As learnt by the reporter from Industrial Bank (IB), after the cooperation between IB and International Finance Corporation (IFC) for promoting the loans for energy conservation and emission reduction projects at home in 2006 and 2008, the agreement on the third phase of energy conservation and emission reduction loan carried out by the bank in collaboration with the IFC has come into force recently.
It is reported that, in this collaboration, both parties will not only continue pushing the development of energy conservation and emission reduction jointly in China, but pay attention to the underdeveloped areas, releasing the first products in China for providing special financing services for the energy conservation and emission reduction projects of SMEs in the underdeveloped areas. In the cooperation agreement, both parties acknowledge that the proportion of energy conservation and emission reduction loans extended to the underdeveloped areas should be ensured not below 70% of the total loan amount under the cooperation.
Besides, this cooperation is obviously different from the previous two phases in terms of the targets, areas and categories of loan extension. IB and IFC pay more attention to giving financing support to the energy conservation and emission reduction of SMEs via diversified businesses. Considering that the Chinese SMEs are highly in need of financing for energy conservation and emission reduction projects but generally encounter financing difficulties and narrow financing channels, the third phase products released jointly by both parties in collaboration for energy conservation and emission reduction loans feature the following four characteristics.
First, the energy conservation and emission reduction loans extended by IB under the program will be solely used to serve SMEs, namely those with total assets less than RMB 100 million and the total operating incomes below RMB 100 million in the previous year or a total of employees less than 300 by the end of the previous year.
Second, based on the original project loans, a new type of loan, working capital loan, is added with a view to helping SMEs to extend their financing channels and reducing their financing cost in a practical manner, not only meeting the financing needs of SMEs for energy conservation and emission reduction projects, but also addressing their needs of working capital to carry out energy conservation and emission reduction businesses.
Third, to promote the development of energy conservation and emission reduction in China in the underdeveloped areas, with this collaboration, both parties specifies that the proportion of energy conservation and emission reduction loans extended to the underdeveloped areas should be ensured not below 70% of the total loan amount under the cooperation. As the underdeveloped areas in China are mainly concentrated in the west, the product will lend vigorous support to the SMEs in West China to carry out energy conservation and emission reduction projects.
Fourth, the loss sharing mechanism will be maintained in the cooperation. In other words, IFC will share losses for any qualified loans extended by IB, which will pay the loss sharing cost to IFC. This is equivalent to that the bank purchases an insurance for the financing demands of SME customers, and in this way, the requirements for pledge and guarantee in traditional credit are lowered appropriately, thus coming the obviously lowered financing threshold and cost for SMEs.
We can see that the third phase of energy conservation and emission reduction loan released by IB and IFC this time is another innovation in energy conservation and emission reduction loan. It further enriches and improves the financing service coverage and products of IB for energy conservation and emission reduction and it is helpful for IB to provide better financial services for the construction a beautiful China.
In fact, as the first Chinese Equator bank as well as the forerunner and advocator of green finance in China, IB has long seen a broader field for sustainable finance in energy conservation and emission reduction loan, and promoted the change in its corporate governance and business concept. To this point, Gao Jianping, Board Chairman of IB, has an in-depth understanding: “In 2006, when we collaborated with IFC to explore the development of the green finance product, energy conservation and emission reduction loan, we paid more attention to the innovative product and the competitiveness of the new business model represented behind the product. Then, during product promotion, we have gradually understood the profound connotation of green finance and the sustainable development concept contained in it through in-depth exchange and interaction with governments, enterprises, and even communities and non-governmental organizations. Meanwhile, we have gradually introduced the concept into our corporate governance, put forward the social responsibility practice model of “obtaining reasonable profits while bringing benefits to the stakeholders”, and worked hard to push forward the innovation in banking business models.”
Under the guiding of such sustainable development concept, IB began to design carbon finance product in 2007, becoming the first one releasing the integrated carbon finance services covering the front, middle and back offices of carbon trading. In 2008, it announced to the public to adopt the Equator Principles in Beijing, becoming the first Chinese “Equator bank”. In 2009, it established the first Chinese institution specialized in sustainable finance at its Head Office. In 2010, it issued the first low-carbon credit card in China, extending the green finance from the field of corporate project to personal consumption. In 2011, it innovatively released such green finance products as emission rights pledged credit and carbon assets pledged credit. Up to now, IB has formed two product families including green finance based financing service and emission right finance service, taking a leading position in the industry in such aspects as market concept, social influence, product development, technical regulations, and service fields and accumulated rich experience in the field of localized sustainable finance.
As revealed by relevant data, by the end of November 2012, the Bank's balance of green finance based financing loans hit RMB 111.736 billion, of which the credit balance accounted for RMB 71.653 billion and the non-credit financing balance amounted to RMB 40.083 billion. The projects supported by green finance of IB have saved 23.0554 million tons of standard coal (TCE) across China each year, reduced 66.1855 million tons of carbon dioxide, 879,400 tons of chemical oxygen demand (COD), 14,500 tons of ammonia nitrogen, 43,600 tons of sulfur dioxide, and 6,900 tons of oxynitride, utilized 14.6629 million tons of solid waste in an integrated manner, and saved 255.7906 million tons of water.
At the 18th CPC National Congress, which dropped the curtain in November, the construction of ecological civilization and beautiful China was placed at an outstanding position. The energy conservation and emission reduction in China will have broader development rooms. In the view of IB, its path of sustainable finance will become wider and wider. “Green credit and green finance businesses will not only be a market with great potential and important orientation for the business development of commercial banks in the future, but more an important opportunity to propel the transformation of commercial banks,” said President Li Renjie of IB.