The Financial Sector
Chinese banks play a central role in enabling the global investments of Chinese companies. As discussed in the Actors section, China’s policy banks and commercial banks are active across the globe financing projects in a range of sectors. They also provide day-to-day banking services to Chinese companies through overseas branches, and they provide general corporate loans that companies can use across their operations.
This page covers:
China Banking and Insurance Regulatory Commission (CBIRC) Green Finance Policies
China’s banking sector regulator is the China Banking and Insurance Regulatory Commission (CBIRC). Among its many tasks, CBIRC supervises and monitors banks’ and insurers’ corporate governance, risk management, business operations, and information disclosure. It also plays a role in international regulatory standard-setting and facilitating international cooperation of the banking and insurance sectors.
For over a decade, the commission has been developing a policy framework that promotes green finance by Chinese banks. While there is not yet a binding policy or regulation specifically on overseas finance, CBIRC has been progressively strengthening the green credit system. In 2012, it issued the Green Credit Guidelines, which include provisions specifically addressing overseas investments. Building on this cornerstone, several additional documents were issued in the following years that further developed China’s “green finance” system, with the latest guidelines on Green Finance issued in 2022. The evolution of this framework is explained below. At the same time, Chinese banks have increasingly been making their own commitments to enhance green credit and performance.
The Green Credit Guidelines (2012)
The Green Credit Guidelines (CBRC  #4), issued by China’s banking regulator, apply to both policy banks and commercial banks (see Actors section for background on these types of banks). The guidelines aim to improve banks’ due diligence, client compliance review and project assessment with respect to environmental and social issues, including in overseas projects. The banking regulator has stated that these guidelines should be integrated into all banks’ loan processes.
The guidelines set out self-assessment requirements for banks and state that the regulator will also conduct on-site and off-site monitoring regarding each bank’s environmental and social risk. The results will then serve as an important basis for rating, institutional licensing, business licensing, and performance evaluation of senior bank management. Mechanisms for self-assessment and evaluation were later developed through subsequent policies. We will return to those later.
Expanding the Reach of the Green Credit Guidelines Overseas
In 2017, the banking regulator issued guidelines explicitly aimed at banks financing overseas projects: the Guiding Opinions on Regulating the Banking Industry in Serving Enterprises’ Overseas Development and Strengthening Risk Prevention Control (CBRC  #1). The guidelines urge Chinese financial institutions to integrate environmental and social risk management into all stages of their involvement in overseas projects (Article 27). Banks are encouraged to learn from international best practice and ensure compliance with host country laws, with special attention paid when financing is provided for energy resources, agriculture, major infrastructure and project contracting (Article 26). Other important provisions of the guidance include:
- Financial institutions should urge clients involved in projects with major environmental and social risks to establish a complaint-response mechanism to promptly respond to “the reasonable demands” of the people, NGOs and other stakeholders (Article 29).
- For overseas projects with potentially significant environmental and social risks, they should agree with clients in advance to disclose key information such as project name, name of major investors and contractors, credit amount and environmental impact assessments in a timely manner, and actively strengthen relationships with stakeholders (Article 30).
- The China Banking Association should strengthen communication with financial institutions, relevant industry associations and competent authorities, and establish a blacklist system for companies operating overseas that are found to have violated laws and regulations or who are linked to other inappropriate behavior. This blacklist should be updated regularly and sent to Chinese financial institutions (Article 40).
Although this document does not include any implementation mechanisms, it indicated the developing expectations of the banking regulator regarding the overseas operations of Chinese banks.
Practical Advice: Engaging the China Banking Association
The China Banking Association is the industry group representing China’s banking sector and is supervised by CBIRC. Most major Chinese banks are members. Although the association’s main role is representing the interests of Chinese banks and developing the banking industry, it also plays a role in disciplining members.
As mentioned above, the banking regulator has instructed the association to maintain a blacklist of companies with bad reputations for their overseas conduct. Importantly, it now plays a role in the “Green Bank Evaluation,” which reviews and verifies bank self-evaluations of Green Credit Guideline implementation, and it ranks the banks accordingly. It therefore plays an important role in strengthening relevant government policies. It may be useful to copy the China Banking Association on communications that you have with Chinese banks and CBIRC.
Green Finance Guidelines (2022)
In June 2022, CBIRC issued its Green Finance Guidelines for the Banking and Insurance Industries (CBIRC  #15). This builds on the 2012 guidelines and various documents that have been published since then. According to CBIRC, the guidelines were issued to extend the coverage of the green finance system to the insurance sector, and to strengthen the implementation of existing green finance policies.
