Green lending surge is good news for sustainable growth

A growing number of Chinese companies have been benefiting from "green credit", since the China Banking Regulatory Commission in June last year encouraged finance houses to develop more products aimed at improving natural resource efficiency, environmental protection and sustainable development.

The CBRC claims the balance of green lending by 21 major banks hit 6.01 trillion yuan ($944 billion) by the end of 2014, a 15.67 percent rise from the beginning of that year.

It said the projects supported by the loans were expected to reduce annual standard coal consumption by 167 million tons, water use by 934 million tons, carbon dioxide emissions by 400 million tons, sulfur dioxide emissions by 5.88 million tons and nitrogen oxide emissions by 1.6 million tons.

One enterprise to have taken out such a green credit line is Shanxi Qiangwei Paper Co Ltd, a private gypsum board facing paper manufacturer.

With a total annual production capacity of 300,000 tons, it has applied for loans worth 200 million yuan from the Industrial Bank Co Ltd, a mid-sized commercial lender headquartered in Fuzhou, capital of Fujian province.

Fujian's environmental protection authorities regularly inspect local paper manufacturers, and had in the past ordered those that did not meet national wastewater standards to halt production until they sorted out any problems.

But during its loan due-diligence process, Industrial Bank examined Shanxi Qiangwei for potential environmental and social risks, and persuaded it to build its own water-treatment reservoir in accordance with local standards, thus avoiding any potential production shutdowns.

It also helped the company create its own emergency health and safety plan, and monitored its implementation. Future environmental updates will be carried out at the firm on a quarterly basis.

Officials said that after introducing the strict measures and advanced technologies, Shanxi Qiangwei has been able to reduce its annual standard coal consumption by 134,400 tons and carbon dioxide emissions by 330,000 tons, as well as recycle 370,000 tons of waste paper and 272,000 tons of waste rock.

Seven years ago, Industrial Bank adopted the Equator Principles, a voluntary set of guidelines for signatory banks to determine, assess and manage environmental and social risks when financing development projects.

By the end of June, the Shanxi Qiangwei project was one of 236 the bank had approved under the principles, worth a total of 501.7 billion yuan across 10 sectors including wind power generation, water pollution control and chemical raw material manufacturing.

The bank is exploring the development of a range of innovative new financial products, including carbon pledge loans, emission rights pledged credit and green financial asset-backed securities.

"Developing these green products and services has opened a new market for the bank. Following the Equator Principles, we have also been able to enhance our own risk management capability, too, which has given us a very definite advantage, in both our domestic and international operations," said Li Renjie, the bank's president.