Banks in China get funds to help cut carbon emissions

Some banks said they have received funds through the carbon emissions reduction facility launched by China's central bank, as the country accelerated the transition toward a greener economy.

China Development Bank, a policy financial institution, said it recently received 10.27 billion yuan ($1.62 billion) of funds via the CERF. The funds accounted for 60 percent of 17.11 billion yuan of medium and long-term loans CDB granted to emissions reduction projects, including the 600-megawatt Zhanjiang Xuwen offshore wind farm project. It is estimated that the projects will cut annual carbon emissions by 3.43 million metric tons.

All the 94 turbines of the Zhanjiang Xuwen project realized grid-connected power generation in November, providing strong support for China's goal to have carbon emissions peak by 2030 and achieve carbon neutrality by 2060.

The People's Bank of China, the central bank, launched the CERF in November to offer low-interest loans to financial institutions that help companies reduce carbon emissions. Using the new monetary policy instrument, the central bank will provide 60 percent of the loan principal made by financial institutions for emissions reductions at a one-year lending rate of 1.75 percent.

The PBOC has issued the first batch of funds worth 85.5 billion yuan through the CERF in support of financial institutions' issuances of carbon emissions reduction loans totaling 142.5 billion yuan. It is estimated the loans will help 2,817 companies cut carbon emissions by about 28.76 million tons, Sun Guofeng, head of the monetary policy department at the PBOC, said at a news conference on Dec 30.

China Development Bank included carbon emissions factors into the whole process of lending, established a carbon accounting information system of lending and provided an institutional foundation for lending associated with carbon emissions reductions.

The bank said it will keep improving the level of management of carbon emissions reduction loans and strengthening support for green and low-carbon projects so the loans will be precisely directed toward projects which have the effect of cutting carbon emissions.

Agricultural Bank of China Ltd, a large State-owned commercial lender, also received 11.37 billion yuan of funds through the CERF.

The money accounted for 60 percent of 18.95 billion yuan in loans issued by ABC to support 263 clean energy, energy conservation and environmental protection projects, including the 800-MW Zhangbei National Wind and Solar Energy Storage and Transmission Demonstration Project in Hebei province.

It helped 197 companies to cut 3.83 million tons of carbon emissions, which accounted for 13.3 percent of the amount of carbon emissions to be reduced with the help of the CERF, the bank said.

In recent years, ABC pushed for a transition toward green management, adopted the green development concept through the whole process of operation and management, built a comprehensive system of green finance governance, continuously ramped up the issuance of green loans and promoted innovation in diversified financial products.

By the end of 2021, the outstanding balance of its green loans reached nearly 2 trillion yuan, up more than 30 percent year-on-year.

"The use of the CERF will bolster growth of investment and medium and long-term bank lending in emissions reduction-related areas," said Lian Ping, chief economist at Zhixin Investment and president of the Zhixin Investment Research Institute.

"Currently, the CERF is only used in key areas which have significant carbon emissions reduction effects. In the future, it may expand to other areas, such as energy conservation and emissions reductions in energy-intensive industries, research, development and production of energy-efficient and low-carbon products as well as vegetation restoration," Lian said.

Considering that loan demand in the area of energy conservation and environmental protection is still low and carbon emissions reduction technologies are still at the stage of research and development, clean energy will become the main area of support of the CERF in the short term, he added.

As of the end of September, the outstanding balance of green credit of 21 major domestic banks reached 14.08 trillion yuan, up more than 21 percent from the beginning of 2021.

The overall asset quality of green credit remained good, with the nonperforming loan ratio staying below 0.7 percent annually in the last five years, the China Banking and Insurance Regulatory Commission said.