China's mega dam project in Tibet on Brahmaputra to see scrutiny over green finance risks

Banks and investors typically look closely at large-scale hydropower to ensure developers have understood potential risks to water availability, wildlife and the local ecology

China’s 1.2 trillion yuan ($167 billion) mega-dam in Tibet will face strict scrutiny to access green financing because of the potential environmental and social impacts of large hydropower, according to Sustainable Fitch.

Banks and investors typically look closely at large-scale hydropower to ensure developers have understood potential risks to water availability, wildlife and the local ecology, Nneka Chike-Obi, the data provider’s head of Asia-Pacific ESG ratings and research, said Monday in an interview with Bloomberg Television.

“When you are talking about a project at that large of a scale, there will be environmental impacts,” she said. “Is the benefit worth it is another question.”

The development on the Yarlung Tsangpo river overlaps with one of the world’s key biodiversity hotspots. Advocacy group International Campaign for Tibet claims the project could displace residents in the surrounding area, and impact the livelihoods of millions of people in India and Bangladesh.

China’s government has pledged to protect the local environment, and insists the plan won’t harm areas downstream of the dam.

While the majority of the project’s financing is likely to come from public sources, developer China Yajiang Group could tap bank loans or the bond market, Citigroup Inc. analysts wrote in a note last month.

The private sector may play a role in providing finance, though all hydropower projects face additional scrutiny because of the environmental and social risks, Chike-Obi said.

Chinese entities have issued the most green debt globally this year, totaling about $84.5 billion of loans and bonds, according to data compiled by Bloomberg Intelligence. In April, China raised 6 billion yuan in its debut sovereign green bond sale as it attempted to tap overseas investors.