Date: November 1, 2013 Source: Financial News
Recently, many cities in China were attacked by serious smoky fog, which draws great attention from people to atmosphere pollution and investment in control of such pollution and also brings massive business opportunities for the industry of atmospheric environment protection. Longyan, a small city in the mountainous region in West Fujian known for the holding of Gutian Meeting, attracted the attention of people again in recent years due to the appearance of a group of green and environmental protection enterprises led by Fujian Longking Co., Ltd.
As learnt by the reporter in the interview with Longking recently, for the control of smoky fog, the company has a number of solutions, including electrostatic precipitation, desulfurization and denitration, which can reduce the exhaust particle of heavy emitters like thermal power plant down to a level far below PM2.5.
The development of low-carbon, recycling and ecological economy contains great demands for financial services. As the first Equator Bank in China, Industrial Bank (IB) has, in recent years, actively advocated the philosophy of sustainable development, kept giving prominence to the business features of green finance, and supported the development of green economy in China by making use of green finance tools effectively. In the process of cooperation with Longking, IB has played an important role in pushing the system reform driven by green finance at the strategic level and boosted the overall level of commercial banks in developing green finance to a new height.
“Golden” catalyst for the green cause
Through the technologies of electrostatic precipitation or fabric filter, the heavy smoke becomes large powdery particles that can be collected. With the treatment of special equipment, such particles can be made into new environment-friendly building bricks in beautiful casts and different colors, which are either solid or hollow. The reporter saw the magic change personally in the state-level laboratory center of Longking.
In a production area of Longking visited by the reporter, the assembled equipment pieces for export waiting for final commissioning and packaging were arranged almost full of the workshop. Although now being conferred with many honors such as the leading enterprise in the Chinese environmental protection industry and the first listed company in China's atmospheric environment protection industry, Longking was formerly a small radio factory, with an annual loan of only millions of RMB a year at the initial stage.
Growing into an enterprise today, it cannot do away with the support of financial institutions. Now, it has had business exchanges with almost all financial institutions in the region, but in the eyes of Longking, IB is different from other banks. Even if becoming a leading one among similar enterprises, more than 30% businesses of Longking with banks are handled by IB.
Yang Feng, Director of the Business Department of IB Longyan Branch, told the reporter: “Once, an order for desulfurization and denitration products was very urgent, so it needed the instant extension of loans. We visited it to collect materials, finished the examination and approval, and granted the loan of RMB 20 million all within a day. Then, the customer gave high comments on our service. Although the competition among financial institutions in the region became increasingly furious, the business share of Longking in IB has always kept growing. Even in this year, we also covered its downstream subsidiaries into the overall credit scale for the group, offering a group-based credit of RMB 1 billion.”
Now, Longking is trying the BOT model with a view to further reducing cost. Meanwhile, IB is also introducing the business of financial lease to it.
Improving green financial service through system innovation
It is a striking speed even to a loan for small- and mini-sized enterprise that often involves a small amount and gives priority to efficiency to finish examination and approval and grant the loan within a day. Thus, the story behind the loan aroused great interest of the reporter.
Wang Xiaoming, President Assistant of IB Longyan Branch, told the reporter: “The loan scale for green finance is allocated for special purpose. The Head Office has set down certain requirements for ratio of green finance based loans in the total amount of loans of every branch, encouraging all branches to establish specialized teams for green finance and giving certain preferential treatment in terms of allocation of resources including loan interest rate.”
Since this year, all banks have been under the pressure of loan-deposit ratio assessment and thus have quite limited loan resources. Meanwhile, joint-stock banks, in confrontation with the pressure of making profits, must also take into consideration inclining resources to businesses which are key areas for their future transformation. Under such a circumstance, financial services to small- and mini-sized businesses become a strategic key area for a great number of banks. Nonetheless, the specially listed green financial loan showcases its position in the future differentiated competition strategy of the IB.
Besides the determination, how can the determination to develop green finance be implemented in the day-to-day businesses? The answer given by IB is reform.
The relevant officer in charge of the Corporate Finance Headquarters of IB Longyan Branch introduced: “Behind it, the authorization system is a great reform of our bank. Since last year, the Head Office has changed the practice of allocating the approval authority according to regions into that of determining the line of approval based on the service targets of branches. For instance, if Beijing Branch and Longyan Branch provide services to enterprises of the same scale, the credit line that the presidents of both branches can approve for a loan is the same. Besides the credit line, the energy conservation and emission reduction loans within 5 years are also within the approval authority of branches. In this year, the approval power for loans within three years extended to key technical transformation projects in Fujian is also given to branches.
For the loan business, the key factor to improve efficiency is to simplify the procedure of examination and approval. In addition, the reporter also learnt that Longking was a key corporate customers engaging in environmental protection, and it was under the direct management of the Head Office in terms of customer management. In other words, all business needs related to such enterprises can be directly reported to the Head Office for solutions. A flexible mechanism is the key cause for the loan granted at an extraordinary speed.
If some urgent needs of an enterprise are met in a desired manner by a bank, then the relation between the bank and the enterprise can, no doubt, become closer. In the relation between Longking and IB Longyan Branch, the service framework with green gene where system innovation has been carried out in accordance with the requirements of green finance becomes the support that the branch provides differentiated services to the enterprise.
The future of green finance: innovation in business model
The Sustainable Finance Department of IB Head Office was renamed the Environment Finance Department in this year. The change of name further reinforces the future development direction of IB's green finance: to form a sustainable business model.
Liang Pingrui, General Manager of the Environment Finance Department of IB, interprets the green finance strategy of the bank as follows: “the development of green finance brings the bank with new business areas and assets of high quality and new source of incomes. At the early period of promoting green finance businesses, 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 felt and understood the profound connotation of green finance and the sustainable development concept extended from it through in-depth exchange and interaction with the government, 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. The sustainable development concept which contains the green finance concept has become the core concept for guiding the operation and management of our bank and reconstruction of the business process.
In the case of Longking, if relevant enterprises accept the solution of IB to introduce financial leasing tools, it will significantly alleviate the financial burden of those enterprises using equipment and meanwhile, further improve the product sale of Longking. Of course, it will also bring the bank more benefits. This is a “tri-win” situation. Furthermore, with the continuous promotion of innovative products in the area of green finance like emission right financing, the business model oriented development of green finance also becomes more prominent.
In the field of emission right finance, as the earliest bank getting engaged in the domestic emission right trading market, IB has offered active assistance in designing the framework and system for emission right trading regulations, providing integrated financial services regarding emission right. At present, IB carries out active cooperation with 9 of the 11 pilot provinces and municipalities for emission rights trading at home, provides professional financial services such as consulting for the design of emission right trading regulations, development of emission right trading and settlement systems, emission rights pledged credit, and financing for projects reducing the emission of pollutants.
Only after forming its business model can green finance become a sustainable development model, and this is an inevitable path to achieve differentiated competition in the banking industry in the future. Although up to now, Liang Pingrui indicated, the green cause is still a matter of “reputation” for many enterprises, the green business model of IB demonstrates clearly that it is not merely a flubdub to “obtain reasonable profits while bringing benefits to the stakeholders”.
According to the data provided in the third quarter report issued by IB freshly, by the end of September 2013, the bank has accumulatively provided 2,350 enterprises with green finance based financing totaling more than RMB 320 billion, with a balance approaching RMB 170 billion.