Lenders up high-tech efforts for green biz

China has enhanced deep integration of financial technologies and green finance to promote green transitions and sustainable development of the real economy, experts said.

"In the past few years, we saw financial technologies play an important role in promoting the development of green finance. Using financial technological measures, China effectively improved green asset identification capability and reduced the cost of green certification, financing costs of environmentally friendly small and medium-sized enterprises, and transaction costs of green assets," said Ma Jun, chairman of the Green Finance Committee of the China Society for Finance and Banking and president of the Beijing-based Institute of Finance and Sustainability (IFS).

"With the adoption of financial technologies, the country can also improve information transparency and verify data authenticity to lower the risk of greenwashing," Ma said.

A recent report jointly issued by the IFS and the Green Finance Center at the Paulson Institute said many good practices for green asset identification can come through the adoption of financial technologies, which are also used in several other scenarios, including green data collection, environmental risk early warning and management and environmental information disclosure. Some financial institutions have also explored creating personal and corporate carbon accounts, promoting financing for sustainable agriculture and green consumption and promoting carbon accounting of financial institutions.

The Green Finance Committee of the China Society for Finance and Banking estimated that China's cumulative demand for green and low-carbon investment will reach 487 trillion yuan ($69.43 trillion) between 2021 and 2050. Such tremendous room for growth of green finance requires more incentives, more innovations and also the application of financial technologies, said Ma.

"We believe financial technologies can enable more green finance business in the future," he said.

Gracie Sun, managing director of the Green Finance Center at the Paulson Institute and senior advisor of the institute, said financial technologies will have greater space for development in terms of biodiversity conservation, carbon accounting, carbon asset management, transition finance, environmental, social and governance (ESG) factor assessment and investment, and sustainable agriculture.

Huang Dingwei, deputy director of the Financial Work Office of Huzhou Municipal People's Government, said the office upgraded its green financial services platform this year via the application of artificial intelligence and digital technologies.

"Our platform adopted models to perceive a company's financing needs by analyzing its tax, hiring and order information as well as financial indicators, found the bank that is most suitable for the company by using algorithms, and sent the information on financing needs to the bank. As a result, we enabled banks to be aware of businesses' financing needs in a more intelligent way," Huang said.

The platform also created corporate customer profiles on green development intelligently and efficiently based on its ESG and carbon accounting systems, he said.

Bank of Huzhou, a regional joint-stock commercial lender based in Huzhou, Zhejiang province, developed an ESG rating model for corporate borrowers, integrated the data provided by the Financial Work Office of Huzhou Municipal People's Government with the business credit information collected by the bank, embedded the ESG model in its credit management system, and generated visualized analysis results.

"We used big data profiling to detect potential risks of our corporate customers and improve the quality and efficiency of due diligence as much as possible. Next, we will use our ESG rating results as a risk premium factor, which will directly affect our business loan pricing," said Fang Xiaying, general manager of the bank's green finance department.