“Green Credit” Becomes a New Area of Growth for Small and Medium Banks

Near to the launch of the Revitalization Plan of New Energy Industry, “green credit” has been given priority by certain banks. Green credit focuses on energy saving, environmental protection and new energy.

At the forum for energy saving and emissions reduction proposed by Perfect Environmental Protection Tech Co., Ltd on 8 August 2009, the business opportunities in the energy-saving and environmental protection industry, especially in the fields of new energies and energy saving in construction, drew attention from the participants. As one of the participants, the Industrial Bank put forward the solution of an energy-saving and emissions-reduction system on the basis of the financial supporting platform, which caught the attention of the other participants. It is understood that in addition to the Industrial Bank, other small and medium banks such as the Shenzhen Development Bank and CMBC have developed a complete supporting platform for “green credit” projects as important sectors of growth.

Financing demands for energy saving and emission reduction projects emerge

Recently, the Shenzhen Expertise Federation of Energy Conservation, Shenzhen Branch of Industrial Bank and Shenzhen Perfect Environmental Protection Tech Co., Ltd. held a forum on energy conservation and emission reduction at Shangri-La Hotel in Futian District, Shenzhen.

Zhao Hua, Secretary-general of the Shenzhen Expertise Federation of Energy Conservation expressed that the General Office of the State Council recently issued a national Notice on Arrangement of Energy Saving and Emission Reduction Work on 3 August. China is a country facing serious energy shortages. Among the 45 products that underpin industrialization, China is faces serious shortages in 25 kinds, of which the majority are energies. Moreover, China’s economic growth requires high energy consumption. Electric energy, as one of the most common city energies, can most directly reflect the technical level of a country and its state of energy utilization.

According to incomplete statistics, China consumes 176.83 billion kwh of electric energy more than developed countries every year. The level of energy consumption in China is more than twice the average world level. That is to say, the potential for energy saving is huge. The potential for energy saving in China is up to RMB 30 billion every year, half of which will be saved through electric savings though the use of air conditioners.

The same goes for Shenzhen. On the one hand, Shenzhen faces electricity shortages On the other hand, its electrical consumption is seriously high. The main reasons why buildings such as office buildings have extremely high energy consumption are poor system design, nonstandard and uncommon application of energy saving measures and low standard of system operation management. So, the potential for energy saving is huge. Energy conservation and environmental protection have become the inevitable trend of the refrigeration and air conditioning industries as an important field for building energy conservation.

In recent years, some enterprises have implemented energy saving projects in the form of EMC, which has proven to be a good approach. While the aid and support from the government cannot benefit all small and medium energy-saving and environmental-friendly enterprises, more energy-saving and environmental-friendly projects are still in great need of financing demands.

CIB and SDB move first

As one of the participants, the Industrial Bank (IB) put forward the solution of energy-saving and emissions-reduction system on the basis of the financial supporting platform, which captured the attention of the other participants. It is known that IB plans to grant a total loan of RMB 10 billion for energy-saving and emissions-reduction projects during the 11th Five-year Plan. By the middle of last year, IB had granted 69 loans totaling at RMB 2.153 billion.

A significant action of the “loan proposal for energy-saving and emission-reduction projects” of the Shenzhen Branch of the Industrial Bank is that it has lowered the threshold for enterprises to obtain bank support, which enables enterprises to enjoy discount interest and incentives from the government for energy-saving and emission-reduction projects after enterprises are qualified for loans. “IB is not only a provider of loans for energy-saving and emission-reduction projects, but also a supplier of energy-saving equipment, energy-saving plans and associated third party support services.” An official said.

Shenzhen Development Bank (SDB) is also a fast moving bank which is aware of these business opportunities. In June, a “green financial service” action was jointly launched by the Environmental Protection Bureau of Shenzhen and the Shenzhen Branch of SDB. The latter will provide a package of financial services to enterprises which require financing for the optimizing and upgrading of environmental protection facilities.

For instance, the SDB will release a guideline for green credit policies in the next three years to support the growth of small and medium enterprises in terms of environmental protection. Development of environmental protection enterprises is restricted due to outstanding problems such as insufficient pledges and difficulties in financing. The “brilliant” financing proposals launched by SDB are stipulated according to the actual demands of enterprises of production, trading and logistics. Chattel mortgage, intangible assets mortgage and credit loan are proposed.

However, in contrast to the active preparation of small and medium banks, large state-owned banks are lagging in “green credit”. It is known that although the head offices have granted a large amount of credit lines to support “green credit”, Shenzhen the Branches of CCB, ABC and ICBC lack special classification in terms of green credit. (Source: Nanfang Daily)