On the 24th day of February 2012, China Banking Regulatory Commission (the "CBRC") issued the Green Credit Guidelines (the "Guidelines"), which require banking financial institutions ("Banks") to encourage energy saving, emission reduction and environment protection by managing environmental and social risk(1) of its client. The Guidelines apply to domestic policy banks, commercial banks, rural cooperation banks and rural credit cooperatives. In addition, village banks, loan companies, rural funding cooperatives and non-banking financial institutions shall also adopt the Guidelines to the extent applicable.

The Guidelines introduced some specific requirements in relation to the following aspects:

  1. Organization and Management

The Guidelines require the board of directors or council of the Banks to assume the responsibilities of fixing its green credit development strategy, approving the green credit goal and green credit report, supervising and assessing the relevant performance. Its senior management shall annually report to the board of directors or council the progress of green credit, as well as to the regulators.

  1. Internal Policy

Banks are required to customize its credit guidelines for those industries restricted by the government and those with substantial environmental and social risk according to laws and industry policies. It shall maintain a list of clients with substantial risk, and urge such clients to take mitigating measures.

  1. Lending Procedures

Banks shall:

  1. Pre-lending Investigation

arrange due diligence investigations on environmental and social risk according to the characters of clients; it shall not grant credit to the clients that are unqualified in environmental and social performance.

3.2 Loan Documentation

require in the loan agreement that clients with substantial environmental and social risk shall submit environmental and social risk evaluation report. The loan agreement shall also include representations and warranties clauses regarding environmental and social risk management, undertakings of the client to accept supervision of the lender, and remedies for breach of such representations, warranties and undertakings.

3.3 Loan Disbursement

take the adequacy of the client's environmental and social risk management as an important factor for loan disbursement. Even if credit has been granted, disbursement of the loan proceeds may be suspended or terminated upon the occurrence of substantial environmental or social risk in the project.

3.4 Post-lending Management

implement tailor-made post-lending management measures for clients with potential substantial risk, and shall take measures in a timely manner and report to regulators when substantial risk occurs to its client.

3.5 Oversea Projects

ensure in oversea projects financed by them that the sponsor of the project comply with the environmental and social laws and regulations of the host country.

  1. Internal Management and Information Disclosure

Banks are required to conduct internal audit on green credit regularly and fully disclose its green credit development progress.

  1. Supervision

Banks shall, at least once in two years, conduct full scope evaluation on green credit, and submit its self-evaluation report to the CBRC. The CBRC will conduct off-site and on-site inspection, and take the result as an important factor of rating, granting institution and business licenses and evaluating the performance of senior officers of Banks.