Green Credit in Jiangsu Begins a Virtuous Cycle

In order to implement the Notice on Comprehensively Implementing Green Credit Policies and Further Completing Information Share promulgated by the Ministry of Environmental Protection and the People’s Bank of China, the Environmental Protection Department of Jiangsu Province issued the Notice on Implementing Green Credit Policies and Further Completing Information Share (hereinafter referred to the “Notice”) on 29 September 2009, according to which the Environmental Protection Department of Jiangsu Province and the Nanjing Branch of the People’s Bank of China will select a group of cities and counties to conduct trials on the collection, reporting and sharing of environmental protection information of enterprises in Jiangsu.

It has been reported that in order to implement green credit policies, Jiangsu began to closely link the environmental behavior of enterprises to green credit followed by the publishing and rating of such information in the year 2000. According to figures for the beginning of June 2008, the quantity of rated enterprises in Jiangsu was 14957, among which there were 1095 green enterprises, 8383 blue ones, 4591 yellow ones, 697 red ones and 191 black ones. As the rating system has improved, financial institutions at all levels have launched “green credit” measures to “support green and blue and reject red and black” on the basis of the five-color rating of the environmental behavior of enterprises.

Enterprises scramble to improve their rating

Jiangsu Jiangyin Changjiang Paper Co., Ltd. (Changjiang Paper) was rated as a “black enterprise” because its chemical oxygen demand in every liter of discharged wastewater was 300-400mg, failing to meet standards. This was due to its insufficient facilities for treating wastewater and poor capabilities in the reduction of chemical oxygen demand.

After being given a black rating, decision makers of the company became anxious and felt themselves under unprecedented amounts of pressure. Especially after the "black list” was published in the local news media, banks gave the red light, ceasing their loans to Changjiang Paper and sending people to request repayment of old loans payable by the company.

Changjiang Paper was highly dependant on loans, and thus found itself in a difficult situation. Under increasing pressure, the decision makers of the company suddenly came to the realization that their only chance for revival would be to pay off the company’s debts in environmental protection. They turned this pressure into power by prioritizing the wastewater treatment reconstruction project as the “No.1 Project” and “Lifeline Project” of the company. After raising funds of RMB 6 million, the company employed advanced waste treatment technologies to renovate wastewater treatment facilities, and also added biological wastewater treatment facilities. Following over half a year of efforts, the renovation was completed ahead of schedule. The concentration of chemical oxygen demand in every liter of discharged wastewater was reduced by 60-80mg, satisfying the national first grade discharge standard. In the rating of environmental behavior, Changjiang Paper has finally been taken off the blacklist, and has been given a yellow rating.
The consequences of being blacklisted have made corporate decision makers in Jiangyin realize that their companies will only have broad prospects for development if they enhance their environmental behavior.

Information on environmental protection becomes a prime consideration for credit

In order to promote the timely incorporation of information on environmental protection of enterprises into the credit systems of the banks, strengthen the cooperation and coordination between environmental protection departments and financial departments, intensify social supervision and economic restrictions on illegal environmental behavior of enterprises, the Environmental Protection Bureau of Changzhou and the Central Changzhou Branch of the People’s Bank of China has incorporated information on environmental protection of Changzhou enterprises into the database for credit information of enterprises. For the initiative, the Environmental Protection Bureau of Changzhou and the Central Changzhou Branch of the People’s Bank of China signed the Agreement on Sharing Environmental Protection Information of Enterprises in Changzhou.

According to the agreement, the Environmental Protection Bureau of Changzhou will provide the Central Changzhou Branch of the People’s Bank of China with environmental information every quarter, including the rating list of environmental behavior, the list of environmental accolade winners such as “Environmental Friendly Enterprises”, the list of construction projects built without prior permission or put into operation without environmental protection inspection, the list of enterprises that are under supervision, required to take remedial action within a deadline, subject to limits in their production and discharge, required to stop production for remedial action and that are closed down, the list of enterprises that refuse to pay discharge fees or delay such payment with ill intent, the list of enterprises that are imposed administrative penalties for illegal environmental behavior, and the list of enterprises that are involved in serious and massive environmental pollution accidents or incidents.

Financial departments will actively aid financial institutions in implementing the most strict admission standards on environmental protection and strengthening advance investigation, process review and after-loan inspection for loans to high-pollution and high energy consumption enterprises. No loans or any type of credit support will be granted for extension projects or reconstruction projects that fail in the environmental impact approval or the acceptance inspection for environmental protection facilities. For those projects that are to be eliminated, all types of new credit support will be stopped and measures will be taken to retrieve previously granted loans. The Environmental Protection Bureau of Changzhou will arrange special priority funds for environmental protection to “green” enterprises that are rated according to their environmental behavior. As for “red” and “black” enterprises, all new loans except for those to upgrade and renovate waste treatment facilities will be forbidden. For “black” enterprises, the existing loans will be retrieved gradually on the condition that the safety of credit assets is ensured.

Information sharing optimizes the behavior of enterprises

In order to complete information sharing between environmental protection departments and financial departments, the Environmental Protection Department of Jiangsu Province requires environmental protection departments at various levels to enhance management of environmental protection information, specify the departments and persons to collect and provide information, and submit information on the environmental impact of construction projects under jurisdiction and information on as-built environmental protection acceptance and compulsory clean production review in the previous month prior to the 10th day every month to the superior environmental protection department the local branch of the People’s Bank of China. Environmental protection departments should submit the information on illegal environmental behavior to the local branch of the People’s Bank of China within 20 days after they impose the punishment to such enterprises and the local branch of the People’s Bank of China should report it to the superior level and finally to the credit center of the People’s Bank of China.

County (municipal) branches of the People’s Bank of China should submit information on illegal environmental behavior to the superior level of the People’s Bank of China within one working day of receiving the information submitted by the local environmental protection departments, and submit other information to the superior level of the People’s Bank of China within three working days. The central branch of the People’s Bank of China in every district and city should collect and summarize the environmental protection information and prepare data documents that are checked through format conversion and the pre-check of relative data. The information on illegal environmental behavior should be submitted to Nanjing Branch of the People’s Bank of China within two working days and other information submitted prior to the 20th day of every month.

Meanwhile, all financial institutions should carry out national industrial policies and environmental protection policies, guide and urge their branches to inquire and focus on the environmental protection information in the enterprise credit system while processing enterprise credit business. They should pay due attention to information on environmental compliance, implement green credit policies, prevent credit risks, and promote the development of a resource-saving and environmental friendly society. And also, all financial institutions should collect and master information on compressed or rejected loans confirmed by the branches due to environmental behavior of the enterprises, and submit the Feedback Table of Banking Institutions’ Using Environmental Protection Information to the Nanjing Branch of the People’s Bank of China within 15 working days after every half a year. (Source: China Environment News)