PBoC issued a green finance assessment plan for banking financial institutions on June 9, as reported by Shanghai Securities News on the same day. The plan refers to a comprehensive assessment of banking institutions’ green finance businesses, based on which PBoC will implement incentives or restrictions on those institutions. According to the plan, PBoC will incorporate the results of the green finance assessment into the macroprudential policy and prudent management tools, including the ratings of Chinese financial institutions. In addition, the plan will take effect in July with evaluations on a quarterly basis, meaning the first assessment period is the third quarter of this year.
Specifically, the plan outlines qualitative and quantitative indicators to assess banks’ green finance operations. Among them, the weight of quantitative indicators is 80%, while that of qualitative indicators is 20%. The quantitative indicator system includes four equal-weighted indices: the proportion of green finance business to the overall, the sub-amount share of the green finance business, the YoY growth rate of green finance business, and the green finance risk share. Qualitative indicators include implementation of state and local green finance policies (30 points), formulation and implementation of institutional green finance system (40 points), and financial support for green sector development (30 points).
At present, based on the plan, the central bank is responsible for the evaluation of 24 major banking financial institutions, including China Development Bank (CDB), BOC [3988:HK], ICBC [1398:HK], ABC [1288:HK], and more. PBoC’s Shanghai headquarters, all branches and business management departments, all central sub-branches in capital cities of provinces are responsible for the evaluation of financial institutions within the jurisdiction. Furthermore, PBoC will adjust the indicators and their weights in a timely manner in accordance with the development of green finance.
With the release of the green finance assessment plan, it can be predicted that green finance work is a key economic task for major commercial banks in the future, said Ernst & Young Climate Change & Sustainability partner Judy Li. At present, green finance businesses mainly include green loans and green bonds. According to CBIRC, by the end of 2020, the green credit balance of 21 major banking institutions has exceeded RMB11tr. Besides the domestic green loans and bonds currently included in the assessment system, it is a foreseeable trend that the central bank would incorporate offshore green bonds and syndicated green loans participating overseas into evaluation criteria.