Time: November 19, 2015 Source: Financial News
（http://www.financialnews.com.cn/yh/gd_89/201511/t20151119_87308.html）
From a small factory in mountain area of western Fujian to the first publicly listed company of Chinese atmospheric environmental protection industry and the leading company in domestic de-dusting industry, the successful transformation of Fujian Longking Co., Ltd., is the envy of many peers.
Indeed, when many small and mid-sized energy-saving and environment protection enterprises were still struggling for loans due to limited scale and long cycle of project, Longking however, has obtained green financing of nearly 500 million yuan from IB in recent two years, including investment banking, cash management, green finance and trade finance and other comprehensive services. Presently, Longking has become the leading player in domestic environment protection and de-dusting industry.
In fact, with the release of Master Reform Plan of Ecological Civilization System and green development ideas of the13th Five-Year Planning this year, green credit has been responded actively by commercial banks, and played a unique supporting role in the development of green industry and green economic development. Like Longking, more and more energy-saving and environment protection enterprises have become the beneficiaries of green finance.
As the reporter learned from IB recently, by the end of Oct. 2015, the bank has provided green financing of 754.328 billion yuan for thousands of enterprises, with a balance in green financing of 342.123 billion yuan. It is estimated that, the projects supported may, each year, save 25.5386 million tons of coal equivalents within China, reduce 71.6199 million tons of carbon dioxide, equivalent to total amount of CO2 absorbed by 7.16 million hectare forest, or stopping running 100,000 taxis for 34 years.
Just as what Chairman Gao Jianping, the “captain” of the first Chinese Equator Bank, has summarized, “IB has developed a ‘green-to-gold’ road of sustainability with completely reforged process from innovation in single products to reform of business model and from corporate governance philosophy to enterprise system and procedure.”
Dare To Be the First, Turning Green Into Gold
From launching the first energy-efficient financing program and carbon finance program, offering the first low-carbon credit card to taking the lead in promising to follow the Equator Principles in China, to establishing specialized institution and offering emission rights finance service, IB, as the pioneer of the Equator Principles in China, impressed outsiders with its “dare to be the first” spirit.
The so-called “Equator Principles”, launched by the major financial institutions in the world according to the policies and guidelines of International Finance Corporation (IFC) and World Bank, are a range of benchmarks for financial industry to identify, evaluate and control environmental and social risks in project financing.
It is worth mentioning that, while others were holding a wait-and-see attitude, IB announced to adopt the Equator Principles as the first Chinese equator bank on Oct. 31, 2008, thus became the 63rd Equator Bank globally. Relying on such “one step ahead” strategic decision, IB has secured its leading position in green finance.
As learned by the reporter in the interview, by taking reference to a whole set of ideas, approaches and tools on green finance in the Equator Principles, IB has built a comprehensive environmental and social risks system in recent years. Absorbing the advanced ideas and models of the Equator Principles, IB has registered great prosperity in developing the business of green finance. Up to now, IB's green finance has covered low-carbon economy, recycling economy and ecological economy, becoming the bank with the broadest green finance product family and the most diversified products at home, and achieved large-scale development in the area.
What's more important is that it helps enterprises to manage and prevent environmental and social risks by using the Equator Principles, thus gaining economic, social and environmental benefits.
In January 2012, the first project following the Equator Principles voluntarily in China was implemented in Shaanxi. It is a Liquefied Natural Gas (LNG) Integrated Utilization Project in Jingbian County, Yulin City, Shaanxi, and the investment of first phrase is 300 million yuan. Although originally the project did not fall into the category applicable to the Equator Principles, the principles aroused the interest of the project loan enterprise Xilan Natural Gas Co., Ltd. when habitually mentioned by IB Xi’an Branch planning the special financial service solution for the enterprise.
Pursuant to the Equator Principles, IB helped Xilan to formulate nearly 30 suggestions on the improvement of environmental and social performance in many aspects including occupational health and safety, pollution control, wastes, community communication, and emission of greenhouse gas. In addition, drawing on good practices in the world, it provided a range of construction schemes. Finally, the project achieved both economic and environmental benefits in the areas of improving the city’s ecological and environmental quality, increasing the city’s economic strength and employment, adjusting product structure, and optimizing the supply methods.
Data show that by the end of October this year, IB has examined the applicability of 890 projects to the Equator Principles altogether. Specifically, 251 of them were approved as projects applicable to the Equator Principles, with a total investment of about RMB 542.711 billion, involving 244 customers, 10 major categories of national standard industry and 38 branches of the bank.
