By Paul Davies, Bridget Reineking, and Andrew Westgate

China has issued numerous green policies in an effort to support President Xi’s signature “One Belt, One Road” initiative, which aims to mitigate environmental and social risks arising from China’s overseas lending. Although few of these policies are legally binding, they reflect China’s heightened focus on environmental issues, both at home and abroad. However, given China’s increasing number of foreign direct investments over the last few years, more legally binding obligations may be necessary to better address resulting environmental and social risks.

China’s Green Credit Directive (GCD) is an instructive example. The GCD urges banks to “effectively identify, measure, monitor and control environmental and social risks associated with their credit activities”. Furthermore, the GCD recommends that funds be suspended or terminated if “major risks or hazards are identified”. As Latham has previously written, policies such as these demonstrate that Chinese leadership is taking steps to prioritise environmental, social, and governance impacts of their country’s investments overseas.