Interview with Wang Jingwu, Vice President of ICBC： Commercial banks face great challenges in climate risk management.
Zhongxin Jingwei, November 1st (Wang Quanbao, Wei Wei) It is one year since China officially put forward the goal of "double carbon". In the practice of promoting "double carbon" for one year, the role played by finance has become more and more prominent.
"ICBC’s green loan balance has reached 2.15 trillion yuan, and all major indicators of green investment and financing are in a leading position in the market. The green and low-carbon transformation of investment and financing has achieved remarkable results." Recently, Wang Jingwu, vice president of China Industrial and Commercial Bank, revealed this in an exclusive interview.
As the leader of state-owned big banks, what "double carbon" practical experience does ICBC have worth copying? What are the paths for the financial industry to follow to implement the "double carbon" strategy? How to prevent and control risks in the process of "double carbon" goal?
Photo courtesy of Wang Jingwu, Vice President of China Industrial and Commercial Bank
Grasp the rhythm of investment and financing transformation
Zhongxin Jingwei: In the past year, banks have been actively deploying "carbon finance". In your opinion, what challenges does the banking industry currently face in helping achieve the goal of "double carbon"?
Wang JingwuAchieving peak carbon dioxide emissions and carbon neutrality is an extensive and profound systematic economic and social change, which means that China’s economic and social development will undergo a comprehensive green transformation, and the energy structure, economic structure and industrial structure will all undergo major changes, which put forward new requirements for commercial banks’ risk management ability and management ability.
What we want to make clear is that commercial banks face great challenges in climate risk management. It can be said that climate risk is an important consideration of systemic financial risks.
Specifically, the challenges are divided into two aspects: first, the assessment and response to climate risks are facing great challenges, banks have not fully understood the correlation between environmental change factors and financial risks, and their understanding of physical risks and transition risks brought about by medium and long-term climate change is not enough, so risk assessment and stress testing methods need to be studied; Second, the basic work of climate risk prevention needs to be improved, such as the international and domestic unification of standards such as green finance and brown assets, the acquisition of corporate climate risk and carbon emission data information, etc. Banks are facing the challenge of information asymmetry in the process of preventing corporate environment and climate risk.
Zhongxin Jingwei: China officials have proposed that carbon dioxide emissions should reach the peak by 2030 and strive to achieve carbon neutrality by 2060. The service "30 60" target puts forward higher requirements for commercial banks. What business transformation does the bank need to make in order to help peak carbon dioxide emissions achieve the "30 60" goal of carbon neutrality?
Wang JingwuIn the long run, banks need to promote their own operations and low-carbon transformation of assets. In terms of low-carbon transformation of self-operation, the office and business premises of banks are relatively scattered, and the carbon emissions are relatively wide.Low-carbon transformation needs systematic planning and institutional arrangements, among which the first task is to find out the background of its own carbon emissions and conduct its own operating carbon accounting..
In the aspect of low-carbon transformation on the asset side, banks need to deeply study the transformation of China’s economic structure, energy structure and industrial structure under the background of peak carbon dioxide emissions and carbon neutrality, and its impact on medium and long-term investment and financing risks, especially pay attention to grasping the rhythm of investment and financing transformation, and how to handle the relationship between transformation and security, short-term and long-term, and emerging industries and traditional industries.
Help the national industrial transformation
Zhongxin Jingwei: In the past year, what efforts has ICBC made to help achieve the goal of "double carbon"?
Wang JingwuFocusing on the goal of "double carbon", ICBC has fully implemented the national decision-making arrangements on "double carbon" work, relied on the long-term accumulated experience and advantages in the field of green finance, and based on the low-carbon development trend of China economy, adjusted the investment and financing layout in a forward-looking way, and continued to promote the low-carbon transformation of investment and financing, climate risk prevention and control, and carbon financial product innovation, so as to contribute to serving the national goal of "double carbon" and helping the national industrial transformation.
First, steadily promote the low-carbon transformation of investment and financing.. On the one hand, ICBC has continuously increased its support for low-carbon industries around four main lines: low carbon, zero carbon, carbon reduction and negative carbon. In the field of "zero carbon" and "low carbon", we will focus on supporting industries such as clean energy, green transportation, green building and green manufacturing; In the field of "carbon reduction", actively support enterprise energy-saving transformation, energy efficiency improvement projects and energy-efficient equipment; In the field of "negative carbon", we actively support frontier projects such as carbon capture and the construction of carbon sink forests. Taking the energy sector as an example, ICBC’s clean energy loans have become the main part of loans in the power industry, and the proportion has increased significantly. In particular, new energy power generation loans such as wind power and photovoltaics have grown rapidly, and the loan balance and proportion have obvious advantages in the industry.
