China plans quarterly look into banks' green finance performance

[NEW YORK] China will start reviewing how banks are performing in the green finance sector on a quarterly basis from next year, as the world's second-largest economy steps up efforts to promote sustainable finance.

The People's Bank of China (PBOC) and its branches will grade banks based on metrics including the green finance share of their total business mix, the year-on-year growth rate of the outstanding value, and its share of risk exposure, according to a draft guideline released by the central bank on Tuesday. An external evaluation by the regulator will account for 20 per cent of weighting in the performance review.

The proposal, which is seeking public feedback until Aug 19, will cover a range of financing tools including loans, securities, investments, leasing and trusts. Banks will be rewarded or punished according to their performance results, the central bank said, without elaborating.

China, the world's largest emitter of greenhouse gases, has been active in promoting green finance in recent years. The PBOC co-founded a network of monetary authorities in 2017 to draw experience from one another, as well as running a project on integrating climate risk into financial supervision.

The country was the world's biggest green bond seller with 386 billion yuan (S$76.76 billion) of issuance last year, while banks had outstanding green loans of more than 10 trillion yuan as at November, according to a paper written by PBOC adviser Ma Jun. Banks are allowed to use green bonds and loans as collateral for central bank funding.

China is the largest investor in renewable energy, having poured more than US$750 billion into clean energy projects from 2010 through the first half of 2019, according to BloombergNEF.

BLOOMBERG