This content is from: Portfolio

China’s Green Powerhouse is Going Global

Everbright International is embracing China’s global infrastructure plan by investing in the environment.

  • Allen T. Cheng

When Chinese President Xi Jinping announced the “One Belt, One Road” infrastructure initiative a few years ago, many chief executive officers leaped into emerging markets to build transport links connecting China with Central Asia and Europe. The CEO of China Everbright International is taking a different tack.

Instead of railroads and highways, Chen Xiaoping is building waste-treatment centers in China and offshore, while investing in green technology and projects supporting a clean environment.

Everbright International — the Hong Kong-listed unit of state-controlled industrial and financial conglomerate China Everbright Group — invested about 9 billion yuan ($1.4 billion) in 21 new projects during the first six months of the year, according to its earnings report last month.

The firm is at the vanguard of the Chinese government’s environmental clean-up effort, which includes moving away from power plants fueled by dirty coal in favor of renewable energy. The nation’s infrastructure strategy gives Everbright International a “large global remit,” Chen said in an interview in Hong Kong, adding that 70 percent of the world’s population lives in emerging and frontier markets that have a huge need for environmental investments.

“Many of these markets are just gaining environmental consciousness,” he said. “Our job is to strengthen that consciousness wherever we may go.”

Everbright International’s portfolio held $95 billion of assets tied to 236 environmental projects at the end of June, only three of which were offshore. The assets consisted of energy plants fueled by waste, methane, wind, solar and biomass, as well as centers treating sludge, waste water and hazardous waste.

While the new projects backed by the firm during the first half of 2017 were all in China, Chen said he’s eyeing possible investments abroad.

Last year, Everbright International announced it invested $47 million in a waste-to-energy project in Vietnam. The firm also completed its purchase of Novago sp. z o.o, a solid waste treatment company in Poland, for €123 million ($147 million) in 2016.

Chen invited Geoffrey Hamilton, the chief of public-private partnerships at the United Nations Economic Commission for Europe, to visit the firm’s waste-to-energy project in Nanjing, China last year. Hamilton then asked Chen to lead the development of the UN’s standards for public-private partnerships for waste-to-energy projects, and help promote its sustainable development goals.

“We are strengthening our ties with markets around the world — we are sharing our experience with others,” Chen said. “Through international cooperation we can discover new markets and new opportunities globally.”

[II Deep Dive: China Updates the Silk Road]

Will Oulton, the global head of responsible investment at Australia’s First State Investments, said fund managers increasingly want to invest in companies that provide green technology and operate in a sustainable manner. He said their interest is due in part to asset owners’ desire to invest with firms that help meet the UN’s goals for sustainable development.

“In the future, we believe that it will not enough to say your fund performance was X percent relative to a benchmark,” said Oulton, who is based in London. “You must think about how to measure and disclose the social and environmental performance and outcomes of companies in investment portfolios. The UN sustainable development goals provide a useful framework for addressing this.”

Everbright International is reaching out to universities to stay on top of cutting-edge, green-tech research and development.

For the past six years, Chen has engaged Beijing-based Tsinghua University — China’s equivalent to the Massachusetts Institute of Technology — to help train the firm’s senior management staff. He also has been working with Zhejiang University in Hangzhou, the hometown of Chinese e-commerce giant Alibaba Group, to train Everbright International’s senior engineers.

“No matter how much ability I have I cannot manage 230 projects,” Chen says. “You need a huge team to manage 230 projects. You need an enterprising system, you need technology, and most importantly you need a lot of talent.”

With 8,000 staff and more than 400 senior managers, Chen is well-equipped.

“The key is whether you can grasp the opportunity and that depends on your skills and your team,” Chen said. “You have to understand the government policy, and you have to move quickly as the markets and policy environment is adjusting as the world is in the midst of a major transition.”

China’s National Energy Commission said in January that the country planned to invest 2.5 trillion yuan into renewable power generation by 2020, according to a Reuters report at the time.

Chen and his senior engineering team began collaborating last year with Columbia University in New York to develop a set of waste-to-energy standards that will become part of the World Bank’s investment guidelines for green-energy projects.

“Our future is not only in China,” Chen said. “I tell our staff going out is the key strategy for us. In the future, we may invest in Southeast Asia, South Asia as well as Central Asia.”