OREANDA-NEWS. June 20, 2013. The Beautiful Qilu Shandong Government-Banking-Enterprise Conference on Green Finance was held at Jinan, the city of fountain. This is the second stop of 2013 Beautiful China Tour Green Finance of Industrial Bank (IB).

The attendees include principals from the Development and Reform Commission of Shandong Province, the Energy Conservation Office of Shandong Province, Shandong Environment and Energy Exchange Center, and the Sustainable Finance Department of IB Head Office. At the conference, IB Jinan Branch signed Strategic Cooperation Agreement with three key energy conservation and emission reduction enterprises in Shandong Province.

Since the commencement the 12th Five-year Planning period, it has become a general consensus of all social circles to push forward energy conservation and emission reduction with market-oriented approaches. Against this background, new models, products and techniques have also been released in succession, not only bringing new vitality into the cause of energy conservation and emission reduction, but also serving as a further boost for the incubation and development of green industries.

Nonetheless, some inside analysts point out that the promotion of these emerging things are still confronted with some obstacles, of which financing is still a prominent problem. For instance, the projects for promoting energy performance contracting (EPC), green lighting and new energy automobile can still hardly gain financing due to the lack of guarantee. If a guarantee company is engaged to provide guarantee, not only will the cost increase, but the guarantee company will usually require the enterprise in question to provide counter guarantee. Thus, the operation is not feasible. Even if a loan can be applied successfully, it is usually working capital, which can hardly meet the medium and long-term capital demands of enterprises.

In the eye of banking insiders, the fast development of emerging green industries contains massive needs of financial services. Nevertheless, the entities in such industries, like energy-saving service suppliers, are usually asset-light enterprises, which lack the guarantees in the common sense. As a result, the loan risks are hard to control. At present, the credit models in the conventional sense cannot respond to the financing needs of emerging green industries.

Nevertheless, these hard problems long harassing the financing of green industries may be alleviated substantially in this year.

As learnt by the reporter, IB released the special solution of Green Finance Tactics (2013) targeting at green industries in this year, comprising a number of characteristic products, e.g. the loan by using the future usufruct as the pledge for the financing of EPC projects, purchaser credit for the promotion of new energy automobile, and order financing for the promotion of LED green lighting.

The difficult financing of emerging green industries, the director of the Sustainable Finance Department of IB indicates, can be attributed to the insufficient understanding of financial institutions to the commercial models and risk points of enterprises after all. Thus, they cannot control the substantial risks. With the idea to approach the commercial models of enterprises based on actual market needs, the bank adopts the principle of exploiting resources available but not real property (namely, not stressing on the guarantee by pledging real estate and land) in terms of risk control.

In holding the campaign of Beautiful China Tour in Shandong this time, IB hopes to go deeper into the regional market, grasp the trend of policies, and listen to opinions of enterprises so as to go further into the regional energy conservation and emission reduction market, provide customized service solutions for regional green economy and improve the pertinence and effectiveness of innovation. It is reported that, by the end of the first quarter of this year, IB has accumulatively provided financing loans of RMB 21.2 billion in the area of energy conservation and environmental protection across the province, which were used to support 327 energy conservation and emission reduction projects, covering a number of industries such as electric power, coal, iron and steel, chemical, and papermaking.

As learnt by the reporter, thanks to its long concentration in the field, green finance has become one of the bank's business areas with the most distinctive features of differentiated business operation. As introduced by insiders, IB is the first and only Equator bank in China by now, and green finance has become a general consensus of the bank from top down, with many concepts, systems and products in synchronization with advanced international institutions of the industry.

Taking it as a favorable tool for the creation of differentiated advantages to serve energy conservation and emission reduction program and observe the Equator Principles, the bank has developed many green finance products of milestone from launching the energy-efficient financing program, carbon finance and low-carbon theme credit card to financing with future usufruct as the pledge. Moreover, IB has established the Sustainable Finance Department, the first institution specialized in green finance at the head office level, organized an integrated professional team with multi-functions, and set up green finance departments and appointed full-time product managers in charge of green finance at the branch level, thus building a mature and sturdy business team for green finance.