On the 24th day of February 2012, China Banking
Regulatory Commission (the "CBRC")
issued the Green Credit Guidelines (the
"Guidelines"), which require banking
financial institutions ("Banks") to
encourage energy saving, emission reduction and environment
protection by managing environmental and social risk1 of
its client. The Guidelines apply to domestic policy banks,
commercial banks, rural cooperation banks and rural credit
cooperatives. In addition, village banks, loan companies, rural
funding cooperatives and non-banking financial institutions shall
also adopt the Guidelines to the extent applicable.
The Guidelines introduced some specific requirements in relation
to the following aspects:
Organization and Management
The Guidelines require the board of directors or council of the
Banks to assume the responsibilities of fixing its green credit
development strategy, approving the green credit goal and green
credit report, supervising and assessing the relevant performance.
Its senior management shall annually report to the board of
directors or council the progress of green credit, as well as to
Banks are required to customize its credit guidelines for those
industries restricted by the government and those with substantial
environmental and social risk according to laws and industry
policies. It shall maintain a list of clients with substantial
risk, and urge such clients to take mitigating measures.
arrange due diligence investigations on environmental and social
risk according to the characters of clients; it shall not grant
credit to the clients that are unqualified in environmental and
3.2 Loan Documentation
require in the loan agreement that clients with substantial
environmental and social risk shall submit environmental and social
risk evaluation report. The loan agreement shall also include
representations and warranties clauses regarding environmental and
social risk management, undertakings of the client to accept
supervision of the lender, and remedies for breach of such
representations, warranties and undertakings.
3.3 Loan Disbursement
take the adequacy of the client's environmental and social
risk management as an important factor for loan disbursement. Even
if credit has been granted, disbursement of the loan proceeds may
be suspended or terminated upon the occurrence of substantial
environmental or social risk in the project.
3.4 Post-lending Management
implement tailor-made post-lending management measures for
clients with potential substantial risk, and shall take measures in
a timely manner and report to regulators when substantial risk
occurs to its client.
3.5 Oversea Projects
ensure in oversea projects financed by them that the sponsor of
the project comply with the environmental and social laws and
regulations of the host country.
Internal Management and Information Disclosure
Banks are required to conduct internal audit on green credit
regularly and fully disclose its green credit development
Banks shall, at least once in two years, conduct full scope
evaluation on green credit, and submit its self-evaluation report
to the CBRC. The CBRC will conduct off-site and on-site inspection,
and take the result as an important factor of rating, granting
institution and business licenses and evaluating the performance of
senior officers of Banks.
1The "environmental and social risk"
is defined in the Guidelines as any hazard and relevant risk
brought to the environment and society by any activity in respect
of construction, production, operation of the bank's client and
its material related parties, including those environmental and
social problems relating to energy consumption, pollution, earth,
health, safety, migration arrangement, environment protection,
change of climate.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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