Recently, the China Minsheng Banking Corporation (CMBC) established the “Financial Service Center for Green Enterprises” in Beijing. The center will focus on the fields of energy conservation, environmental protection, new energy and low-carbon industries as encouraged by national industrial policies. The center will provide support for enterprises engaged in natural gas, power plant emissions and wastewater treatment and solid waste treatment. Meanwhile, it will further integrate resources to develop a variety of innovative low-carbon financial products and thereby cooperate with enterprises and projects which comply with national requirements on energy saving, emissions reduction and environmental protection according to the principle of “green credit”. The center will seek to develop green finance and low-carbon finance.
CMBC’s move to expand green financial services has been met with a high level of attention and praise in the industry. This indicates that there are huge prospects for the banking industry in supporting the development of the low-carbon economy. During the transition to a low-carbon economy, a large number of traditional industries will upgrade and renovate and a large number of new industries will emerge, which will spur on huge demand for “green credit”. There is huge potential for banking institutions in the provision of financial services relating to the low-carbon economy, including credit and consulting services, development of relative financing products and derivative financing products and financing to low-carbon projects. Along with the gradual establishment and maturity of China’s carbon trading mechanisms, the gradual abundance of products and continuous enlargement of market scale, banks will be able to both participate directly in the market and provide financial services to various market participants as agents.
In view of the move by CMBC, in order to better meet the demand for “green credit”, banking institutions will need to continuously increase their efforts in financial innovation. First, they need to innovate modes of operation management. The industrial forms, technical characteristics and growth laws in the low-carbon economy mean that banking institutions will have to focus on sustainability, enhance social responsibilities, develop credit rating and risk pricing models which meet the requirements of low-carbon enterprises and projects, promote the integration and innovation of products and services, and enhance the professional standard of operations. Therefore, in terms of management, the “Financial Service Center for Green Enterprises” of CMBC has drawn on the flat-type and vertical mode that was used in the division based reform of the CMBC, so as to highlight efficiency. In terms of operations, it has committed to professionalism and innovation, so as to highlight actual effects and support the development of the “green economy”.
Second, they need to optimize their business structure and innovate in products and services. Facing a demand for developing low-carbon economy, in terms of business structure, banking institutions should seek to constrain loans to industries characterized by “high pollution, high consumption and overcapacity”, and increase financing to tertiary industries and environmentally friendly industries. Therefore, the “Financial Service Center for Green Enterprises” of CMBC will enhance its efforts in innovation and exert itself to provide financial services to green industries, such as investment and financing, financial consultation, structured financing and financing lease. It will research and conduct trials in standardized loan and financing modes and financial low-carbon products such as green equity, intelligent property rights and pledge of carbon emission rights, providing more financial support to energy conservation and environmental protection.
Third, they should innovate the methods of risk control. Banking institutions should stipulate the measures and methods of risk control and establish and perfect the risk control mechanisms according to the characteristics of new products and business. Therefore, CMBC has stipulated a series of internal “green credit” review and approval systems such as the Guiding Opinions of CMBC on Green Credit Policies, which integrate environmental risk control into the management processes to realize the sound development of green financial services.
Promoting and developing green finance has become for the core means for commercial banks to perform their social responsibilities. Commercial banks should both promote the concept of green finance and be an innovator of green financial services. This is an innate need for the sound growth of the banking industry, and is also an inevitable move to adapt to the development of the world finance industry.
(Source: China Economic Net)