The View | How China’s new complaints procedures can prevent ‘green’ ESG investments from harming local communities
- Guidelines now require Chinese banks and insurers to set up grievance mechanisms, which will allow affected communities to speak up – and investors to better address their risks
On June 1, Beijing issued green finance guidelines for Chinese financial institutions. Notably, Chinese banks and insurers are asked, for the first time, to establish grievance mechanisms to manage clients’ environmental, social and corporate governance (ESG) risks.
Increasingly, investors are adopting grievance mechanisms to help them understand the impact and prevent harm, as a response to the pressure to show ESG integrity, and because certain industry standards now require them.
The green finance guidelines issued by the China Banking and Insurance Regulatory Commission (CBIRC) are the latest to require grievance mechanisms that offer a channel for communities to be heard, and for investors to effectively address risks.
Most international development finance institutions have such mechanisms in place; 113 financial institutions receiving money from the Green Climate Fund are required to have them, and multiple impact management and measurement standards herald the importance of these mechanisms.
Recently, ANZ became the first commercial bank to set up a grievance mechanism for communities, after long and costly disputes arising from a project it financed in Cambodia.
