technologies. It will help China fill the gap in green financing standards and generate useful lessons for other parts of China and increase the quality and safety of agricultural food products,” said Martin Raiser, World Bank country director for China.
“This project has a strong focus on promoting global public goods. Through this project, both China and the world will benefit from reduced agricultural pollution and emissions.”
China’s agricultural sector accounts for about 14% of global agriculture-related greenhouse gas (GHG) emissions and is a major source of two highly potent GHGs: methane and nitrous oxide.
The level of green financing in China is low due to a general reluctance of financial sector institutions to finance agriculture investments, which are perceived to be of high risk and relatively low return.
Lack of clear green finance standards has also been an obstacle to developing the market and attracting investments.
The Henan Green Agriculture Fund (GAF) Project will support the establishment of a dedicated investment facility to demonstrate the viability of financing green agriculture investments by providing financing for equity investments and on-lending to eligible firms.
Henan is a major agricultural province with some of the highest output of livestock and grains in China.
At the same time, agriculture has a significant environmental footprint. For example, Henan is the largest consumer of chemical fertilizers and the second largest consumer of pesticides in the country.
Qualifying projects for the green finance
The GAF will finance green agriculture projects, which are defined as those that achieve more resource-efficiency and environmental sustainability, are climate-smart, and increase the quality and safety of agri-food produce.
Financing could go towards green inputs and equipment production, reduction and elimination of chemical fertilizer, pesticide and plastic use through good agriculture practices;
- investments in technologies and practices that reduce GHG emissions and nutrients run-off;
- investments in improving energy and water resource use;
- and investments in reducing food loss and waste.
Seventy-five percent of the project’s activities are expected to provide direct climate co-benefits.
The project will foster the development of green agriculture financing standards based on globally accepted green investment principles, good practices and performance benchmarks, as applicable to China’s agriculture sector.
These would cover such areas as identification of green agriculture investments, improved processes for project evaluation and selection, management of social and environment risks, and measurement and reporting of environmental benefits based on scientific evidence, transparency and accountability.
The project will be implemented by the Henan Agriculture Development Fund Investment Corporation, which will serve as the fund manager and investor.
About 60 small and medium enterprises (SMEs) in the agriculture sector are expected to receive financing through the GAF.
The project should also have a catalysing impact by directly and indirectly mobilising public and private funds to support green agriculture investments by these SMEs.