Agricultural Bank of China: The green giant

Zhou Mubing, ABC: leads the bank’s commitment to green financing

It should come as little surprise that a bank with the word ‘agricultural’ in its name has a commitment to green financing.

It appears to be part of the job description for Agricultural Bank of China (ABC). Even the bank’s logo is green, a reminder of its deep involvement in agricultural and forestry lending when it was established as the Agricultural Cooperative Bank in 1951.

ABC now has a client base extending well beyond farmers and land-owners. Its $3.23 trillion of assets make it the third-largest bank in the world, according to S&P Global Market Intelligence.

But the commitment to green financing under chairman Zhou Mubing remains, allowing ABC to take advantage of Chinese president Xi Jinping’s push for a more environmentally sound economy.

Since 2013, the bank has launched initiatives to make its green focus clearer to both staff and customers, including an effort to standardize practices across the bank.

For instance, ABC has created a green credit indicator system for management and a green credit index covering 19 credit policies in several industries, including iron and steel and thermal power.

“As one of the first state-owned commercial banks to implement green finance in China, ABC … has established a diversified green financial product and service system covering green credit, green agriculture, rural areas and farmers, green investment banks, green leasing, green investment and other fields to better serve and support green customers and projects,” says Peng Zuyou, general manager of the corporate banking department.

In 2017, the bank announced a green financial development plan, defining its long-term strategy in the market. The plan aimed for a mix of social responsibility and commercial viability, co-opting 30 departments, 38 branches and five subsidiaries to work together so that the green finance business would grow.

At the end of 2018, ABC had a green credit balance of Rmb105.4 billion ($14.73 billion).

Many of the biggest opportunities for China’s green bankers will come in the domestic market, which still has plenty of room for product development and structural innovation. But ABC has not neglected the potential business it can get from overseas, especially as environmental concerns start to be included in the infrastructure lending taking place as part of the Belt and Road Initiative.

Peng points to the bank’s efforts to collaborate with other large international institutions. ABC is the only Chinese state-owned commercial bank to have signed a contract with the IFC to carry out green financial cooperation. It is the most senior Chinese lender participating in the green financial cooperation committee of the Asian Financial Cooperation Association.

China’s BRI projects have been going on for some time now, but it was only recently that the country made a more concerted effort to make more BRI projects green. ABC was one of the first Chinese financial institutions to sign on to the BRI green investment principles, which were laid out at the end of 2018.

ABC has also been one of the most innovative banks in the green sector. It was the first to list green Chinese financial bonds on the London Stock Exchange, the first to launch clean development mechanism consultancy services in state-owned commercial banks and the first to work with the IFC in developing green credit asset securitization standards.

If that were not enough, ABC was also the first in China to sell a green credit asset-backed securitization product, creating a model for others in the country to follow. This helped the bank issue Rmb60 billion in financing for a project that cleaned up polluted waste water in the Zhejiang province.

Similarly, the bank assisted China Resources Capital Holdings in raising Rmb1.35 billion worth of asset-backed notes dedicated to funding wind and green energy projects.

Peng refers to the bank’s commitment to bluer skies, cleaner water and greener mountains. It is a noble aim, and one with which its rivals could not find fault.