Source: China Financialyst (June) Date: June 2013
As the first “Equator bank” in China, Industrial Bank (IB) has, for years, implemented the Scientific Outlook on Development thoroughly, actively responded to the call of the state for energy conservation and emission reduction, followed the development tide of green finance, vigorously practiced green finance, and performed its corporate citizen's responsibilities. From launching the first energy-efficient financing program and carbon finance program, to taking the lead in promising to follow the Equator Principles and to setting up a specialized institution, IB's green finance has undergone more than 7 years' exploration, with professional capability and market capacity increasing day by day. Now, “green finance” has become an eye-catching business card of IB.
As proved by the practice, green finance corresponds to the financial concept of the global sustainability, boasting a broad prospect and a big market.
Innovation in philosophy, “obtaining reasonable profits while bringing benefits to the stakeholders”
In recent years, the environmental problem has become increasingly protruding. It has become a focal point both domestically and internationally to pay attention to climate changes and achieve sustainable development. As early as 2006, China put forward the restrictive targets of lowering the energy consumption each unit GDP by 20% and the total emission of main pollutants by 10%. In 2009, China put forward again the objective of reducing the emission of carbon dioxide each unit GPD in 2020 by 40-45% compared with that in 2005. It was specified again in the “12th Five-year Plan” issued in 2011 to develop recycling economy, promote low-carbon technologies, respond to the global climate changes actively, facilitate the harmonization of economic and social development with population, resources and environment, and take a path of sustainability. In 2012, the 18th CPC National Congress put the construction of ecological civilization and beautiful China at an outstanding position. “Green, energy conservation, environmental protection, and sustainability” are the essential and indispensable core ideas for the “Construction of Beautiful China”.
It is the responsibility of commercial banks, as the most important pivot for the distribution of resources in modern economic system, to lend vigorous support for energy conservation and emission reduction, and the development of low-carbon economy, guide social funds to flow to the areas of low energy consumption, low emission and high efficiency, push the transformation of economic development model and industrial conversion and upgrading in an active way, and boost the sustainable development of economy and society. Against the general backdrop, IB began to consider the relationship between the performance of social responsibilities and its own sustainable development, exploring innovation in the business model to perform its social responsibilities with a view to achieving the harmonious development of commercial interests and social and environmental benefits. IB innovatively put forward the social responsibility concept of “obtaining reasonable profits while bringing benefits to the stakeholders” to support the sustainable development of society, economy and environment by providing extensive green financial products and services, and established the corporate philosophy of sustainable development to “implement the Scientific Outlook on Development, further understanding to the relationship between the social responsibilities of a bank and its own sustainable development, actively explore ways to push forward the performance of social responsibilities as a bank, and construct a relationship where human can live in harmony with the nature, environment and society”. Thus, it becomes a strategic choice of IB to develop green finance and build a “green bank”.
Exploring practice and carrying out specialized operation
Upholding the concept of sustainable finance, on the one hand, IB carried out in-depth research in green economy including the areas of low-carbon economy, recycling economy and ecological economy, providing professional green finance products and services through sustained innovation. On the other hand, it has viewed the market and customer in a new perspective, adjusted the target customer and business structure on its own initiative, and lent vigorous support to industries and projects which can acclimate themselves to the development of low-carbon economy and recycling economy, supporting the responsible corporate customers that have the awareness of sustainable development and combine business operation with performance of social responsibilities. During the process, with sustained exploration and practice, IB has gradually established and improved its green finance service system, building a “green bank” in an all-sided manner.
Stressing on learning from international experience and adopting international guidelines In October 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. With the adoption of the Equator Principles, IB has improved its capacity to control the environmental and social risks and alleviated or mitigated the environmental and social risks in projects, thus refining its system for controlling environmental and social risks. At the decision-making layer, for instance, IB's board of directors and management team has established the “Equator Principles Work Leading Group”; at the institutional layer, the bank has issued a range of policies for the management of environmental and social risks in succession; and at the layer of capability building, it has intensified the building of internal capabilities and carried out a variety of training programs, popularizing the knowledge of sustainable finance across the entire bank. By the end of 2012, IB has examined the applicability of 727 projects against the Equator Principles, with a total amount of project investment up to about RMB 1,007.7 billion.