“Professional Business”
“For small and mid-sized energy-saving and environmental protection enterprises with a long cycle of project like us, the financing support from IB is just like opportune rain.” The relevant person in charge of Xiamen Lianyi Jiyuan Environmental Protection Engineering Co., Ltd (“Lianyi Jiyuan”) sighed, “When the project land was not ready as collateral, IB still provided us with loans, which totally proved their professionalism.”
At the end of 2010, the first urban domestic garbage treatment plant in Xiamen was approved with a total investment of 198.67 million yuan. It is estimated that, as the project constructor, Lianyi Jiyuan faced a capital gap of about 110 million yuan.
At the beginning of 2013, Lianyi Jiyuan submitted an application for project loan to IB. Based on pre-loan due diligence and understanding of project construction and the actual needs of the enterprises, the green finance function of IB Xiamen Branch submitted credit extension plan and review report for risk identification to the relevant department of the bank, and the application was approved in May of that year by the Head office with a credit line of 110 million yuan.
However, the report and approval process is not as simple as it looks. “From the Head Office to the branch, IB attaches great attention to the project and coordinates closely.” As introduced by an account manager of IB Xiamen Branch, both the approval method and guarantee measures were innovated.
On the one hand, IB Head Office combined formal approval and pre-approval when some of the project's formalities had not completed, thus finishing the approval process at Head Office effectively. On the other hand, the Environment Finance Dept of the Head Office provided professional guidance to technique issues of the project, such as certified emission reduction, RDF revenue, garbage treatment process and efficiency of methane power generation, solving these problems in the approval process.
In particular, when the project land was not ready as collateral, the branch used garbage treatment fee collection rights as pledge, thus making a breakthrough on the original policies on project loan. The branch also set preferential interest rate, and adjusted repayment arrangement according to regulation, which lowered the financing cost and reduced operation pressure for enterprises.
“Professional business” is one of the prominent characteristics in the support of small and mid-sized energy-saving and environmental protection enterprises by IB. As learnt by the reporter, IB established an energy efficiency financing team as early as 2005, which developed into the Environment Finance Department today with nearly 200 members after institutional function adjustment, becoming the biggest green finance team in China, which further showcases its professionalism in business operation.
Comprehensive Innovation, Building Green Bank
IB believes that green finance not only extends new business and realizes new business growth, but can also become an important opportunity for commercial banks to form its own business characteristics and brand, implement differentiated competition strategy and realize sustainable development.
IB hopes to become a full spectrum finance service provider and comprehensive green bank in the Chinese green finance market by innovating products and services of green finances.
In 2011, the first case of Chinese carbon assets pledged credit business was implemented. By pledging the expected carbon sale incomes of its 20 MW small hydropower project in the future, a private-funded hydropower generation enterprise of Fujian successfully applied the financing support from IB.
This small hydropower CDM (clean development mechanism) project had been registered at UN successfully with an expected emission reduction of 43,000 tons, and signed a purchase agreement on emission reduction with a Swedish carbon assets company.
However, during its communication with the clients, IB learned that, due to the rainless period from January to May of each year, both the electricity generated by hydropower station and revenue of the company were reduced. On the one hand, the carbon emission reduction was not issued yet, thus the company had not gained carbon sale incomes, and on the other hand, faced with capital demand for repairing the hydropower station, the cash flow of the company was tight.
How to solve the problem? For the actual needs of the company, IB took the future accounts receivables (carbon sale incomes) of the hydropower project as pledge guarantee, and designed a credit extension plan with an initial amount of 1.08 million yuan, and continued to optimize the plan depending on the issue of actual emission reduction and project operation. In the mean time, IB also, by taking its advantages in professional capabilities, legal, financial and negotiation, helped business owner to reach more reasonable emission reduction trade agreement and to avoid potential legal disputes.
In the end, IB remedied the shortcomings of CDM by way of innovative finance, reduced the impact to project operation by CDM's long approval process, activated the enterprise's carbon assets, and effectively relieved the financing problems for small and mid-sized enterprises.
Carbon assets credit extension is just one of IB's numerous innovative products. In fact, IB has not only registered a number of 1st in the industry, but also extended green finance business into a full coverage from enterprises to individuals, and built a relatively complete system of green finance products and services including energy-saving and emission reduction financing service, emission rights trade service and individual low carbon financial service.
As learned by the reporter in the interview, by taking reference to a whole set of ideas, approaches and tools on green finance in the Equator Principles, IB has built a comprehensive environmental and social risks system in recent years. Absorbing the advanced ideas and models of the Equator Principles, IB has registered great prosperity in developing the business of green finance. Up to now, IB's green finance has covered low-carbon economy, recycling economy and ecological economy, becoming the bank with the broadest green finance product family and the most diversified products at home, and achieved large-scale development in the area.