Date: July 4, 2012 Source: China Times
From its own standpoint, Industrial Bank (IB) practices the harmonious development, initiating the green finance in China. By the end of the first quarter of 2012, the emission reduced in the projects supported by IB under its green finance program is equivalent to shutting down 412 thermal power plants of 100 MW or stopping running 70,000 taxis in Beijing for 124 years.
As the first e quator bank in China, IB has actively followed the development tide of green finance, vigorously practiced green finance, and performed its corporate social responsibilities. From the first launching of the energy-efficient financing program, carbon finance and low-carbon theme credit card, to taking the lead in promising to follow the Equator Principles and to setting up specialized institution, the bank has promoted green finance in a course of over six years, taking a leading position in the industry in such aspects as market concept, social influence, product development, technical regulations, service fields and organizational guarantee. While exploring a “green-to-gold” sustainable finance road, IB has also established its differentiated competitive edges and built up fresh and distinctive corporate culture and brand image.
Initiating the green finance in China with the outlook of “obtaining reasonable profits while bringing benefits to the stakeholders”
Against the backdrop of global climate change and the cause of energy conservation and emission reduction promoted by the state, IB proposed the social responsibility practice model of “obtaining reasonable profits while bringing benefits to the stakeholders”. In May 2006, in collaboration with its partner, International Finance Corporation (IFC), IB designed the energy conservation and emission reduction financing program and released the energy-efficient financing product innovatively, initiating the green finance service in China.
With the deepening practice in exploring green finance, IB has elevated the concept of sustainable finance of “obtaining reasonable profits while bringing benefits to the stakeholders” to the strategic level of corporate governance and corporate culture and further transmitted and implemented the concept into the following aspects gradually: rules and regulations, organizational structure, business flow, and product innovation. By giving consideration to the protection of ecological environment and the interests of the general public and performing social responsibilities during business activities, IB has not only pushed forward the flourishing development of green finance, but also boosted the following three transformations in the aspect of business concept. First, green finance has become a consensus of the bank regarding corporate governance, and it has established the corporate governance philosophy of sustainable development to actively explore different ways to promote the bank to practice social responsibilities and construct a good relationship where human being coexists with the nature, environment and society harmoniously. Second, IB has transform ed from accepting restriction passively to seeking commercial opportunities actively. To serve energy conservation and emission reduction and follow the Equator Principles have been taken as favorable tools to create differentiated competitiveness and explore new commercial opportunities by IB . Third, IB has transferred its focus from on the development and promotion of single green finance product to on the overall reconstruction of commercial models and business flow.
For instance, regarding credit granting policies, IB has specifically prohibited entering into those industries that featured backward capacity, out-of-date technologies, heavy pollution, and waste of resources, or those that are expressly ordered to shut down or put under restricted development by the state. The admittance to credit granting has been controlled strictly. The customers to which IB plans to grant credit should be analyzed especially in the following key factors, including industrial position, cost advantage, technological level, innovation capability, and market brand. Forward-looking and pertinent measures should be taken timely in the precondition of meeting the requirements for environmental protection and energy conservation and emission reduction.
In the credit examination and approval, IB requires checking relevant energy conservation and emission reduction and environmental protection information of a customer when handling the credit business for the customer, and regards the situation of energy conservation, emission reduction and environmental protection as a necessary condition for the approval of loans. The energy conservation and emission reduction performance as well as the environmental impact of credit projects are taken as important part s for the management after credit extension. In case of any major behavior violating laws and regulations and major potential risk in energy conservation and emission reduction, environmental protection, and security, warning will be given to the enterprises and relevant measures will be taken against the enterprises in question.
Adopting the Equator Principles to construct a management system for environmental and social risks
On October 31, 2008, IB officially announced to the public to adopt the Equator Principles, becoming the 63rd “equator bank” around the world and the first and only one in China up to now. Apart from carrying out review over the financing business of any project with a total investment exceeding USD 10 million in line with the requirements of the Equator Principles and identifying the environmental and social risks of the financing project, IB has also provided a complete set of concepts, methods and tools for green finance with reference to the Equator Principles and established all-sided management regulations and system for environmental and social risks from decision making to implementation, from regulations to flow, and from capacity construction to information disclosure.
From the end of 2009 when the first project compliant with “Equator Principles” (2×300MW expansion project of Fujian Huadian Yongan Power Plan t) was launched officially to the end of the first quarter of 2012, IB has examined the applicability of 673 loan projects to the Equator Principles, with a total amount of project investment up to RMB 910.6 billion. Specifically, 127 of them were approved as projects applicable to the Equator Principles, with a total investment of RMB 163.1 billion involving 126 customers. Among them, 37 loans have been extended by 18 branches of the bank. In addition, the first project supported by the bank in which the enterprise followed the Equator Principles out of its own will was implemented successfully in Xi'an, with a total investment of RMB 320 million. This signifies that the Equator Principles which have been observed extensively in the world have gained wider recognition in China, and it also indicates the change that Chinese enterprises now seek to manage risks with the Equator Principles in an active way rather than follow the principles in a passive way, a sign that the practice of sustainable finance ha s been further deepened in China.