The new guidelines reiterate many of the requirements in previous policies discussed above. They state that banks and insurers are required to effectively identify, monitor, prevent and control environmental, social and governance (ESG) risks in their business activities throughout the project cycle. Compared to the previous policies’ focus on environmental and social risks, the new guidelines adopt a more comprehensive concept of “ESG risks” and extend the requirements to include not only the customers of financial institutions (i.e., the parties receiving financing), but also the customers’ primary contractors and suppliers. The guidelines also call on banks and insurers to strengthen information disclosure and communication with stakeholders (Article 4).
The guidelines cover the general operations of banks and insurers, but also make specific reference to overseas finance, stating that they should: actively support the green and low-carbon development of the Belt and Road Initiative; strengthen ESG risk management of overseas projects; require project sponsors and their main contractors and suppliers to abide by host country ecological, environmental, land, health and safety laws and regulations; follow relevant international practices or standards and ensure that project management is substantially consistent with international good practices (Article 25). This reiterates a theme of recent policy documents from China that stakeholders involved in overseas projects should follow international best practice.
In addition, the guidelines include several important provisions:
- ESG risk assessment: Banks and insurers are required to develop customer-targeted ESG risk assessment criteria. Banks should use these risk assessments as a basis for customer ratings, credit access and management, and use appropriate risk management measures. For customers with major ESG risks, banks should require they adopt risk mitigation measures including risk response plans, stakeholder complaint channels and effective communication mechanisms, among other measures (Article 14).
- Compliance review: Banks and insurers should conduct rigorous compliance review of their customers. They should formulate a checklist of ESG compliance documents and issues for ESG compliance risk review, and ensure customers pay sufficient attention to and perform effective risk control and meet compliance requirements (Article 19). Credits to and investments in customers with records of serious violations of laws and regulations or major ESG risks should be strictly restricted (Article 20).
- Contract terms and disbursements: When customers or investment projects are high risk, banks and insurers should include clauses in contracts that require customers to submit ESG risk reports, formulate statements and commitment clauses on strengthening ESG risk management, and provide remedy clauses if commitments for managing ESG risks are violated (Article 21). ESG risk assessment benchmarks should be established in the design, preparation, construction, completion, operation, and shutdown phases of a project, and fund dispersal can be suspended or terminated if a project shows significant risk or potential hazards (Article 22).
- Responding to problems: When a customer has a major ESG risk event, banks and insurers should urge it to take timely measures to address the risk and promptly report the potential impact of the event (Article 23).
- Disclosure and grievance response mechanisms: Banks and insurers should make their green finance strategies and policies public, and should learn from international conventions, standards and good practices to improve their information disclosure. For credits or investments that involve significant ESG risks, banks and insurers should establish a grievance response mechanism and proactively disclose relevant information (Article 28).
- Oversight: CBIRC should perform routine regulatory and supervisory inspections of banks and insurers (Article 31) and may take regulatory action if violations are identified (Article 32).
Implementing the Guidelines
After the 2012 Green Credit Guidelines set out the requirements for bank evaluation, CBIRC began to develop mechanisms for implementing the green finance policies.
Chinese banks are required to make annual self-assessments of their progress in implementing the Green Credit Guidelines. This process is internal, results are not published and at present the self-assessments are conducted at the portfolio level, rather than on a project-by-project basis. However, if you publicize evidence of negative social and environmental impacts of a Chinese bank funded project, and alert CBIRC, this may make it more difficult for banks to conceal recurring project-related problems in their self-assessments. According to a 2014 notice issued by CBIRC, banks are required to complete and submit their self-assessment before May 31st of each year. This self-assessment is based on a set of Key Performance Indicators set by the commission.
In 2018, the China Banking Association, the industry group representing China’s banking sector, began piloting the “green bank evaluation” through which it reviews and verifies the self-assessment of Chinese banks, and ranks the banks accordingly. The results of this review are fed back to CBIRC for use in its monitoring and rating of banks.
The 2022 Green Finance Guidelines also adopt these evaluation mechanisms to support their implementation.
Practical Advice: Using the Green Finance Guidelines in advocacy with Chinese banks
If you are concerned about a project that is receiving finance from a Chinese bank, you can refer to the green finance guidelines in communications with the bank. Based on the 2017 and 2022 guidelines, you could call on Chinese banks to require their clients to improve their conduct on the ground, including redressing harms. If this is not effective, or you are seeking to stop a harmful project altogether, you can call on the banks to review their financing of the project, suspend or cancel further financing, and push for early repayment of loans.
The Green Finance Guidelines can be a useful framework for your messaging as they apply to all sectors and all stages of the loan cycle, meaning that they can be invoked before a project receives financing and before impacts occur, and also through the rest of the project cycle. As these guidelines are increasingly focused on “risk,” it may be useful to focus your communications on the potential and actual risks of the project and explain how these risks are not being adequately addressed.
