Date: June 9, 2017 Source: Shanghai Securities News
(http://finance.jrj.com.cn/2017/06/09032522590021.shtml)
Industrial Bank (IB) didn’t expect that green finance would become one of its core strategic business 11 years after it cooperated with International Finance Corporation (IFC) to launch China’s first energy efficiency financing product in 2006. The practice hereafter proved that the efforts in green finance not only showed dramatic outcome but also helped avoided many risks.
For local governments, green finance is also their focus. The reporter from Shanghai Securities News learned that the application of Zhejiang Province for the pilot zone of green finance reform and innovation was very likely to be approved in the near future.
With low NAP rate, green finance boosts banks to enhance quality and efficiency
As expressed by Yang Ying, the GM of green finance department of IB Hangzhou Branch, during the interview, IB Hangzhou Branch witnessed low NPA rate as much as 0.98% in 2016, which was lower than the local average level due to the vigorous development of green finance business in recent years.
Some insiders revealed that last year there were only 3 shareholding banks in Zhejiang Province that earned real profit and IB was one of them. By the end of April, 2017, IB Hangzhou Branch has provided totally over RMB 100 billion of green financing for more than 800 enterprises and projects; the balance of green finance exceeded RMB 54.6 billion, accounting for one tenths of the total scale of IB’s green finance.
From the view of the whole bank, by the end of April 2017, IB has accumulatively granted green financing of over RMB 1.2048 trillion for many energy saving & environment protection enterprises and projects and the green financing balance has amounted to nearly RMB 567 billion. The NPA rate was only 0.38%, down by 0.11% compared with the year beginning, and the asset quality excelled the industry average.
IB set foot in the green finance field in 2006. After efforts of a decade, in 2015, IB further determined the strategy of taking green finance as one of the seven core business of the group, setting up a special green finance promotion team inside the group, building a group of green finance. The development of related business also led the industry.
As for the reason for low NPA rate in green finance, Peng Guanghui, the vice president of IB Hangzhou Branch mentioned that one of the reasons is that a large part of green finance projects come from state-owned enterprises and the supply-demand condition is better than that of other industries while national policies are beneficial for banks to avoid risks.
In the general background of increasingly rigorous environmental issues, the state has made top design and overall layout for the construction of ecological civilization, including the implementation of the new environmental protection law, the “Ten Rules for Water”, “Ten Rules for Atmosphere”, “Ten Rules for Land” and other rules of environmental protection; seven administrations and departments have jointly issued the Guiding Opinions about Establishing the Green Finance System. Green finance has become a national strategy.
Ma Jun, the chief economist of PBC, indicated in a forum held in the second half of this March that green finance has been included in almost all files of the PBC. Now they are going to be implemented, especially implementing the Guiding Opinions about Establishing the Green Finance System jointly issued by seven administrations and departments in last August. A work team is now formulating the scheme of job breakdown for green finance opinions and some breakthroughs are very likely to be made, such as reducing the cost of green finance by means of PRC re-loan, interest subsidy and security.
It is reported that in 2016 China issued totally RMB 230 billion of labeled green bonds in the overseas market in 2016, accounting for 40% of the global green bonds, making China the largest green bond market in the world. The scale of green credit & loan is also expanding. By February 2017, 21 banks have issued RMB 7.5 trillion of green credit & loan, accounting for 8.8% of the balance of each item. In addition, green ABS, green security bonds and other innovative products keep popping up.
Green finance gains support everywhere and helps banks increase impact
There is no doubt that green finance is now embracing a rare opportunity. Local governments are greatly pushing the development and innovation of green finance in many ways.
The reporter of Shanghai Securities News learned that, in April 2016, coordinated by Zhejiang provincial government and actively promoted by Zhejiang Provincial Financial Promotion Union, IB and National Development Bank, the Specialized Committee of Green Finance of Zhejiang Province was officially launched which, at the beginning of 2016, developed the general scheme of green finance reform and innovation pilot zone and submitted it to the State Council. Zhang Wei, the general secretary of Zhejiang Provincial Financial Promotion Union, revealed that this pilot zone is very much likely to be approved.
Many places, including Huzhou City, are striving for the title of the pilot zone of green finance reform and innovation. Huzhou proposed that it would make efforts to become the national pilot zone of green finance reform and innovation by constructing a green finance system in alignment with the ecological civilization construction and social and economic development of Huzhou during the Thirteenth Five Year Plan.
Wang Qun, the deputy director of the planning finance sector of the Environmental Protection Department of Jiangsu Province, said during the interview that the Department is also discussing with the provincial financial bureau about how to more effectively using financial measures and considering further promoting the work of green credit & loan and green fund.
In fact, supported by national industry policies, banks will also have more opportunities by making a breakthrough with green finance.
“We are a new-coming bank in Zhejiang but we have built tight connections with the government via green finance.” Peng Guanghui said the issuance of green bonds for Yiwu government helped open the door of cooperation with Yiwu State-owned Asset Administration, allowing IB to become one of its three partnering banks.
The background of this brand effect lies in that although many places are developing green finance and other banks can also issue mid-term notes or short-term financing products, green bonds are more beneficial for promoting the brand.
Obviously IB has once again won the market. In 2016 IB formulated the mid-term goal of green finance “Two Ten Thousands”, which is to, by 2020, achieve RMB 1 trillion of balance in green financing inside the group, and achieve ten thousand clients (projects) in green finance.
“The market of green finance is very promising. First, it gains much attention from the state and is greatly supported by policies; second, the market is massive and almost half of national key PPP projects are environmental protection projects, such as green buildings. The goal of our national is that by 2020, green buildings will account for 50% of all newly-built construction in cities, the area of energy-saving reconstruction of existing building will exceed 500 million square meters, the area of energy-saving reconstruction of public building will reach 100 million square meters. The demands on financing in this regard are very remarkable and banks can do a lot about it.” said by Luo Shiyi, GM of Green Finance Dept., IB.