CBIRC Asks Fls to Establish Green Finance Systems by 1 June 2023

The CBIRC (China Banking and Insurance Regulatory Commission) has issued new guidelines aimed at promoting the development of green finance in the banking and insurance industries, financial industries are asked to establish and improve the relevant management systems and procedures to comply with the guidelines within one year, i.e. by 1 June 2023.

In a notice, the CBIRC said the guidelines will help promote the implementation of green finance policies aimed at achieving China's national goals of achieving peak carbon by 2030 and carbon neutrality by 2060.

Banks and insurers are directed to incorporate ESG requirements into their management processes and risk management systems, as well as to strengthen ESG information disclosures, communications and interactions with stakeholders. 

The guidelines clarify that the board of directors of a bank or insurer have the main responsibility for mapping out their organisation's green finance development strategy. FIs are asked to ensure they establish leadership and coordination mechanisms for their green finance work.

Innovations in green finance systems and mechanisms are encouraged provided the risks are controllable and legal and regulatory compliance is maintained, the CBIRC said.

The guidelines call on banks and insurers to adjust and improve their credit and investment policies to provide more active support to the construction of a clean and low-carbon energy system, and businesses involved in industries such as energy conservation, pollution reduction, carbon reduction, green enhancement, and disaster prevention. 

Banks and insurers are also asked to improve their investment and financing process management, credit and investment due diligence and approval processes, encourage their customers to improve their ESG risk management, and improve post-lending and post-investment management. 

For SMEs and online businesses, FIs are instructed to implement differentiated management measures in terms of risk assessment, due diligence, compliance reviews, credit management, and post-investment management – so as to help businesses improve their ESG risk management. 

The guidelines say the CBIRC encourages banks and insurers to actively support green and low-carbon construction as part of the Belt and Road initiative. Specifically, they are asked to strengthen ESG risk management of overseas projects that are being granted credit and investment, and to require project sponsors, contractors and suppliers to comply with laws and regulations around ecology, environment, land, health and safety where the projects are located.

The guidelines further require banks and insurers to strengthen internal control management and information disclosures, establish a green finance assessment and evaluation system, improve due diligence and exemption mechanisms, and implement incentive and restraint mechanisms to "ensure the continued and effective development of green finance".