Like other guidelines discussed in this guide, the Green Finance Guidelines require that project developers abide by relevant host-country laws, but they also go further and call on Chinese banks to commit to adopting international practices and norms. If you communicate with a Chinese bank regarding a project it is involved in, it is important to highlight any failures to abide by host-country law and regulation. You may also strengthen your position by referring to relevant international standards to demonstrate the risks of the project. If you do allege any violations of local law or regulation, it is important to be specific and provide evidence to support such claims.
You could also draw on the Key Performance Indicators (KPIs) to make a detailed assessment of the bank’s performance and use this in your communications. The international organization Friends of the Earth US has used the KPIs to conduct assessments of financing for specific projects, which you can read here.
You can also communicate with CBIRC to inform them about the case and provide evidence that a Chinese bank is financing an overseas project that is causing social and environmental harm. By copying CBIRC on emails to banks you may increase the chances that they will act on the information you provide.
The Green Finance Guidelines require banks to set up grievance response mechanisms for high-risk projects. So far, no Chinese banks or insurers have such mechanisms and the guidelines do not specify when and how they should be set up. Since grievance response mechanisms can potentially provide channels for raising concerns and redressing grievances, it is important to urge Chinese financial institutions to set up such mechanisms aligned with the effectiveness criteria set out in Guiding Principle 31 of the UN Guiding Principles on Business and Human Rights.
Export-Import Bank of China Policies
China Eximbank is a major policy bank and plays an important role in financing Chinese overseas investment and some types of aid projects (see Actors section). The Eximbank is headquartered in Beijing and has representative offices in Hong Kong and around the world.
The bank has published basic social and environmental standards that apply to its domestic and overseas lending. The guidelines cover issues such as project evaluation, loan management and supervision, and environmental impact assessment. They briefly touch on land and resource rights, resettlement and public consultation. Eximbank is also subject to the China Banking Insurance Regulatory Commission’s guidelines (discussed above).
China Eximbank was the first Chinese bank to publish guidelines related to outbound investment. The Guidelines for Environmental and Social Impact Assessments of the China Export and Import Bank’s Loan Projects (2007) are basic and consist of only 21 brief articles, although they touch on key issues across the project cycle. These guidelines are now dated and have likely since been replaced. The Eximbank website now refers to Green Credit Guidelines of the Export-Import Bank of China, although they are not published.
The most detailed document available on Eximbank’s policies is its White Paper on Green Finance and Social Responsibility (2019). This states that the Bank has adopted internal green credit guidelines, as well as regulations regarding due diligence investigation, loan disbursement and payment verification, to strengthen management of environmental and social risks in all steps of its business process. Although the white paper itself is not a policy, it provides a useful summary of the steps in Eximbank’s assessment process (p.14), which also indicate key moments for advocacy (pictured below).
Signing loan agreement
The paper states that Eximbank has established an “environmental and social risk accountability mechanism” (p.15). It provides no detail on this mechanism but states that it has held accountable the entities and people in charge who have violated rules for loan disbursement or failed to address risks that cause credit losses and environmental and social damages.
The bank makes clear that the laws and regulations of host countries should be followed in evaluating and managing environmental and social risks of overseas projects, and if host countries lack sound environmental protection mechanisms, policies and standards, Chinese standards or international best practice should be followed instead. If necessary, the bank may include in loan agreements requirements regarding environmental and social responsibilities of borrowers. For projects associated with major environmental and social problems during construction and operation, borrowers or project owners will be required to take immediate measures to address damages. For projects that fail to do so, measures such as suspending disbursement or recovering loans in advance can be taken based on the terms of the loan agreement (p.20).
There are currently no avenues through which the public can request information on specific Eximbank financed projects or express grievances. Project assessment is not an open process, and no project documents are published by the bank. Nonetheless, if Eximbank is financing a project that has resulted in harms, the White Paper can be drawn on in your communications and advocacy with the bank.
China Development Bank Policies
The bank claims to have standards in place for managing the environmental and social impacts of its activities. However, it has only published summaries of these policies. According to the bank’s reports, assessments of project proposals include an appraisal of the environmental and social risks. Loan applications must include environmental impact assessments, and the bank can reject loans on environmental grounds.
According to an article previously posted on the bank’s website, it strictly controls environmental and social risks and issues credit ratings to its customers, which consider environmental performance. Bank customers that are penalized for environmental infringements may have their credit rating lowered, potentially jeopardizing future loans. In serious cases the bank may suspend lending. In 2014, the China Development Bank adopted its Green Credit Work Plan and Interim Measures for Green Credit Management, which integrate the assessment of environmental and social risks into its lending cycle, from project development, to review and approval, and post-lending. These documents are not published.
