On March 4, 2010, the Industrial Bank of China (IB) published the Sustainable Development Report of IB (2009). This report is the bank's social responsibility report for 2009. In addition to being the first sustainable development report in China 's banking industry, this is also the first social responsibility report in the industry to focus on sustainable development. This represents a new level of emphasis and action on social responsibilities from within the domestic banking industry.
Officials from the IB stated that for an enterprise, “sustainable development” is a higher level of social responsibility. The Industrial Bank has long been advocating and implementing a mode of social responsibility oriented around “sustainable development”, which involves striving for a mutually-beneficial balance between enterprises, society and the environment. Naming its social responsibility report the “sustainable development report” reflects the bank's strategy of closely integrating the concepts of sustainable development and social responsibility. This is also a true reflection of the action that the bank has taken. This means of orientation is already commonplace among banks and financial institutions overseas, and more and more domestic enterprises are beginning to adopt the term “sustainable development report”. This demonstrates a level of common understanding.
The Sustainable Development Report of IB (2009) comprises of eight chapters, namely: “General, Management, Development, Environmental Protection, Repaying Society, Globalization, Practice and Appendix”. Centered on sustainable development, the report details the actions and the results of the bank in terms of social responsibilities in 2009. Specifically, this is introduced from a number of perspectives, such as the bank's strategic concept of social responsibilities, risk control, service improvement, support to the sustainable development of China and other emerging markets, environmental protection and initiatives for public benefit. The report demonstrates the action that China's first Equator Bank has taken to achieve sustainable development from a more systematic and comprehensive perspective.
In the report, IB defines the connotations of social responsibility from the perspectives of the environment and sustainable development. For example, the report has a chapter about the bank's environmental and social risk control systems, and it also details the green concepts and results of two of its distinctive products, namely product finance governed by the Equator Principles and energy-saving and emissions-reducing projects. Moreover, the bank has included a special section entitled ”The Equator Principles: The Green Declaration of Banks” in the report. This section introduces the basic concepts behind the Equator Principles, the bank's strategic thoughts behind adopting the principles as well as modes of implementation, results, detailed case studies and independent comments. Officials from the bank say that the goal of this approach is to share its experiences in the fulfillment of its commitments with more stakeholders that keep a focus on the Equator Banks so as to further spread the concept of “green finance”. In addition to the sustainable development report, the bank will release its very first Annual Report on the Implementation of the Equator Principles, which will attract more attention and interest towards the sustainable development and green credit of China's banking industry among overseas stakeholders.
As the first Equator Bank in China, the Industrial Bank's initiatives in sustainable finance cover the fields of environmental and social risk control, green credit, energy-saving and emissions-reducing project loans and low-carbon products. In addition to the due diligence, examination and after-loan management of environmental and social risks of projects that are governed by the Equator Principles, the bank has also established environmental and social risk control systems. It hopes to develop financing business in a way that benefits the environment and society by adopting systematic standards, procedures and measures for environmental and social risk control. It also hopes to guide business expansion using the concept of sustainable development, placing equal emphasis on economic gain and social responsibilities.
The bank has gone from being the first to develop energy-saving and emissions-reducing loans projects in China to becoming the first Equator Bank in China; it has gone from paying attention to environmental and social risks to seeking a harmonious relationship between people, nature, environment and society, adopting a corporate governance policy emphasizing the performance of social responsibilities; it has gone from strengthening its own capabilities in environmental and social risk control to assisting other banks and companies in the exploration of sustainable development so as to achieve mutual benefit; it has gone from strictly implementing green credit standards and using the “one-vote-veto” system for projects that fail to meet environmental protection requirements to promoting the sustainable development of other emerging markets. These transitions demonstrate that the Industrial Bank has realized three major transformations, namely, from conducting trials to arriving at a consensus in corporate governance, from passive acceptance of constraints to actively seeking opportunities, and from offering a single financial product to the comprehensive redesign of operation modes and business process. These transformations have been affirmed by an increasingly optimized internal governance environment and a number of positive social effects. In February 2010, the Industrial Bank was awarded the China Baosteel Environmental Excellence Prize, the highest social award in the field of environmental protection in China. The Industrial Bank is the only financial institution to have won this award.
As stated by the New York Times at the beginning of the year, China is leading a green revolution. As important national policies aimed at promoting the development of a low-carbon economy, promoting economic transformation and promoting the optimization and upgrading of industries are established, the issue of sustainable development is set to attract more attention. Finance is the center of an economy. The mode of performing social responsibilities by promoting sustainable development, a mode coined by the Industrial Bank, will give rise to a new social responsibility system in China's banking industry. This system will put banks on par with international competitors, fall in line with the reform of finance domestically and fit in with the development strategies of commercial banks. The formation of such a system will also bolster the scope and efficacy of China's green revolution.
