Guest blog by Li Shicong, intern at chinadialogue in San Francisco and environmental studies major at Mount Holyoke College.
Green Watershed, a Chinese environmental non-governmental organisation led by Yu Xiaogang, recently released their second annual report ranking 14 Chinese commercial banks on their green performance. The report shows that most banks are making slight progress in green banking compared to last year, but there is still a long way to go before they meet global standards. Because Chinese banks are entering the international market aggressively, attitudes toward sustainability may affect the global environment as well.
Green Watershed studied the same 14 Chinese listed banks as last year, including leading banks such as ICBC, China Construction Bank and Bank of China. The editors analysed the sustainable performances of the banks through 13 indicators examining their internal policies and external impact on sustainability, two of which are new this year: social donations and overseas investment. Social donations measure donations to charities, while overseas investment focuses on the transparency surrounding investments.
Adina Matisoff, San Francisco-based China Sustainable Finance Campaigner from the international non-governmental organisation Friends of the Earth, explained to chinadialogue that social donations offer a gateway for Chinese banks to draw positive attention to their green performance. On the other hand, as more Chinese banks start to build international portfolios, overseas investment as an indicator is helpful for the international community to judge the banks’ social responsibility.
Overall, China Merchants Bank, Industrial Bank, ICBC and Shanghai Pudong Development Bank led the list, while Bank of Nanjing, Bank of Ningbo, Huaxia Bank and Shenzheng Development Bank seemed to have made few efforts towards greener practices.
This year, seven Chinese banks referred to the Global Reporting Initiative’s Sustainability Reporting Guidelines in their individual corporate social responsibility (CSR) reports. The GRI guidelines are the most widely adopted framework for sustainability reporting in the world. This is a good indication that more Chinese banks are adopting global standards.
However, only one bank, Industrial Bank, is signatory to Equator Principles—a globally accepted framework to evaluate social and environmental risk in project financing, which currently covers over 70% of international project finance debt. “As taking part in Olympics is a sign of world-qualified sports team”, Yu Xiaogang explained to chinadialogue, “Following the Equator Principles is also a sign of international standard banking…the Equator Principles will be essential when Chinese banks compete with other foreign commercial banks”.
The report also revealed limited transparency in green banking. Only two banks disclosed information on overseas investment and just four provided materials on loans to energy inefficient and highly polluting industries. This year, Green Watershed sent out questionnaires to each bank to supplement public information they used to build the report; however, only five banks responded.
Yu points out that after the report was released, ICBC disclosed more information about their CSR report in a local newspaper, which suggests progress. However, disclosed information on environmental responsibility and on projects that had created ecological problems was still lacking.
Green finance in China is still in its nascent stages. A lot of Chinese commercial banks continue to offer large loans to projects that threaten local ecosystems, such as Canadian Oil and Sand Project and Gibe III Hydroelectronic Dam in Ethiopia. Yu plans to create more defined indicators for evaluating green banking in China in future reports.
Photo courtesy of Quinten Yearsley.