“China’s Banking Sector’s Environmental Record”

Those directly responsible for environmental accidents are sometimes exposed – but not so often the funding banks or consortiums. In 2009, Chinese banks made loans worth 9.59 trillion yuan, about US$1.4 trillion. The sector’s total assets leapt from 31.4 trillion yuan (US$4.6 trillion) in 2004 to 84.2 trillion yuan (US$12.3 trillion) in the first quarter of 2010, assets that gave China’s banks the ability to influence the environmental performance of numerous projects and companies.

In July 2007, the government unveiled a “green loans” policy, encouraging environmental lending standards. Since then, China’s environmental NGOs have been actively promoting the implementation of this policy. A number of these groups founded the Green Banking Innovation Prize in 2008, and in April published China’s Banking Sector’s Environmental Record.

The work of the Yunnan NGO Green Watershed and eight others, the book focuses on 14 publicly listed Chinese banks and a few foreign ones working in China. This is the first time NGOs have examined the banks’ environmental records.

The book examines eight environmentally controversial projects and businesses that have received funding or investment from major commercial or policy banks. For example, the mining firm Zijin, — responsible for a copper-tainted waste-water leak in early July — received money from the Export-Import Bank of China, the Agricultural Bank of China, the Bank of China, the China Construction Bank and the Industrial and Commercial Bank of China.

It also evaluates three foreign commercial banks operating in China: Standard Chartered, HSBC and Citibank. Although these banks are all signatories to the Equator Principles, the book says, they have not revealed how these voluntary principles (for determining, assessing and managing social and environmental risk in project financing) are implemented in China, the number of loans made or any actual case studies. This makes it hard for the Chinese public to monitor them.

Since 2009 the government has clearly required new financing mechanisms and regulations to guide funds towards green industries, and actively promoted “green lending”. This means there will be more work for China’s green NGOs. Also, if environmental groups can — based on the content of this book — develop an effective and interactive communication platform with regular updates of the environmental record of the banking sector, it will make for wider and longer-lasting teamwork.

China’s Banking Sector’s Environmental Record
Yu Xiaogang (editor)
Yunnan Science and Technology Press, 2010

— By Ni Huan

Ni Huan is a project manager for SynTao, a consulting company that focuses on corporate social responsibility and socially responsible investing.