Background information:
For a downloadable version of the Sustainable Development Report of IB (2009), please visit:
http://download.cib.com.cn/netbank/download/cn/Sustainable_Finance/2009Sustainable_Finance.pdf
IB's Path to Sustainable Development
The Industrial Bank has always placed an emphasis on the development of sustainable finance. It has actively explored numerous ways of driving the bank on in its performance of social responsibilities, and advocates green credit and the development of a culture of environmental and social risk control. It strives to strike a balance between people, nature, environment and society.
The Industrial Bank is the pioneer of energy-saving and emissions-reducing loans in China. From its initial cooperation with the IFC in 2006 to the end of 2009, the bank has granted 222 energy-saving and emissions-reducing loans, totaling at RMB 16.58 billion. As of the present, these loans are absent of NPLs and interest payment defaults. The bank has fulfilled its public commitments of “granting RMB 10 billion in loans within three years (from 2008 to 2010)” in advance. The projects supported by the energy-saving and emissions-reducing loans are able to save about 10.3964 million tons of coal, reduce carbon dioxide emissions by 31.778 million tons, reduce chemical oxygen demand (COD) by 439,100 tons and utilize 472,500 tons of solid waste every year. In October 2007, IB signed the Statement by Financial Institutions on the Environment and Sustainable Development to join UNEP FI, and is committed to complying with related environmental laws, rules and regulations, establishing an environmental management system, integrating environmental factors into decision making, supporting environmental protection and realizing sustainable development. At the Ceremony and Press Conference for the Adoption of the Equator Principles held in Beijing October 31, 2008, IB announced its commitment to the Equator Principles, thereby becoming the first Equator Bank in China. This indicates that the Industrial Bank leads domestic commercial banks in regards to introducing advanced international modes, strengthening environmental and social risk control, and promoting rational and sustainable development. This event was named as one of the major achievements in the financial service industry by the State Council in the Fifth China-U.S Strategic Economic Dialogue, which was held in December 2008.
Owing to its successful efforts, the Industrial Bank has been nominated for the FT's Sustainable Banking Awards for three successive years. It was named as the runner-up for the Sustainable Deal of 2007, and was named “Asian Sustainable Bank of the Year” in 2009.
After being awarded the Green Bank Innovation Award 2007 by Economic Observer, the Industrial Bank went on to win the 2008 China Best Green Banks Award, independently appraised in 2009 by nine non-governmental environmental protection organizations. This is the first award for green banking and green finance in China. The independent evaluation made by non-governmental environmental protection organizations highlights the fairness and wide scope of representation of the award.
On February 2, 2010, the Industrial Bank won the China Baosteel Environmental Excellemce Prize, which is the highest social award in the field of environmental protection in China. The Industrial Bank is the only financial institution to have won this award.
Moreover, the bank does not limit its efforts in sustainable development to itself, but adopts an open approach towards other banks. By means of training, forums and meetings, IB publicizes its sustainable development concepts and the actions it has taken to other banks (such as the China Development Bank and ICBC). It has also forged links with banks aboard and shared its experiences with banks in emerging markets such as Vietnam. From August 13-15, 2009, a green credit delegation from Vietnam paid a visit to the Industrial Bank to learn more about its implementation of the Equator Principles, green credit and energy efficiency financing. The delegation comprised of six ministries/commissions, including the National Bank of Vietnam, the Ministry of Natural Resources and Environment, the Ministry of Finance, the Ministry of Industry and Trade, the Ministry of Planning and Investment and the Economic Commission of the National People's Congress of Vietnam as well as some major commercial banks. The Industrial Bank's concepts of sustainable finance are now being marketed to more emerging markets overseas.
About the Equator Principles
The Equator Principles (EPs) are a voluntary set of standards for determining, assessing and managing social and environmental risks in project financing. The principles were established on the basis of the Policies and Guidelines on Sustainable Development of the IFC. The Principles advocate that financial institutions should perform due diligence obligations in regard to environmental and social issues in project financing. They constitute the benchmark industry standard for environmental and social issues in project financing, and apply to are applied to the practice of international finance. The Equator Principles represent a milestone in the development of international finance. The principles serve as a guideline for banks in different countries to operate sustainable finance. As of the present, 68 financial institutions worldwide have announced their commitment to the Equator Principles. The project finance of these banks accounts for 85% of project finance worldwide. The Industrial Bank is currently the only bank in China that has adopted the Equator Principles.