Time: September 8, 2016 Source: 21st Century Business Herald
(http://epaper.21jingji.com/html/2016-09/08/content_46388.htm)
As the president of G20 in 2016, China includes green finance into the agenda of the summit, and calls for the launch of the G20 green finance research group. On August 31, China’s central bank and other seven ministries issued Guidance on the Construction of the Green Finance System. This is the most systematic policy framework on the development of green finance so far, said Yi Gang, Deputy Governor of China’s central bank.
In recent years, quite a few banks have actively involved themselves in green finance market and even have listed green finance as their strategic business.
On September 6, a journalist from 21st Century Business Herald interviewed several institutions including Industrial Bank, Bank of Nanjing and HSBC, and learned that currently the green finance business of these banks served enterprises in the form of "credit plus non-credit”, and has form its own characteristics.
IB: Non Credit Occupies 50%
Luo Shiyi, General Manager of IB’s Department of Environmental Finance, told the journalists that, broadly speaking, green finance refers to all investments and financing that can produce environmental benefits. China has also established relevant standards of green finance, including Guide to Green Credit, Guide on Issuing Green Bond and Directory of Green bond-backed Projects and so on.
Green finance includes not only credit, but also bond, trust, fund, financing and leasing that also have a promising prospect. In IB’s green finance business, credit and non credit account for 50% respectively.
In addition to the Department of Environmental Finance at the level of headquarters, IB has also set up a group to promote green finance, and takes the parent bank as the mainstay, integrates the Group’s nine financial business licenses, and pushes forward businesses led and coordinated by IB. Its branches also set up environmental finance centers.
According to the data provided by IB, since 2006, IB has accumulatively granted green finance of nearly RMB 900 billion for over 6400 enterprises, and the current balance has exceeded RMB 430 billion, occupying more than 14% in the financing balance of enterprises.
Moreover, IB also developed green finance products for individuals, such as low carbon credit cards and consumption loan for new energy vehicles.
Luo Shiyi told the journalist that the green finance business is of higher quality than other assets. "Economic, social and ecological benefits are good, and its ratio of non-performing asset is also lower than the average level of the bank and the industry. For instance, at the end of the second quarter this year, IB's ratio of non-performing asset in green finance business stands only 0.47%."
He also analyzed that green finance business involves some typical environmental protection industries such as sewage treatment, air and soil treatment, new energy and renewable energy. Most of them are public utilities and government-led projects with a rigid demand, a relatively stable cash flow, and a long term. They belong to weak cyclical industries, and have certain requirements for bank's professional services and risk control capabilities.
Competitions exist in the "blue ocean"
“In recent years, we have noticed the blue ocean of green finance, and also invested in that field. Meanwhile, we can feel the pressure of competition in the industry. But the green finance market is too large to handle for a single bank." Luo Shiyi said.
In the development of this business, a number of banks have formed their own differences and characteristics. Unlike the Industrial Bank, second-tier departments are in charge of green finance business for a majority of banks and they are forming relevant product systems.
For instance, personnel in Bank of Nanjing told the journalist that green finance is elevated to a strategically important position in the bank. In 2014, a green finance group was set up with the leaders as the head and the personnels responsible for relevant departments as its members; it adjusted the headquarters’ structure and organization, and established Department of Green Finance in the Business Division committed to construction of green finance system and marketing-related work.
Bank of Nanjing also relies on government-related resources, focuses on key enterprises and characteristic parks and expands the influence of the Bank's support on green finance industry. In the future, Bank of Nanjing will further its research and development of characteristic products in fields including energy efficiency financing, water efficiency, carbon finance and emission permits.
Apart from China-funded banks, foreign-funded banks also hope to benefit from China’s green finance market.
A personnel who works in green finance business of a joint-stock bank told the journalist that foreign-funded banks have the advantage in helping Chinese enterprises issue green bonds in foreign market.
Huang Bijuan, CEO of HSBC Greater China, told the journalist that in terms of capital market, HSBC takes an active part in the development of green bond market. For example, in 2016, it assisted the Bank of China in issuing overseas green bonds amounting to $3 billion, representing the most diverse ones with the largest amount in the international market.