On the other hand,ICBC actively supports the low-carbon transformation and development of "high carbon" industries.For high-carbon industries such as "two highs", we will continue to implement the credit policy of "customer classification, security and pressure", support key enterprises to save energy and reduce emissions, update equipment, and continue to withdraw from backward production capacity.
Secondly, innovate to build a carbon financial product system.. ICBC launched the first batch of "carbon-neutral" bond investment and financing business, and underwritten 12 "carbon-neutral" bonds, leading the market in underwriting scale. ICBC actively participated in the National Green Development Fund, fully docked the construction of the national carbon market, and innovatively supported the construction of the green financial reform and innovation pilot zone, and achieved positive results.
This year, ICBC actively innovated financial products in the capital market, and launched the first ESG theme fund in the market, the "carbon neutral" asset allocation index, and the first wealth management product with the theme of green finance.
Third, continue to strengthen climate risk management.. ICBC has incorporated climate risk into comprehensive risk management, continuously promoted climate risk management among various risks such as credit risk, market risk and strategic risk, embedded climate risk elements into the whole process of investment and financing policies and business management of various industries, and adopted reasonable risk control measures for high-carbon enterprises with prominent climate risks.
Recently, under the guidance of the People’s Bank of China, ICBC has also completed the pilot work of climate risk stress testing and achieved good results.
Guiding the flow of credit resources to green areas is one of the key tasks.
Zhongxin Jingwei: As the leader of state-owned banks, what comparative advantages does ICBC have in green finance?
Wang JingwuIt can be said that green finance is the traditional advantage of ICBC, with its early start, rich background and solid foundation. ICBC has integrated the requirements of green finance into development strategy, corporate governance, policy system, business process and risk management, and established a perfect green finance development system, which has effectively played the role of pioneer and leader in the development of domestic green finance.
In recent years, ICBC’s green investment and financing scale has continued to lead the industry. By the end of June, the balance of ICBC’s green loans exceeded 2 trillion yuan, reaching 2.15 trillion yuan; The balance of green bond investment, green non-standard agency investment and green lease financing is more than 400 billion yuan, and the cumulative issuance of green financial bonds is nearly 10 billion US dollars. The main indicators of green investment and financing are in the leading position in the market.
First, the green financial strategy promotion system is perfect. As early as 2007, ICBC took green finance as its development strategy and vigorously promoted the construction of green credit from top to bottom. China Industrial and Commercial Bank’s Green Credit Development Strategy, published in 2015, clearly regards the promotion of green credit construction as one of the important long-term strategies of the whole bank, and is committed to building a leading international green credit bank and becoming a green bank with a good international reputation. Over the years, ICBC has continuously improved the governance structure of green finance, and formed a green financial strategy promotion system with the overall leadership of the Board of Directors and the Green Finance Committee, coordinated division of labor among all departments, active innovation of branches and full participation.
Second, the green financial policy system is solid and effective. ICBC has formulated investment and financing policies in 16 sectors and 50 industries, fully highlighted the "green" orientation, and continuously increased the support and control of differentiated policies. In the enterprise dimension, the enterprise technology, environmental protection, energy consumption and other indicators are embedded in the key industry customers and project selection criteria; In the industry dimension, key areas such as clean energy, green transportation, energy conservation and environmental protection will be positioned as active or moderate entry industries, and differentiated management measures such as economic capital occupation, authorization, pricing and scale will be supported.
Third, the forward-looking research on green finance has achieved remarkable results. ICBC took the lead in publishing the results of environmental risk stress test among domestic peers, and it is also one of the earliest financial institutions in the world to carry out environmental risk stress test research. ICBC has also released ESG index and "One Belt, One Road" green finance (investment) index, which provide methods for the global financial industry to quantify environmental risks. In addition, ICBC also took the lead in the pilot project of environmental information disclosure under the framework of China-UK dialogue, and explored the environmental information disclosure standards of the financial industry.
Fourth, international cooperation in green finance is vivid. In 2017, under the guidance of the People’s Bank of China, Industrial and Commercial Bank of China launched the "Belt and Road" inter-bank cooperation mechanism (BRBR) in propose to create. In 2018, it assisted the Green Gold Committee and the City of London to jointly draft the Belt and Road Green Investment Principles (GIP) and became the first signing institution. In addition, ICBC actively contributes to the formulation of international rules with the help of relevant UN platforms. In 2018, as the only invited Chinese bank, it participated in the "Responsible Banking Principle" project initiated by the financial initiative of the United Nations Environment Programme and became the first batch of contracted banks. In 2019, as the only Chinese-funded institution, ICBC was invited to join the Global Investor Alliance for Sustainable Development (GISD) initiated by UN Secretary-General Guterres.
Zhongxin Jingwei: Green credit plays an important role in promoting green economic transformation. How does ICBC guide credit resources to the green field?
