The newly released guidelines will significantly increase the degree of attention paid by China’s banking and insurance sectors to work related to green finance, thereby improving efforts to foster low-carbon and sustainable development, officials said. experts.
The China Banking and Insurance Regulatory Commission recently announced that it has issued guidelines on green finance, requiring banks and insurers to promote green finance at a strategic level, reduce the carbon intensity of their asset portfolios in a gradual and orderly manner and, ultimately, to achieve carbon neutrality. of asset portfolios.
Banks and insurers should increase their support for the green, low-carbon and circular economy, prevent environmental, social and governance risks, include ESG requirements in their management processes and comprehensive risk management systems , strengthen ESG information and improve relevant policies, mechanisms and processes. management, the CBIRC said.
The regulator has asked banks and insurers to adjust and improve their lending and investment policies to support energy conservation, reduction of pollution and carbon emissions, green growth and prevention of disasters in key sectors and areas, and promote the application of green and low-carbon technologies.
Banks and insurance companies must take different actions in different situations, ensure the development of certain industries while limiting the growth of others, and avoid “one size fits all” measures and “campaign-style” carbon reduction , said the regulator.
Du Hongxia, a member of the China Banking Association’s expert working group dedicated to promoting the banking sector to support China’s dual carbon goals, said the recently released green finance guidelines can be attributed to the same origin as the guidelines on green credit issued by the regulator in 2012. , which aimed to encourage banks to develop green lending services and adopt more rigorous management of environmental and social risks.
The new guidelines will play an important role in supporting the development of green finance, as the government-led guidelines will effectively address market efficiency challenges. In addition, the regulator has expanded the scope of financial institutions by following guidelines from banks to insurers, Du said.
Major state-owned commercial banks and some major domestic commercial equity lenders have conducted many explorations of green finance and developed a comprehensive set of business development strategies and implementation mechanisms in various aspects, including structures organizational, business procedures, information disclosure and risk management. management. However, many small and medium banks do not have clear business strategies that support organizational structures or core capacities in green finance, said Zeng Gang, deputy director general of the National Institution for Finance. and development.
“By issuing new guidelines, the regulator aims to require all types of banks and insurers to develop a comprehensive set of institutional systems to support the development of green finance and improve their overall capabilities in this area. ensure that the entire banking system and insurance sectors will become more systematic, regulated and standardized in terms of offering financial services as part of China’s green transition,” Zeng said.
The regulator will promote best practices in these sectors and encourage more banks and insurers to advance related activities, he added.
As of the end of the first quarter, China’s outstanding green loans in yuan and foreign currencies reached 18.07 trillion yuan ($2.71 trillion), up 38.6 percent year on year, according to the People’s Bank. of China, the country’s central bank.
The total amount of domestic labeled green bond issuance in China exceeded 1.5 trillion yuan as of April 28. More than 30% of domestic green bond issuers were from the financial sector and more than half of domestic green bond investors were commercial banks, UBS Global said. Chief Investment Office of Wealth Management in a May 16 report.
The average annual growth rate of new green bond issuance from China since 2017 was 72%. The funds raised were mainly invested in renewable energy, low-carbon transport and water resources, the report said.