Since the launch of China's "going out" policy some 15 years ago, Chinese outbound investment has increased over 30-fold, to almost US$103 billion in 2014. As China's overseas footprint has grown, so have the environmental and social controversies linked to Chinese-backed projects. In the past few years alone, Chinese companies and banks have come under fire for a range of deals, such as copper mines in Ecuador that have fuelled social conflict.

But unlike US or European governments, which have largely let their multinational corporations roam the globe with little environmental oversight, China has issued government policies aimed at promoting stronger environmental stewardship for Chinese investments overseas.

One of these policies is the Green Credit Guidelines, issued by China's banking regulators three years ago this month. The guidelines not only instruct banks to link lending decisions to clients' environmental performance, but also require banks to ensure that borrowers abide by international best practices abroad.

The international aspect of the guidelines is visionary both in terms of promoting sustainable finance and global corporate responsibility. But the proof of the pudding is in its eating, and implementation of the guidelines, as we describe in our recent report, "Going Out, But Going Green?", is falling short. In six of the seven overseas case studies we examined, we found compliance failures...