Intensifying the system construction and process rebuilding for the business of green finance. In order to promote and regulate the development of energy conservation and emission reduction business, IB has, in succession, released a series of rules and regulations, such as the “Measures on Management of Energy Conservation and Emission Reduction Business”, the “Detailed Admittance Criteria for Energy Conservation and Emission Reduction Projects”, the “Criteria for Identifying the Property of Energy Conservation and Emission Reduction Projects in the Field of Environment”, and business marketing instruction, specified the types of supported projects and admittance criteria, thus not only pointing out the direction for business development, but also providing institutional guarantee for the flourishing development of energy conservation and emission reduction businesses.
In the credit work, IB has carefully implemented the intentions of national policies on the works of energy conservation, emission reduction, and elimination of backward production capacity, and enforced the green credit requirements in the links of due diligence, examination and approval, and post-credit inspection, establishing a long-acting green credit mechanism. Regarding credit granting policies, IB has specifically prohibited entering into those industries that featured out-of-date capacity, out-of-date technologies, heavy pollution, and waste of resources, or those that were ordered to shut down or put under restricted development. The credit granting admittance 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. IB has substantially enhanced its awareness of compliant management in the work of credit examination and approval. The bank required checking relevant energy conservation and emission reduction information of a customer when handling the credit business for the customer, and regarded the status 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 were taken as an important part for the management after credit extension. In case of any major law-breaking behavior and major risks in energy conservation and emission reduction, environmental protection, and security, warning would be given to and relevant measures would be taken against the enterprises in question.
Sustained innovation and upgrading of green financial products and services. In 2013, IB released its special green finance program, “Green Finance • Tactics (2013)”. Targeting at the diversified financial needs of corporate financial customers in the field of energy conservation and environmental protection, the program is a multi-layered and integrated system of products and services formed on the basis of the two product families of IB's green finance, ‘8+1' financing services and emission rights based finance (special products and services developed for international and domestic carbon trading pilots and emission right trading pilots), which covers financial products, service models and solutions, and it is a brand-new upgrading of products and services, mainly including ten general-purpose products, seven characteristic products, five financing models and seven kinds of solutions. At the layer of product, for instance, the program also includes seven characteristic products such as financing for energy performance contracting (EPC) by using the future usufruct as the pledge, contract environmental service based financing, carbon assets pledge based financing, emission right pledge-based financing, and energy conservation and emission reduction(CHUEE) financing, besides the ten general products of conventional banking; at the layer of model, it provides five service models including financing for the production increase of energy-conserving and emission-reducing equipment manufacturer, financing for utilities service supplier, financing for franchised projects, financing for energy management company (EMC) and financing for financing lease company; further, it also provides seven integrated solutions covering carbon trading, emission right trading, conserved energy trading, utilization and protection of water resources, integrated services for industrial chain, industrial consolidation, and financing for special projects.
Green finance realized specialized operation. 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 of the Head Office, in 2012. By now, IB 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 creation, technical support, assets management, marketing operation, trading service, and business cooperation. Meanwhile, IB has, according to the divided segments, formulated the technical admittance criteria and formed the green finance credit admittance. Holding a scientific and discreet attitude, the bank has refined and elevated its industrial understanding and business knowledge, standardized them one by one, and established a green finance certification system, realizing certification over green finance projects one by one. Moreover, it has carried out “measurable, reportable and examinable” environmental benefits calculation. The bank has improved the credit management system. Each green credit passing the green finance certification would be labeled distinctly in the credit system. In this way, the green finance businesses could be under unified management and analysis. At the level of branch, IB has set up departments in all branches for controlling environmental and social risks in a planned manner and driving forward green finance businesses, and appointed product managers in charge of green finance. Across the entire bank, a professional group of green finance consisting of more than 100 members has become the core force of IB for the sustainable development of green finance. In 2013, IB takes new measures to build its green finance group. At present, IB is actively pushing the setup of regional institutions specialized in green finance in all branches, such as green finance business headquarters or departments, so as to further improve its overall differentiated competitive edges in green finance and enhance the regional professional brands and specialized operation of green finance.
