Notice of the China Banking and Insurance Regulatory Commission on Issuing the Green Finance Guidelines for the Banking and Insurance Industry
Scope of Application
Guidelines for the China Banking and Insurance Regulatory Commission (CBIRC) and its local offices, policy banks, commercial banks, development banks, and insurance companies, among other Chinese financiers and insurers.
Purpose
Offers green finance guidelines to promote green finance; improve environmental, social, and governance (ESG) risk management; and assist in pollution prevention and control.
General Key Points
Financiers should:
- Charge their boards of directors or councils with the responsibility of examining and approving green finance reports and determining a green strategy, its goals, and oversight mechanisms.
- Designate a senior manager to take the lead in green finance work.
- Curb the development of high-energy-consuming, high-emissions, and low-level projects.
Financiers and Insurers should:
- Establish the following requirements for developers, contractors, and suppliers:
- Comply with host countries’ laws and regulations on ecology, the environment, land, health, safety, and other areas.
- Follow international practices or guidelines.
- Ensure that project management is consistent with international good practices.
- Restrict the credit and investment of developers and contractors with a history of violating laws and regulations pertaining to ESG risks.
- Suspend or terminate funding contracts for projects with hidden dangers.
Key Points on Stakeholder Engagement
CBIRC and Local CBIRC Offices should:
- Promote the establishment and improvement of information-sharing mechanisms.
Financiers and Insurers should:
- Require developers and contractors to establish a sufficient, timely, and effective communication mechanism.
- Disclose green finance strategies and policies.
- Improve the level of information disclosure by referring to international conventions, standards, or good practices.
- Establish an appeal response mechanism for credit granting or investments involving major ESG risks.
- Where necessary, engage a qualified and independent third party to attest to, evaluate, or audit financiers’ activities in fulfilling their ESG responsibilities.
Key Points on Environmental and Social Impact Assessment
CBIRC and Local CBIRC Offices should:
- Help financiers and insurers obtain information about green industry projects and corporate ESG risks.
- Alert banking and insurance institutions about relevant risks.
- Strengthen daily, off-site supervision to monitor projects’ ESG risks.
- Take regulatory measures against financiers and insurers that violate laws and guidelines pertaining to ESG risks and green finance. Urge financiers and insurers to rectify these violations.
- Adopt appropriate methods to evaluate the green financial performance of financiers and insurers based on self-assessments.
- Refer to the results of these self-assessments to determine the regulatory rating, institutional access, business access, and performance evaluation of financiers’ and insurers’ executives.
Financiers and Insurers should:
- Strengthen due diligence on credit granting and investment.
- Conduct strict compliance reviews of potential developers, contractors, and projects.
- Effectively identify, monitor, prevent, and control ESG risks in their business activities, particularly BRI projects.
- Formulate ESG risk assessment standards for developers and contractors.
- Financiers use risk assessment results to determine developers’ and contractors’ ratings, access to credit, appropriate risk management measures, and loan pricing.
- Insurers use the results to make decisions on investments and apply appropriate rates to developers and contractors.
- Establish the following requirements for developers and contractors:
- Submit reports on ESG risks.
- Commit to stronger ESG risk management.
- Take risk mitigation measures, including formulating and implementing major risk response plans.
- Seek third-party verification.
- Set ESG assessment checkpoints throughout the life cycle of each project.
- Include remedies for ESG risk management in contracts to address potential failures by developers and contractors.
- Seek support from qualified and independent third parties, especially for the review of ESG risks.
- Establish an effective green finance assessment and evaluation system, as well as a reward and punishment mechanism.
- Establish and improve the internal reporting system and accountability system for developers’ and contractors’ major ESG risks.
- Report issues in a timely manner.
Insurers should:
- Raise awareness of ESG among financiers, developers, and contractors.
- Carry out accident prevention and potential risk screening according to contracts.