Wang JingwuGuiding the flow of credit resources to the green field can be said to be a key point of ICBC’s green finance work. Industrial and Commercial Bank of China has issued a series of incentive and safeguard measures, and the intensity is still increasing.
The differentiated investment and financing policy I mentioned earlier is one of the important aspects. In addition, ICBC has arranged a variety of incentive mechanisms.
First, make an annual plan for green loans, arrange a certain special scale of green loans, and give priority to ensuring the credit supply of green industries. The second is to implement internal transfer price (FTP) incentives for green loans. Third, strengthen the assessment of green credit, incorporate green credit into the performance assessment index system of branches, and focus on the assessment of key indicators such as the proportion of green loan balance and the growth rate of green loans. Fourth, carry out special audits of green credit, regularly select some branches to conduct special audits of green credit every year, and objectively evaluate the implementation of green credit policies by branches.
Prevention and control of environmental and social risks is an important part of green finance.
Zhongxin Jingwei: Environmental and social risks are important contents of green finance work. How to improve the ability of environmental and social risk management?
Wang JingwuPrevention and control of environmental and social risks is an important part of green finance, which is of great significance to restrict investment in ecologically destructive projects, guide financial resources to invest in eco-friendly fields and promote financial stability.
In this regard, it can be said that ICBC has established a relatively complete environmental and social risk management policy, system and process, strictly abides by the red line of ecological protection, the bottom line of environmental quality, the online utilization of resources, land, health, safety and other hard constraints, and strictly formulates environmental access standards and risk control measures.
First, implement green classified management of investment and financing.According to the "green" degree of investment and financing and the degree of environmental and social risks, investment and financing are divided into four levels and twelve categories, and differentiated investment and financing policy management is implemented.
The second is to strengthen risk management in environmentally sensitive industries., reasonably control the financing of environmentally sensitive industries, improve the requirements for key indicators such as enterprise technology, energy consumption, technology and environmental protection, and proactively withdraw from corporate financing with high environmental and social risks, especially for industries involving heavy metal emissions. Strict investment and financing control regulations have been formulated.
The third is to implement the whole process management of environmental and social risks., in the due diligence, examination and approval, contract signing, fund disbursement, post-loan management and other links, the corresponding environmental and social risk management requirements are embedded.
Fourth, intelligent management of investment and financing environment and social risks.. For many years, ICBC has always adhered to the mechanism of enterprise risk information collection and prevention and control that the head office and branches are responsible for. Recently, ICBC pioneered an intelligent management system for environmental and social risks in the industry, and used big data analysis to realize intelligent prompt and control of environmental and social risk information.
Zhongxin Jingwei: What are the explorations and attempts in financial technology to help environmental and social risk management?
Wang JingwuWith the rapid development of financial technology, it can be said that financial technology has great potential in environmental and social risk management. ICBC continues to explore and innovate in this respect. The recently launched intelligent management system for environmental and social risks is a case. This system can automatically complete the collection, collation, distribution and transmission of risk information, greatly saving manpower and material resources, and truly making risk management timely, accurate and effective.
In the future, ICBC will also explore new fields such as investment and financing carbon accounting, ecological protection red line map and climate risk identification by means of financial technology, and continuously improve its environmental and climate risk management capabilities by means of new technologies such as big data, Internet of Things and artificial intelligence.
Zhongxin Jingwei: Looking forward to the future, what plans does ICBC have in the "double carbon" work of financial services?
Wang JingwuIt is an important strategic task for financial institutions and an inevitable requirement for their long-term development to implement the deployment requirements of "peak carbon dioxide emissions and carbon neutrality". In the future, ICBC will make efforts in the following five aspects:
The first is to strengthen scientific planning. Consistent with the inherent requirements of the national "double carbon" goal, we should consider the relationship between green and low-carbon transformation of investment and financing, energy security and financial stability, respect the objective laws of economic and social transformation, and scientifically grasp the pace of work.
The second is to strengthen service entities. Rationally allocate resources, actively support the development of green and low-carbon industries, reasonably control the financing of high-carbon enterprises, and effectively serve the low-carbon transformation and high-quality development of the real economy.
The third is to strengthen overall development. Co-ordinate the work of double carbon, green finance, ESG investment and other related work, co-ordinate the work of double carbon under the framework of green finance, and rely on China’s relatively perfect green financial system to carry out the work.
The fourth is to strengthen system promotion. Coordinate the financial support of green and low-carbon industries and the prevention and control of climate risks in investment and financing, actively improve their carbon performance and vigorously promote the low-carbon transformation of their own operations.
The fifth is to strengthen exploration and innovation. Strengthen research on new modes and formats in the fields of carbon finance and climate investment and financing, and provide all-round and distinctive innovative products and services. (Zhongxin Jingwei APP)