Scale development, turning green to gold
In the process of pushing the development of green finance, IB has achieved multi-win in economic, environmental and social benefits and realized the harmonious development between finance and environment.
Large-scale business development. From the implementation of the first energy-efficient project financing project in 2007 to the end of 2012, IB accumulatively granted nearly RMB 200 billion of “green finance” based financing loans to around 1,000 enterprises with a variety of financial tools, with the financing balance of green finance exceeding RMB 110 billion, which accounted for nearly 10% of the corporate credit balance. The business of green finance covers three major fields: low-carbon economy, recycling economy and ecological economy, and involves a variety of projects such as improvement of energy efficiency, development and utilization of new energy and renewable energy, carbon emission reduction, sewage treatment and water area control, reduction of sulfur dioxide emission, and recycling of solid wastes in the mainstream sectors, including energy, construction, transport and manufacturing, etc. Green finance is an indispensable area for IB's corporate finance business.
Significant environmental benefits. By the end of 2012, the projects supported by IB have saved 23.16 million tons of coal equivalents within China each year, reduced 66.83 million tons of carbon dioxide, utilized 15.01 million tons of solid waste in an integrated manner, and saved 255.79 million tons of water. The emission reduced is equivalent to shutting off 153 thermal power plants of 100 MW or stopping running 70,000 taxis for 46 years. The effect in boosting energy conservation, emission reduction, and environmental protection is self-evident.
The influence of green finance brand keeps increasing day by day. Thanks to its unremitting efforts in the field of green finance, IB has gained the attention and recognition of the international community and friends from all circles at home. IB won the annual sustainable banking award jointly appraised by the British Financial Times , and International Finance Corporation (IFC) twice respectively 2007 and 2009, the only Chinese bank winning this award up till now. In 2012, IB topped the ranking of “2012 China Green Credit Report” released by the Policy Research Center for Environment and Economy of the Ministry of Environmental Protection. In recent years, the bank has won a number of honors appraised by domestic mainstream finance media for many times, such as the “Best Corporate Citizen”, the “Best Green Bank”, and the “Low-carbon Pioneer Enterprise”. In particular, IB received the honor of “National Collective Role Model for Emission Reduction” for the “11 th Five-year Plan” period jointly conferred by the Ministry of Human Resources and Social Security (HOHRSS), the National Development and Reform Commission (NDRC), the Ministry of Environmental Protection (MEP) and the Ministry of Finance (MOF), becoming the only commercial bank receiving the honor across the entire country. This is a high recognition for IB's exploration and practice in green finance for more than seven years.
Planning actively and moving ahead with innovation
In 2013, IB initiates the “water plan” again. The state has attached increasing importance to the utilization and protection of water resources as it plays an important role in the national economy and livelihood of people. In 2012, the state issued, in succession, a range of policies and plans for intensifying the utilization and protection of water resources in China, such as the Opinions of the State Council on the Implementation of the Strictest Regulations on the Management of Water Resources , the 12th Five-Year Plan for the Nationwide Treatment of Urban Sewage and Construction of Reclamation and Use Facilities , and the Plan on Water Pollution Prevention and Control in Key River Basins (2011-2015). Based on estimation, during the “12th Five-year Plan” period, the total investment in the utilization and protection of water resources will exceed RMB 1700 billion.
In 2013, IB launched the division of business boundaries, product integration and innovation, and establishment of business objectives in the utilization and protection of water resources. In the aspect of product integration and innovation, for instance, IB embarks on the preparation of more detailed comprehensive solutions in the field of utilization and protection of water resources, namely, to release comprehensive service programs integrating characteristic products, including contract environmental service based financing and franchise and business right pledged financing, through basic product combination and innovation, so as to provide integrated solutions for the development and protection of water resources, water conservation, and construction and operation of comprehensive facilities. In the future, IB will make more investment in the field of utilization and protection of water resources.
As the forerunner and advocator of green finance in China, IB will continue its cause of green finance by closely following the progressive march of the national undertaking of energy conservation and emission reduction, and move ahead with innovation, so as to erect a banner of innovation for the development of green finance by Chinese financial institutions and make new contributions to the development of China's energy conservation and environmental protection cause and building of a “Beautiful China”.