Bank of Communications President Zhang Baojiang: The development potential of transformation finance will far exceed that of green finance
"Transformation finance is the proper meaning of the banking industry to serve sustainable development. Doing a good job in green finance and supporting sustainable economic and social development is an important manifestation of commercial banks, especially state-owned banks, in compliance with the global ESG development trend and practicing the political nature of financial work. An important manifestation of people-oriented." Zhang Baojiang, President of Bank of Communications, delivered a speech at the "2024 ESG Global Leaders Conference" today and pointed out that in order to grasp the focus of the banking industry in promoting transformation finance, at this stage, the banking industry can participate in the formulation of transformation finance standards, innovate financial product services, and service companies actively take actions in carbon accounting.
Zhang Baojiang pointed out in his speech that doing a good job in green finance and supporting sustainable economic and social development are important manifestations of commercial banks, especially large state-owned banks, complying with the global ESG development trend and practicing the political and people-oriented nature of financial work. The Third Plenary Session of the 20th Central Committee of the Communist Party of China emphasized the need to implement financial policies and standard systems that support green and low-carbon development, expand support for "green development" to support "green and low-carbon development", and made the latest deployment of financial support for low-carbon transformation.
In recent years, commercial banks have actively supported the development of low-carbon industries such as new energy and achieved remarkable results. As of the end of June, the balance of green loans across the industry reached 34.8 trillion yuan, 2.9 times that at the beginning of the "14th Five-Year Plan". At the same time, transitional finance that supports the transformation of high-carbon industries to low-carbon industries is about to enter the fast lane of development. Carbon-intensive industries account for a relatively high proportion of China's economic structure, and economic activities that need to be transformed account for 90%. The development potential of transformation finance will far exceed that of green finance.
Under the leadership of governments and regulatory authorities at all levels, commercial banks are carrying out transitional finance practices. For example, Shanghai is actively building an international green finance hub, committed to building it into a demonstration model serving green and low-carbon transformation, and is exploring the "Shanghai Plan" for transformation finance. The development of transformation finance will surely become a new important area for banks to implement ESG concepts and promote high-quality development in the future.
Zhang Baojiang pointed out that around the five pillars proposed in the "G20 Transformation Finance Framework", the banking industry can actively take the following three aspects in promoting transformation finance at this stage.
The first is to participate in the formulation of transitional financial standards.Defining standards and providing authoritative basis for transformation activities are important prerequisites for the development of transformation finance. The People's Bank of China is accelerating the formulation of a catalog of transformation finance, and Shanghai has also explored the launch of local versions of industry standards. In this process, commercial banks can give full play to their professional advantages and actively participate in the formulation of relevant standards. In 2023, under the guidance of the Financial Office of the Shanghai Municipal Party Committee, the Bank of Communications took the lead in formulating the Transformation Finance Catalogue of Shanghai City's Water Transportation Industry, filling gaps in relevant fields; currently, the Bank of Communications is taking the lead in the national-level catalog formulation of the industry based on the guidance of the People's Bank of China.
In addition to participating in the formulation of national standards, commercial banks should also strengthen their own top-level design to provide precise and effective policy support for transformation finance. In the "14th Five-Year Plan", the Bank of Communications proposed to use green as the background for the business development of the entire group, and clearly proposed the development of transformation finance to help traditional high-carbon industries transform into green and low-carbon. Recently, based on the issued local transformation finance catalog, we have formulated service plans for shipping and other industries, established differentiated access standards and credit policies, and promoted the accelerated development of transformation finance.
The second is to innovate financial products and services. On the one hand,Serving key carbon emission enterprises to reduce emissions is the top priority of transformation finance. For key carbon emission companies, banks can provide low-cost financing incentives through financial products such as sustainable development-linked loans and transition bonds. Since the beginning of this year, the Bank of Communications has implemented sustainable development-linked loans in many industries such as shipping, steel, and chemical industries. Among them, we worked together with COSCO Shipping to successfully issue the first domestic transformation financial loan for the water transportation industry.
On the other hand,Supporting supply chain companies in carbon emission reduction is also of great significance. According to research data from the International Carbon Disclosure Project, the carbon emissions of core companies 'supply chains are more than 11 times their direct carbon emissions levels. For small, medium and micro enterprises with supply chains, banks can develop green supply chains and green trade financing, including providing services such as settlement, guarantees and letters of credit for green international trade, and play an active role in decarbonizing the supply chain.
The third is to serve enterprises to carry out carbon accounting.Carrying out carbon accounting and disclosing information based on this is an important foundation for the development of transformation finance. Carbon accounting requires strong professional capabilities, which most enterprises, especially small and medium-sized enterprises, do not have. In recent years, commercial banks have conducted relatively in-depth research on carbon emission measurement for their own operations and investment and financing customers. On the basis of continuing to strengthen capacity building, they can cooperate with customers in need in carbon accounting. Since 2021, the Bank of Communications has continuously carried out carbon emission measurement for investment and financing customers, gradually improving the scope and precision of carbon data coverage for customers. Relevant work can not only provide high-quality data foundation for climate stress testing and information disclosure, but also provide useful support for the setting, monitoring and evaluation of carbon reduction targets for transformation financial projects.
In addition, developing transitional finance is a systematic project that requires the brainstorming and joint efforts of all sectors of society. Zhang Baojiang put forward three suggestions.
The first is to expand the scope of access of financial institutions and help improve the functions of the carbon market.Financial institution participants are very important to activate the carbon market and improve the efficiency of carbon pricing. At present, the transaction volume in the domestic carbon market is small, and there is still room for improvement in the carbon pricing formation mechanism. It is recommended to gradually expand the scope of market access, allow banks to participate in the market, and better play the important role of the carbon market in transition finance.
The second is to recommend that local governments establish corporate carbon accounts to reduce the difficulty of low-carbon accounting.It is recommended to integrate energy consumption data and related production data to form a corporate carbon account indicator system. On the premise of ensuring information security, share corporate carbon data with financial institutions, improve the efficiency of carbon data collection and carbon accounting, and reduce the development costs of transformation finance.
Third, it is recommended to strengthen inter-industry cooperation and enrich transformation financial products and services.For example, in view of the high debt ratios of some traditional high-carbon companies, banks can cooperate with M & A funds and debt-to-equity swaps. Insurance institutions can provide insurance protection for transition finance in response to possible risks such as the transformation effect does not meet expectations.
