To Industrial Bank Co. Ltd., one of China's most active green bond issuers, helping new entrants scale up their green finance operations is a growing business.
The seventh largest bank in China by assets has recently signed partnership agreements with Bank of Jiujiang Co. Ltd., Zhejiang AnJi Rural Commercial Bank Co.Ltd. and Bank of Huzhou Co. Ltd. to help them develop green loan and debt products, improve operations and attract talents.
"We are in talks with several financial institutions for more green finance cooperation. We hope to leverage professional skills and years of experience [in green finance] to serve the industry," Luo Shiyi, general manager of the green finance department at Industrial Bank, said in a recent email interview.
China's nascent yet fast-growing green bond market became the world's second-largest after the U.S. as of September 2018. During the first three quarters in 2018, Chinese issuers had sold 91.0 billion yuan of green bonds domestically and 52.3 billion yuan offshore, according to the Climate Bonds Initiative. The balance of green loans extended by 21 major Chinese banks was estimated at over 8 trillion yuan as of June 2017, according to the China Banking and Insurance Regulatory Commission.
China's green finance market has long been dominated by some of the country's largest lenders such as Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. Compared to smaller banks and new entrants, large lenders have better access to capital, stronger expertise in financial modelling as well as client relationship. And yet, more than 1.7 trillion yuan of demand for green loans and debt is not being met every year, Luo cited data from the Development Research Center of the State Council as saying.
"We will be happy to see more banks to compete with and together we can enhance the green finance operations…provide differentiated services for clients," Luo said.
Industrial Bank has long been in the green finance sector in China. In 2006, it launched the country's first green loan product, targeting energy-saving and emission-reduction projects.
As of end-2018, the bank's outstanding onshore green bond balance was around 80 billion yuan, Luo said. The bank also issued US$600 million and €300 million of green bonds offshore in 2018. As of end-2018, the bank had over 10,000 green finance clients, with their combined loan and debt balance of over 800 billion yuan, according to Luo.
Luo added the bank will also help Chinese commercial lenders underwrite and issue offshore green bonds. It will continue to work with international organizations and investors to improve their understanding of Chinese green finance standards as well as the country's issuers, Luo said.
"[The issuance of offshore green bonds] will help Chinese commercial banks to improve international awareness, expand offshore investor base, as well as to promote banks' international strategies and overseas operations," Luo said.
As of Jan. 10, US$1 was equivalent to 6.79 Chinese yuan.