On September 2, 2010, President of the Industrial Bank (IB) Mr. Li Renjie attended the Changchun International Finance High Level Conference of the Sixth Northeast Asia Expo upon invitation and delivered a wonderful speech.

 The Northeast Asia Expo is an important nationwide conference. It is the only State Council Sponsored event in Northeast China that is centered around regional cooperation in Northeast Asia and that demonstrates the economic and social development of the former Northeast industrial base and the results of international exchange and cooperation. The Exposition has been successfully held on five occasions, with state leaders having attended all previous events. With the theme of “Green finance—New impetus for transformation of development modes”, the Changchun International Finance High Level Conference of the Sixth Northeast Asia Expo was sponsored by the People’s Government of Jilin Province and relative financial departments. The event aimed to promote green finance, accelerate the growth of the green economy and promote the financial cooperation and exchanges in the Northeast Asia region.

 The following is the transcript of the speech made by IB President Mr. Li Renjie:

 Li Renjie: Ladies and gentlemen, good afternoon! The world has entered the post-crisis era. Our country has identified the revitalization of the old Northeast industrial base as an integral part of the national development strategy. This has provided an excellent opportunity for the economic development of Jilin Province. During the process of development, we have been thinking about how we can achieve sustainability. To put it simply, how can we refrain from endangering the survival of later generations while satisfying the demands of this generation?

 I am happy to see that the theme of this conference is “Green finance—New impetus for transformation of development modes”. As the first Equator Bank in China, the Industrial Bank has explored this field in recent years. This is what I would like to share with everybody today.

 First, just now a number of speakers mentioned the Equator Principles and the Equator Banks in their speeches. How did IB come to know and accept the Equator Principles? As to the birth of the Equator Principles, a group international mainstream banks such as CitiBank and Barclays Bank, and the IFC got together in Greenwich, UK in 2002 to discuss how banks should focus on environmental and social problems and which principles banks should follow in project financing. They came to a common understanding, which was called the Greenwich Principles at the time. Later some NGOs protested that the principles should not just be an exclusive club for developed countries, but should also be followed by developing countries. Considering that developed countries are generally located in the Northern Hemisphere and developing countries tend to be located in the Southern Hemisphere, there is often talk of a north-south divide. Since the two hemispheres are separated by the equator, the principles were name the Equator Principles, which implies that they are for all countries to follow on both sides of the equator. Not only developed countries, but also developing countries should follow the principles. Now, there are 67 Equator Banks in the world. The Equator Principles include guidelines on ten major aspects, eight categories and sixty-two sectors, and also include eight performance standards.

 What is the difference between the Equator Principles and the current environmental credit policies in China which are often mentioned, namely the green credit policies? Here, I would like to share my fairly superficial personal understanding.

 First, the environmental credit policies currently applied in China are generally single policies, and do not come together to form a complete system. On the other hand, the Equator Principles are a complete set of principles and standards as well as the scope processes and methods for their application. That is to say, the Equator Principles are more comprehensive.

 Second, the main focus of China’s current green credit policies is environmental protection, while the Equator Principles also covers social risks, such as basic principles for protection of employee rights and land acquisition and relocation, as well as protection of communities and cultural heritage
.

Third, these green credit policies in China are compulsory, and banks are often passive in their implementation. On the other hand, the Equator Principles are a voluntary code which banks choose to follow.

 Fourth, the current green credit policies in China simply emphasize the social responsibilities of banks in environmental protection and the prevention of risks, whereas the Equator Principles emphasize common sustainable development between banks, society and the environment. So in this sense they are interactive.

 Fifth, green credit policies place more concern on the entry into and exit from projects, i.e what projects can we lend to and what projects we cannot lend to. On the other hand, the Equator Principles require management of a project throughout its entire lifespan. This is also an interactive relationship.

 So how did the Industrial Bank come to know about the Equator Principles? Back in 2004 we reshaped our board of directors by introducing overseas strategic investors, including the IFC. They introduced us to these advanced concepts. As the IB, we were also thinking that we, as a legal entity and corporate citizen, should assume social responsibilities. On the other hand, we were also thinking about how the environmental toll of China’s rapid development since the turn of the century could be reduced and how sustainability could be achieved. So, we stated to research new approaches in 2005. In 2006, we first launched our energy-saving and emission-reducing loans. In 2007, we signed the Statement by Financial Institutions on the Environment and Sustainable Development of the UNDP. In October 2008, we formally adopted the Equator Principles, becoming the 63rd Equator Bank in the world China’s first.

 I would like to go on to share our experiences in practice and exploration next. First is the reconstruction of organization. We must follow these principles in terms of organization. Second is the reconstruction of processes. Third is the reconstruction of capacity, which involved systematic training, the spreading of concepts and seeking of social supervision. In addition, we have developed some new products, such as energy-saving and emissions-reducing loans, carbon purchase agency, carbon delivery guarantee, carbon asset mortgage and credit extension etc. We have also developed the first low-carbon credit card in China. Now, we have reviewed over 500 projects of our customers in accordance with the Equator Principles, through which a large number of enterprises have also come to recognize the importance of these principles. Moreover, we have been involved in a great deal of international and national exchanges. We have also won some honors and accolades over the last few years.

 Next, I would like to share our understanding.

First, we first think that the economy and finance are interactive, with the economy determining finance and finance serving the economy. Currently, green economy and low-carbon economy are the general trends. They are an important means of balancing the the economic structure and transforming development modes in the post-crisis era. The banks should strengthen their strategic deployment in green financing business in line with the trend towards the green economy and low-carbon economy.

 Second, the Equator Principles and the green finance spell bright prospects for the banking industry. First, banks are enterprises, and enterprises should make profits. But our profits should not come at the cost of our social responsibilities. We call this responsible profit. Through green finance, we can explore more financial fields and better incorporate ourselves into markets both at home and abroad. This is because in international project financing, observation of the Equator Principles has become the mainstream. If we do not follow these principles, we will be unable to gain a foothold in the market.

 Third, we may establish our own distinguishing features and brands, increase our capacity in risk control, and build up our differential competitive advantages in this specific field. During our promotion of the principles, we have also undergone all-around reforms in the bank. First, we have a common understanding in corporate governance, which is not limited to a specific level, but is a culture from top to bottom. Second, we have converted passive acceptance of the constraints of the Equator Principles into the active pursuit of competitive advantages in this regard.

 Moreover, we have comprehensively reconstructed our business mode and operation processes instead of just developing products.

 To conclude, I have some expectations and suggestions. China’s green finance has bright prospects. However, global awareness of green finance is still lacking. More efforts should be made to promote this concept. Second, we should speed up efforts to improve our laws, regulations and systems. Third, we need policy guidance in the form of incentive and constraint mechanisms. Fourth, we need more auxiliary facilities, such as agencies.

 I see that time is getting on, so I will have to stop here.

 Thank you for listening.