Developing two ranges of products regarding financing service and emission right finance service
With its development for years, IB has, in the field of green finance, developed two ranges of products regarding financing service and emission right finance service, fully meeting the diversified green finance service demands of customers.
In the aspect of financing service, IB released “8+1” financing service model s to correspond to different demands of customers and project types. “8” refers to the utilization of eight conventional credit modes, including energy conservation and emission reduction project financing, financing under CDM, energy management company (EMC) financing, buyer's credit financing of energy-conserving and emission-reducing equipment supplier, financing for the production increase of energy-conserving and emission-reducing equipment manufacturer, financing for utilities service supplier, financing lease, and emission right pledge-based financing. “1” refers to the non-credit financing mode, covering the issuance of debt financing tools including short-term bonds, medium-term notes and SME collection notes, financial lease, structure financing, trust financing, etc.
In the aspect of emission right finance service, IB has developed special products and services for international and domestic carbon trading pilot s and emission right trading pilots.
In the aspect of international carbon trading market, IB has released such products as clean development mechanism (CDM) project development consulting, carbon-purchasing agency, performance guarantee for verified carbon emission reduction (CER), and carbon assets pledged credit extension, covering all the links of carbon trading in the upstream, middle stream and lower stream, all of which have witnessed successful cases. Meanwhile, it has established extensive cooperation with dozens of overseas carbon traders and domestic mainstream environment benefits and rights exchanges.
In the aspect of domestic carbon trading pilot, IB has actively participated in the construction of domestic carbon finance cooperation platform and constructed cooperation platforms for carbon finance business. At present, of the seven state-level carbon trading pilots, IB has launched financial innovation regarding carbon trading pilot in the exchanges in Shanghai, Hubei and Guangdong.
In the aspect of the paid use and trading pilot of emission right at home, in order to facilitate the orderly progress of the pilot work and assist the government to construct a thorough environmental economy institution in favor of the market-based deployment of environmental resources, IB innovatively released the emission right finance services in 2010, including consulting for the design of emission rights trading regulations, development of emission rights trading and settlement system, emission rights pledged credit, and financing for projects reducing the emission of pollutants. At present, IB has launched cooperation regarding the emission right finance service with a number of provinces including Zhejiang, Jiangsu, Shanxi, Hebei and Hunan. The first business was successfully implemented in Jiaxing, Zhejiang in March 2011, and under entrustment, IB is developing the emission rights trading and settlement software system for Shanxi Province.
Green finance achieved specialized operation and large-scale development
IB has kept pushing forward the specialized operation of green finance, establishing a special energy-efficient financing team in 2005, setting up a sustainable finance center in 2009, and upgrading the sustainable finance center into sustainable finance department, a Class I department, in 2012. By now, the bank has established five specialized teams including project financing, carbon finance, market research, technical services, and Equator Principles review, endeavoring to build an assets operation platform integrating the six functions: product launching, technical support, assets management, marketing operation, trading service, and business operation. Meanwhile, IB has, according to the classification of sub-fields, formulated the technical admittance criteria and established green finance credit admittance. It has improved the credit management system. Each green credit passing the green finance certification has distinct labels in the credit system. In this way, the green finance businesses are under unified management and analysis.
Since the implementation of the first energy-efficient financing project in 2006, IB, by utilizing a variety of financial tools, has accumulatively extended over RMB 100 billion green finance based financing loans to around a thousand enterprises. A group of green finance customers has come into being preliminarily. With the total amount reaching RMB 129.008 billion, the balance of financing reached RMB 84.731 billion, of which the credit balance hit RMB 65.037 billion and the non-credit financing balance amounted to RMB 19.694 billion, growing at a rate over 200% on average each year.
By the end of the first quarter of 2012, the green finance supported projects of IB has saved 61.1227 million tons of standard coal within China, reduced 179.9542 million tons of carbon dioxide, 2.2579 million tons of chemical oxygen demand (COD), 14,700 tons of ammonia nitrogen, 74,600 tons of sulfur dioxide, and 8,600 tons of oxynitride, utilized 17.4134 million tons of solid waste in an integrated manner, and saved 173.8180 million tons of water. The emission reduced is equivalent to shutting down 412 thermal power plants of 100 MW or stopping running 70,000 taxis in Beijing for 124 years.
At present, the China Banking Regulatory Commission (CBRC) has issued the Green Credit Guidelines, putting forward relevant requirements for the banking industry to develop green finance. Nonetheless, it is a systemic project to develop green finance, and the government should construct a good policy environment to encourage banks and other financ ial institutions to develop green finance. For this reason, IB puts forward suggestions to boost green finance from the aspect of policies.