China Offers “Green Credit” to Polluting Enterprises

March 26, 2009, the Guangzhou based Meishan Mauri Yeast Company was highly anxious upon hearing the news that it would be “red carded” for its environmental record. This “red card” would limit the loans that that the company can obtain from banks.

In order to counter the increasingly severe issue of environmental pollution, “green credit” policies are being implemented across the nation in an effort to break away from the traditional practice of simply fining companies with poor environmental records. Guangdong is one of the strictest enforcers. Recently, the Guangdong Province Environmental Protection Agency issued a notice on enterprise environmental protection for 2008, among which, 269 were named as “Provincial Key Pollution Sources” for credit appraisal. The public notice shows that 210 key pollution source enterprises are being considered as environmentally creditable enterprises and will be presented with a “green card”; 31 are planned to be rated as environmentally warning enterprises and presented with a “yellow card” and 28 are planned to be rated as environmentally controlled enterprises and presented with a “red card”. Enterprises given a “yellow card” or a “red card” still have the chance to take remedial measures. Twelve of the 28 “red card” enterprises, including Panyu Meishan Mauri Yeast Co., Ltd, have taken remedial measures and have managed to meet the goals set by the environmental protection agency. Recently, the Guangdong Province Environmental Protection Agency issued a public notice on the environmental protection credit of enterprises in 2008.According to the Guangdong Province Environmental Protection Agency, details of the remedial action taken by warned enterprises will be given to the People’s Bank and the China Banking Regulatory Commission, and a recommendation will be made for the credit restrictions to be lifted. In the meantime, 16 enterprises, including key local enterprises such as the China Petroleum & Chemical Corporation Guangzhou Branch, were still unable to lose the “card” or take satisfactory remedial action. These enterprises may face restrictions on their future loans.

Personnel at the Guangdong Banking Bureau stated that banks have established a platform for information communication with the environmental protection agency. Relevant reports from the environmental protection agency issued on banking industry intranets at the earliest possible time so that banks can refer to such information in real time. In addition to placing loan restrictions on “yellow card” and “red card” enterprises, some banks have also been providing increased support to “environmentally-friendly” enterprises. In addition to “yellow card” and “red card” enterprises announced by the Guangdong Province Environmental Protection Agency, many prefecture-level cities in the pearl river delta have also adopted similar measures. Recently, environmental protection agencies in Dongguang and Foshan issued enterprise environmental protection credit management measures. According to these regulations, once an enterprise is given a “red card”, it will be unable to obtain bank loans.

Wu Renhai, Professor of the Institute of Environmental Science at Zhongshan University stated that the implementation of “green credit” is an effective deterrent on high polluters. Compared with traditional forms of restriction, “green credit” is more direct and effective. By exerting an impact on the capital source and operation of an enterprise, it encourages enterprises to take action to manufacture cleanly and be more proactive in assuming environmental responsibilities. (source: Xinhua Net)