Date: June 10, 2017 Source: China Business
（http://www.cb.com.cn/finance/2017_0610/1186869.html）
As one of the five concepts guiding China's future development, green development has become an important connotation of the current structural reform of supply side, which contains huge financial demands.
The World Wide Fund (WWF) estimates, during "the 13th Five Year Plan", China's green financial demand will reach up to RMB 14.6 trillion, which means that green finance will embrace an upsurge in the future and financial institutions will also encounter significant strategic opportunities.
For commercial banks, it is an important task to consider how to make green projects gain economic benefits as well as environmental and social benefits when developing green finance.
As the first Equator Bank in China, Industrial Bank (IB) has been initiating energy efficiency project financing business since 2006 in China, taking the lead in opening up domestic green finance market and gradually promoting green finance aggressively as its strategic business. Now it has excavated green finance for 11 years. The reporter of China Business notices that by the end of April 2017, the bank has accumulatively granted nearly RMB 1.2048 trillion of green financing to 12,123 clients, with the green financing balance hitting RMB 567 billion. The projects supported with such financing could save 28.76 million tons of coal equivalents each year, reduce 83.05 million tons of carbon dioxide, and save 407.84 million tons of water.
Constructing diversified financing mode
“Recently, we have established Zhejiang Energy Group Mixed Equity Investment Fund together with Zhejiang Energy Group. The 20-billion fund will be totally invested in green projects in Zhejiang, such as natural gas, energy and other equities of related corporation.” Peng Guanghui, Vice President of IB Hangzhou Branch, said this was the first green equity fund in Zhejiang, which was also an active exploration and attempt to participate in the green project with equity.
Peng also introduced the financing mode of several green projects, such as the green assets securitization of Hangzhou steel and ticket sales in Xitang scenic spot. These projects are representative cases of IB using various financing tools in the field of green finance to promote green development, and are also important measures of the bank's differentiated promotion of resource allocation.
Reporter found through the investigation that, in addition to the green credit, IB has also constructed green financial product line by using various financing tools and innovating in business mode in terms of supporting the green projects of enterprises and the government to improve the environment.
Luo Shiyi, General Manager of IB Green Finance Department, introduced that at present, domestic green finance mainly gives priority to green credit. Green bonds have begun to develop rapidly since 2016, and green fund, lease and green equity investment have also developed to different extent. IB bases itself on green credit and uses diversified financial products comprehensively to expand new business fields of green finance, such as green lease, green credit, green fund and green investment. It works out multiple financing models and constantly develops innovative diversified green finance products.
For example, in 2010, the bank launched the first low-carbon credit card and carried out the first carbon asset pledge loan; in 2012, it launched the first mortgage on sewerage, and the first comprehensive solution to utilize and protect water resource was introduced in 2013; in 2014, it issued green finance credit asset-backed securities for the first time; in 2016, the bank for the first time published the green financial bond, carried out the first carbon credit card and carried out the first asset buy-back business, and the first green wealth management product issued to individual investors.
Luo Shiyi told to the reporter that in 2016, IB integrated green financial products and services of the whole group, issued a collectivized green financial products and services system: providing a complete range of collectivized green financial products and services including green financing, green lease, green credit, green fund and green bonds, etc. for clients in energy conversation and environment protection industry; aiming at individual customers, putting forward some individual green finance service, such as LC credit card, green mortgage, green consumption loan and wealth management.
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 ratio is 0.38%, down by 0.11% compared with that at the beginning of this year.
In addition to gaining economic benefits, in terms of environmental and social benefits, it is estimated that by the end of April 2017, the projects supported with IB's green finance could save 28.76 million tons of coal equivalents each year, reduce 83.05 million tons of carbon dioxide, 2.34 million tons of chemical oxygen demand (COD) and 0.76 million tons of sulfur dioxide, comprehensively utilize 44.62 million tons of solid waste and save 407.84 million tons of water per year. The energy-saving emission reduction showed above is equivalent to the amount of closing 190 100wg heat power stations, or the total amount of carbon dioxide absorbed by 8.31 million hectares of forests per year.
China's green finance standards need to be improved
Last August, seven ministries including the Central Bank, Ministry of Finance, the China Banking Regulatory Commission (CBRC) and others jointly issued the Guidance on Building Green Financial System, which is also considered to be the symbol of establishing China's top framework system of green finance. In the G20 Hangzhou Summit last year, green finance was also included in the communique for the first time. Li Keqiang, Premier of the State Council stated this March in the Report on the Work of the Government, that green finance should be vigorously developed in terms of the reform of financial system.
As the green finance turns into a national strategy, it is increasingly known by the public, and related regulatory standards and certification regulations are further improved on how to determine whether the financing project is "green" or the raised money is invested into green projects.
According to the people concerned, there are three main criteria for the recognition of green finance projects: one is the green project stipulated in Green Credit Statistics Table promulgated by the CBRC; another is the Green Bond Support Project Catalog published by People's Bank of China (PBOC) and formulated by China Finance Society Green Finance Specialized Committee.
Taking the example of green bonds, different supervision departments in China are responsible for approving green bonds of different types. PBOC is in charge of green financial bond, National Development and Reform Commission (NDRC) is responsible for green enterprise bonds, and Shenzhen & Shanghai Exchange takes the charge of green corporate bonds. But the third-party certification bodies involved in green bonds, such as Ernst & Young Hua Ming and Price Water House Coopers (PWC), have not formed a unified certification assessment standard.
As early as in 2008, IB officially promised that it would adopt Equator Principles and become the 63rd equator bank in the world and the first in China. Equator Principles (EPs), established by the world's major financial institutions according to the policies and guidance of world bank group members, with the purpose of judging, evaluating and managing environmental and social risks in project financing, is a set of international advanced management tools of project financing environment and social risks. At present, there are 89 financial institutions, including IB, in 37 countries around the world, adopting the Equator Principles. They account for more than 70% of project financing in emerging markets. Now, we have four Equator Banks, two of which are in the mainland (the other one is Jiangsu Bank) and other two are in Taiwan.
After years of practice, IB refers to EPs to provide a set of ideas, methods and tools to green finance and establishes a comprehensive environment and social risk system, which effectively strengthens the consciousness of environmental and social risks involved in projects. It also assists enterprises to assess and manage risks and enhance their competitiveness, making IB access to economic benefits and social & environmental benefits at the same time, and achieve the integration of sustainable business mode and social responsibility fulfillment.
By the end of April 2017, IB has accumulatively made judgment on 978 projects based on the Equator Principles. There are 316 suitable for Equator Principles with the total investment amount of RMB 1.2216 trillion.