China is serious about green lending. That’s what Chinese officials signaled to the international community at the first International Green Credit Forum in May, co-sponsored by IFC and the China Banking Regulatory Commission.
CBRC Vice-Chairman Wang Zhaoxing said that China will use evaluation and accountability mechanisms to closely look at how Chinese banks are implementing the Green Credit Guidelines released in February. He told a media briefing on the sidelines of the forum that the Commission will establish means by which to assess banks' work on green credit, and the standards will apply not only within China, but also to overseas branches and operations. He said names of banks that do not perform well in this area may be published, and a bank’s performance on climate-friendly lending will also factor into the evaluation of its senior executives.
The Chinese government launched its groundbreaking Green Credit Policy in 2007, encouraging banks to lend more to climate-friendly projects and less to highly polluting ones. Since then, IFC has worked with Chinese authorities and banks by sharing lessons and technical resources to support the policy.
The Green Credit Guidelines set out how banks should address sustainability issues at the board and top management level and how to integrate environmental and social considerations into the entire lending circle with a robust evaluation mechanism. IFC has been a key technical advisor to CBRC in this effort, and IFC’s Performance Standards were used as reference for the guidelines.
Two of China’s major banks, China Development Bank and Industrial and Commercial Bank of China, built up a combined green credit loan portfolio of nearly $200 billion as of 2011, in areas like waste treatment, renewable energy, and pollution control.
However, evaluation across the banking industry remains challenging. For instance, mandatory reporting has not been put in place and therefore, financing flows are hard to measure.
Going forward, IFC will support CBRC in developing a set of key performance indicators to bring clarity and consistency to the implementation and to strengthen evaluation. IFC will also work with CBRC and China’s Ministry of Environmental Protection to help develop sector-specific guidelines to help banks understand the very real environmental and social business costs of high-risk sectors, such as highly polluting, energy and water-intensive projects.
Regulators, government officials, and other financial sector representatives from 20 countries attended the International Green Credit Forum in Beijing. The next one will be held in Dhaka, Bangladesh in 2013.