Chinese state steps in with ‘transformative’ move on sustainability in private sector

China has introduced green lending guidelines for banks in order to encourage sustainable growth in the private sector.

The government’s banking regulator, the China Banking Regulatory Commission (CBRC), has told lenders to evaluate clients’ ESG risks and to adjust their access to credit accordingly. It ultimately advises banks to curb lending to polluting or energy-intensive industries in favour of support for green projects.

The management and supervision of overseas loans or investments must also improve, says the CBRC, to ensure compliance with the guidelines’ standards on environmental and social issues.

Banks will have to ‘publicly commit to adopt international best practices or standards for overseas projects’ – a measure that will be welcomed by many concerned at the rapid expansion of rarely CSR-conscious Chinese international operations.

China already has green lending incentives, as the state uses its financial muscle to support green projects, but the guidelines document is the first to set out specific principles on the issue. The CBRC intends to establish a rating system to quantify adherence to the guidelines in the near future.

Zhang Rong, the International Finance Corporation’s programme manager for environment and social standards, said that Chinese banks could learn from progress in the area.

He said: “Actually, Chinese banks have already made very good attempts at green credit, and they can learn from the mature technology and management systems that their international counterparts have already been using for some time.”

The WWF observed: “This is a transformative development for China. The guidelines … acknowledge the essential role of the banking sector in promoting a green and sustainable economy, as well as the risks presented by activities that are detrimental to the environment and local communities.”