People’s Bank of China set to begin green finance evaluation of major banks

The People’s Bank of China (PBOC) has revealed it will begin quarterly assessments of the green finance performance of 24 major Chinese banks starting 1 July this year.

According to Regulation Asia, the PBOC has finalised its new evaluation for assessing Chinese banks’ performance in developing and promoting green finance business.

The central bank had previously published draft guidelines in July of last year which set out a system for grading banks on a quarterly basis on their green finance performance, based on a range of qualitative and quantitative methods.

The results of the assessments will be incorporated in financial institutions’ ratings alongside the central bank’s other policies and prudential management tools.

The PBOC claims the assessments will account for initially green bonds and green loans, before eventually being expanded to other areas such as green equity investments, green securities, green trusts, green leases and green financial management.

Under the evaluation system, the PBOC states it will give an 80% weighting to quantitative indicators. These include the total value of a bank’s green finance business against its total assets, the total value of a bank’s green finance business against other participating banks, the year-on-year growth in a bank’s green finance business and the total risk of a bank’s green finance business, including non-performing green loans and overdue or unpaid green bonds.

The final 20% weighting will be provided to qualitative indicators. These include a bank’s implementation of national and local green finance policies, a bank’s establishment and development of its green finance systems and governance, and the financial support a bank provides to green industries.

According to PBOC, the growth of green finance is one of its key priorities for this year. China has pledged to achieve peak carbon by 2030 and carbon neutrality by 2060.

The PBOC’s notice on the evaluation system can be found here.

The Monetary Authority of Singapore recently issued a slew of initiatives for financial institutions to enhance climate-related disclosures and green capabilities.

The initiatives include an implementation guide for climate-related disclosures, a framework to help banks assess eligible green trade finance transactions and a white paper on scaling green finance in the real estate, infrastructure, fund management and transition sectors.

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