Green Credit Standard Expected to Start Trials in September

Green credit standard likely to come first in Hebei

On June 20, Wang Xiaojiang, Director of the Green Finance Institute of Hebei University of Economics and Business told journalists that he is undertaking a task allocated by the Ministry of Environmental Protection to draft a systematic standard on green credit, which is expected to be completed in September or October this year. The standard will be given a trial run in Hebei Province first before being submitted to the central government. The standard will be named the Guiding Standard on Green Credit or Fundamental Guiding Directory on Green Credit.

With the lack of a systematic standard on green credit at present, the commercial banks have been marching forward with their own initiatives. Recent actions include the implementation of a Guide on Credit to Support Energy-saving and Emissions-reducing by the Bank of China in May and the establishment of the first special organization for green finance by the China Minsheng Bank in the Dongcheng District.

According to the bankers, green credit will have an impact on profits in the short-run, but will become more prosperous as time goes on. What banks need most to provide good green credit services is to enhance their ability to analyze green industry.

Systematic standard on green credit lacking

Although some governmental departments have launched guiding opinions on green credit, the absence of a systematic standard has resulted in banks implementing inconsistent standards.

“On the policy level, there are some descriptions on green credit standards, but they are incomplete and nonsystematic. We lack a special industrial directory on green credit, so there are no credit policies on the basis of such an industrial directory.” Zeng Gang, Director of the Banking Research Office at the Chinese Academy of Social Science’s Institute of Finance and Banking analyzed.

Now, the modes of disclosing green credit data adopted by the banks are different. Take the three big state-owned listed banks for example. The China Construction Bank (CCB) discloses green credit data in its recently published social responsibility report. By the end of last year, the balance of CCB’s green credit projects was RMB 181.097 billion; The Bank of China (BOC) discloses this data in its annual report. The amount of green credit granted by BOC in 2009 was RMB 124.494 billion; while recently, the Industrial and Commercial Bank of China (ICBC) has not disclosed a specific balance of green credit. However, according to its new release last year, by the end of June last year, the balance of ICBC’s green credit projects was close to RMB 400 billion.

The disclosed figures show that different banks have different green credit standards. Wang Xiaojiang is currently working on a uniform standard. He expressed that they would translate principled content into a detailed practicable standard on the basis of related national policies.

In view of the practice of green credit, the capacity for industry analysis has become the primary question.

“China’s banking sector likes the pledge mode, but there is nothing for the environmental protection industry to pledge, so, due to lack of understanding of the industry, bankers dare not grant loans, or they require a guarantee.” Dr. Huang Jinlao, Customer Relations Director of Finance Headquarter of BOC said.

BOC tests a green credit guide

Although a green credit standard system at the national level has not yet emerged, some banks have already stated to make their own way in this regard.

BOC has recently issued and implemented the Guide on Supporting Energy-saving and Emission-reducing Credits (hereinafter referred to the “Guide”). BOC staff will refer to the Guide when determining whether or not to grant loans after receiving loan applications from customers. In an interview, Huang Jinlao expressed that BOC was the first bank to stipulate policies and guides for loans to strategic emerging industries.

The Guide classifies the energy-saving and emission-reducing industry into three groups, namely the strongly supported group, permitted group and forbidden group. It covers fifteen industries including thermal power, hydraulic power, nuclear power, wind power, photovoltaic and solar power, biomass energy power, new energy vehicle, new materials, steel, cement, papermaking, non-ferrous metal, glass, coal chemicals and wind power equipment. The Guide has specified the specific standards and measures for granting credit to these industries.

According to Huang Jinlao, the Guide contains implications on two levels. The first is to save energy and reduce emissions through credit policy. For example, loans will not be granted to thermal power plants with the installed capacities under 300,000kW. Relatively, BOC will give support to some production processes and methods that can significantly promote energy conservation and emission reduction. On another level, it provides support to clean and green industries.

In addition, BOC has continually launched internal risk regulations and control measures such as the Guiding Opinion on Standards for Some Industries to Quit Actively and the Notice on Strengthening Credit Regulation and Control. It classifies “high-pollution and high-consumption” industries and outdated capacity enterprises into the limited support group or quit group. Of the banks, it is the first to conduct regional industry quota management over enterprises with outdated capacity. Especially in the review and approval for credit extension, it has reclaimed the review and approval authority over some “high-pollution and high-consumption” industries and conducted the one-vote-down system for environmental protection. By the end of the first quarter, the percentage of BOC’s loans to controlled industries has dropped over one percent. (Source: 21st Century Business Herald)