With 8 Years' Exploration, Industrial Bank Grows into a Professional Service Supplier in Energy Efficiency Credit

On January 19, 2015, China Banking Regulatory Commission (CBRC) and National Development and Reform Commission (NDRC) jointly released the "Energy Efficiency Guidelines" in Beijing, which is another milestone event after the "Green Credit Guidelines" in the development course of China's green credit. As the earliest one offering energy efficiency financing loan in China, Industrial Bank (IB) has always enforced relevant work requirements specified in the "Green Credit Guidelines", kept exploring the area of greed credit, and offered over 1,000 enterprises with energy efficiency financing loan totaling RMB 311.8 billion in the past 8 years.

As a credit financing means provided by banks for supporting energy consumers to improve their energy efficiency and reduce energy consumption, energy efficiency credit is a key area of green credit. The "Energy Efficiency Guidelines" released this time specifies the key service areas and supporting projects of energy efficiency credit, and credit modes and risk control methods available, and encourages innovation in products and services. Requiring the establishment of an incentive and restrictive mechanism facilitating the promotion of and innovation in energy efficiency credit, the Guidelines points out a direction for banking institutions to enter the area of energy efficiency credit and provides effective business guidance.

Analysts believe that the "Energy Efficiency Guidelines" will no doubt guide more financial institutions in the banking industry to enter the area of green credit, and in this way they can bring into play their role of resource allocation in guiding social capital to flow toward the areas of green economy and low-carbon economy.

As early as 2006, energy conservation and emission reduction was elevated as a national strategic objective in China's "11th Five-year Planning". In 2012, the 18th CPC National Congress put the construction of ecological civilization and Beautiful China at an outstanding position. To support the implementation of the national energy conservation and emission reduction strategy, in 2012, the CBRC enacted and issued the "Green Credit Guidelines", the guideline document for green credit, to encourage financial institutions in the banking industry to develop green credit vigorously, putting forward specific requirements for promoting energy conservation, emission reduction and environmental protection. It has become the guideline document for the Chinese banking industry to practice green credit.

It is specifically defined in the "Energy Efficiency Guidelines" that energy efficiency credit includes two modes, namely "credit for energy efficiency projects of energy consumers" and "credit for energy performance contracting (EPC) of energy service companies (ESCOs)".

With the financial products for energy efficiency projects released in China as early as 2006, IB is the Chinese bank offering energy efficiency credit at the earliest time. In 2007, IB began to pay attention to the EPC market, taking the lead to provide medium- and long-term financing projects for energy-saving service suppliers. Moreover, in 2012, the Bank released the standard financing product for EPC by using the future usufruct as the pledge.

Fujian Suner Save Energy Tech Co., Ltd. is a beneficiary of the standard financing for EPC by using the future usufruct as the pledge. It is said that the company planned to build a waste heat boiler for a gas making branch of a chemical corporation in Guangxi in the EPC model. As a typical EPC project making use of waste heat and pressure, it boasted significant economic and environmental benefits. However, the project construction funds should be raised by the energy service company itself, so the project construction encountered financial bottleneck. Considering the above situation, IB designed a special service solution of EPC financing for the company, offering a 3-year project loan of RMB 18 million (accounting for 72% of the total project investment) for the company to buy waste heat boiler devices, fittings and pay the project transformation expenditure. The loan settled the problem of project funds effectively and achieved favorable social and economic benefits.

Over 8 years, IB has kept digging deep into green finance and adhered to exploration and innovation, creating many "No. 1" cases in the industry: the first one launching integrated carbon finance service, the first "Equator Bank", the first bank establishing the institution specialized in sustainable finance - Sustainable Finance Center, the first low-carbon credit card, and the first emission rights pledge-based loan; the first carbon assets pledged loan, the first product for providing special financing services for energy conservation and emission reduction of SMEs in the underdeveloped areas, the first bank offering comprehensive solutions for utilization and protection of water resources, the first bank launching the agency account opening system for carbon trading based on the banking system, and the first issue of green finance credit asset-backed securities…

Now, the energy efficiency credit service offered by IB covers all areas of the low-carbon economy, supporting a great number of enterprises and projects for energy conservation, consumption reduction, reduction of greenhouse gas emission in the sectors including industry, transport, construction, new energy and renewable energy. While consolidating its leading advantages in the areas of energy efficiency credit and green finance, IB has gradually built a system of green financial products and services which includes ten general-purpose products, seven featured products, five financing models and seven kinds of solutions.

As indicated by relevant data, by the end of December 2014, IB has granted around one thousand enterprises the green finance based financing totaling RMB 555.8 billion, with the financing balance hitting RMB 296 billion. Specifically, the energy efficiency credit financing hit RMB 311.8 billion, with the balance reaching RMB 164.5 billion. Such financing could help to save 23.52 million tons of coal equivalents across China each year, reduce 68.8 million tons of carbon dioxide and 1.23 million tons of chemical oxygen demand (COD), utilize 17.11 million tons of solid waste in an integrated manner, and save 262.29 million tons of water. It is equivalent to stop running 100,000 taxis for 33 years.

Now, green finance has become an eye-catching business card of IB, with market position and brand influence rising continuously. It is the only commercial bank at home that has been nominated for the "Sustainable Banking Award" jointly sponsored by the British magazine, Financial Times, and IFC for four years consecutively. In 2012, it topped the ranking of "2012 China Green Credit Report" released by the Ministry of Environmental Protection. It received the honor of "National Collective Role Model for Emission Reduction" for the "11th Five-year Planning" period jointly conferred by the Ministry of Human Resources and Social Security (HOHRSS), the National Development and Reform Commission (NDRC), the Ministry of Environmental Protection (MEP) and the Ministry of Finance (MOF), becoming the only commercial bank receiving the honor across the entire country. It has won the prize of "Annual Best Green Finance for Social Responsibility" appraised by the China Banking Association (CBA) for years consecutively. It has won many other honors appraised by authoritative institutions and media both at home and abroad in succession, including Carbon-value Social Citizen Award, the Best Green Bank, the Best Sustainable Bank Prize, the Low-carbon Pioneer Enterprise, one of the China Green Companies Top 100, etc.

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