The bank has made commitments to work toward implementing the Equator Principles in its operations, but it is not currently an official signatory to the initiative. It is also a member of the UN Global Compact and states that it is committed to the UN Sustainability Goals.
Although it has made significant commitments, China Development Bank does not publish any detailed documents on projects that it finances, and it has no formal grievance mechanism or communication channel. This makes engaging with the bank very challenging.
Practical Advice: Understanding bank loan cycles
If you are planning to engage with a bank regarding concerns about a project that it is financing, it is helpful to understand the basic stages of a bank’s loan cycle. As can be seen above, there are certain requirements at the Eximbank that relate to the project appraisal period (for example, impact assessments), some that concern the implementation period (addressing social and environmental problems), and the post-project period (evaluation of project and impacts). This will be similar at other banks.
There are different measures that a bank can take at different stages in the loan cycle. If a bank is considering a loan proposal, it can reject that proposal or require alteration to the project design if it becomes aware of social and environmental risks. If a project is already active and has resulted in harm, the bank may instruct the loan recipient to remedy these problems and may suspend or cancel the loan if concerns are not addressed.
If possible, you should adapt your messaging depending on what stage of the loan cycle the project has reached. For example, if you are engaging the bank before it has approved a loan, you can call on the bank to conduct thorough due diligence and assign an appropriate risk rating (and reject the loan if the risk is too high). If you are talking to the bank during project implementation, you may call on the bank to investigate your concerns and take action if you feel the project developer is not reporting or managing project risks appropriately.
It should be noted that getting the bank to cancel a project will be much harder than getting the bank not to approve a project in the first place. Therefore, if you do hear that the bank may be considering a loan to a problematic project, it is important to act quickly.
Commercial Bank Policies
China’s commercial banks are subject to the various policies and guidelines issued by CBIRC, but also have their own internal policies. This includes the six centrally state-owned commercial banks, which are major actors in overseas investment: Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Agricultural Bank of China, Bank of Communications, and Postal Savings Bank of China. Other commercial banks are also increasingly publishing statements related to environmental and social performance. Some of them have become members of international best practice initiatives, which means that they have made additional commitments that they should be honoring.
To find more details on a bank’s social and environmental commitments you can review their websites, annual reports and sustainability reports. From these sources you may be able to find the full text of the bank’s policies, or at least identify key commitments. Some banks have issued specific policies, while others may just make basic statements on their websites.
If you are looking for information on a bank’s policies, you should start by looking at their corporate websites (in English and Chinese). There may be sections on their sustainability policies, as well as sustainability reports, which can give you an idea of what standards they apply to their financing. For example, the Hong Kong subsidiary of Bank of China publishes its Sustainability Policy, which includes commitments on environmental protection and social responsibilities. This includes a commitment to “interactive stakeholder communication” with stakeholders, including communities, and requires an “effective feedback approach to stakeholders’ opinion and expectation.” The bank’s sustainability report states that it “requires customers to understand and comply with laws and regulations related to environmental protection, land and occupational health and safety, and to respect the culture and customs of local residents, in order to align with our sustainable development strategies and principles.” If you are looking at a specific commercial bank, you should review their website and publications to see if you can find similar commitments.
Most major Chinese commercial banks have listed subsidiaries in Hong Kong, so searching Hong Kong Stock Exchange disclosures may also reveal useful information.
Environmental and Social Commitments of Major Chinese Banks
Policies / Commitments
- Adopted Guidelines on Green Credit of Bank of China [unpublished]
- Adopted Green Finance Development Plan [unpublished]
- Corporate Social Responsibility Report
- Bank of China signed on to UNEP-FI Principles for Responsible Banking
- Bank of China is a supporter of the Task Force on Climate-Related Financial Disclosures
Industrial and Commercial Bank of China (ICBC)
- Corporate Social Responsibility Reports
- Notice on Strengthening Investment and Financing Management in Industries with Heavy Pollution and High Energy Consumption [unpublished]
- Guidelines for Environmental and Social Risks Assessment in Project Loan Assessment [unpublished]
- ICBC signed on to the UNEP-FI Principles for Responsible Banking
- ICBC is a supporter of the Task Force on Climate-Related Financial Disclosures
- Corporate Social Responsibility Reports
- Agricultural Bank of China signed on to the UNEP-FI Principles for Responsible Banking
- Agricultural Bank of China is a supporter of the Task Force on Climate-Related Financial Disclosures
- Corporate Social Responsibility Reports
- Postal Savings Bank of China signed on to the UNEP-FI Principles for Responsible Banking
- Postal Savings Bank of China is a supporter of the Task Force on Climate-Related Financial Disclosures