The new finance initiative of China Construction Bank focuses on green finance development, with the Bank promoting ecological progress and low-carbon development in China as a global sustainable development trend. Green finance at CCB accelerates the New Financial Services Initiative process and expands on sustainable development projects. In this blog, I will focus on CCB's initiatives to address the UN Sustainable Development Goals, as well as provide an in-depth analysis of how these initiatives will help CCB realise its benefits.
Green Finance
Green finance, as an important branch of the sustainable financial system, refers to the financial sector's focus on the protection of the ecological environment and the management of environmental pollution in carrying out financial activities to promote the sustainable development of society (Lim, K. E, 2022). There are many forms of green finance, such as green bonds, green loans and green investment funds.
Green Bonds
The majority of the green bonds issued were used to protect the environment and reduce pollution. A shift in lending that reduces emissions may reduce physical risks and losses associated with negative spillover effects on the overall financial system (Fatica, S, 2022).
Since 2020, CCB has issued seven green financial bonds costing RMB 31.1 billion, with investors from China, Europe, America, Japan, and Korea participating. The funds raised were invested in green credits, with a particular emphasis on green development, clean energy projects, urban rail transit construction, and other projects (CCB, 2023).
Green Loans
In 2021, CCB made loans to rural photovoltaic projects, supplying 49 million kilowatt hours per year to the grid, attracting the agro-tourism industry to settle in rural areas, increasing local farmers' income, and achieving common prosperity. The CCB encourages forest production and tree planting through forest rights mortgages, which is consistent with China's collective forest rights reform to protect the environment for local economic development (Chinanews, 2022).
CCB will have disbursed approximately RMB 6.53 million in carbon emission reduction loans to 688 projects by 2022, resulting in an annual carbon emission reduction of approximately 1,563 tonnes of CO2 equivalent. To help achieve the carbon neutrality target, the loans will be used for clean energy, energy conservation and environmental protection, carbon emission reduction technologies, and other areas (CCB, 2022).
ESG Rating
CCB's ESG performance
Automated ESG Rating Tool
As governments, financial regulators and the public demand that companies develop around the theme of sustainability, companies will engage in "greenwashing" to hide the environmental impact of their business models and activities. Companies choose ESG to mislead investors, and ESG rating tools can provide investors with the assurance they need to assess their risk (Chakraborti, 2023).
CCB has created an automated ESG rating tool for corporate clients that can generate ESG rating results based on ESG-related information from various clients (CCB, 2022). The ESG rating tool integrates the green finance concept into the bank's operations and promotes and regulates sustainable development, thereby facilitating sustainability and customer selection.
References:
CCB (2021) [ESG Rating] CCB gets an A: Shaping Resilient Development with New Finance. [online] Available at: http://www3.ccb.com/cn/ccbtoday/valuemanagedetail/20210107_1610006529.html (Accessed 3rd Mar 2023).
CCB (2022) China Construction Bank Carbon Emission Reduction Loan Information Disclosures (Q4 2022). [online] Available at: http://www.ccb.com/cn/group/finance/upload/20230215_1676449815/20230215163004819171.pdf (Accessed 3rd Mar 2023).
CCB (2022) Construction Bank helps launch the China Green Bond Principles. [online] Available at: http://www3.ccb.com/cn/group/finance/20220810_1660117296.html (Accessed 3rd Mar 2023).
CCB (2023) Green Finance Bonds to showcase a distinctive ESG concept. [online] Available at: http://www3.ccb.com/cn/group/trends/20230106_1672989257.html (Accessed 3rd Mar 2023).
Chakraborti, S (2023) When firms play the ESG card for greenwashing. [online] Thehindubusinessline.com. [online] Available at: https://www.thehindubusinessline.com/opinion/when-firms-play-the-esg-card-for-greenwashing/article66541321.ece (Accessed 3rd Mar 2023).
Chinanews (2022) Construction Bank builds a comprehensive financial business framework to press the fast button for green development. [online] Available at: https://www.sogou.com/link?url=hedJjaC291Osj6fmiZw1ZvXUlQL07XXmY8yUMdjt9TOkvlyB35DDTiZwkWb8b7vI0FEQdLqFgFOt5pUc3zy0dg (Accessed 3rd Mar 2023).
CSRHub (2023) ESG ratings information for China Construction Bank Corporation. [online] Available at: https://www.csrhub.com/CSR_and_sustainability_information/China-Construction-Bank-Corporation (Accessed 3rd Mar 2023).
Lindenberg, N (2014) Definition of Green Finance. [online] Available at: https://web.archive.org/web/20180721183829id_/https://www.die-gdi.de/uploads/media/Lindenberg_Definition_green_finance.pdf (Accessed 3rd Mar 2023).
MSCI (2023) ESG Rating. [online] Available at: https://www.msci.com/our-solutions/esg-investing/esg-ratings (Accessed 3rd Mar 2023).
Orecchio, A (2022) ESG Rating and Rankings: meaning and definition - Finscience. [online] Available at: https://finscience.com/en/blog/esg/esg-rating-and-rankings-meaning-and-definition/ (Accessed 3rd Mar 2023).
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