Opinion: Overall, the overall ESG performance of the banking industry is good, and the ESG risk of the industry is low. In recent years, policies have been guiding commercial banks to increase investment in green finance and encouraging banks to incorporate ESG management factors into the entire credit decision-making process. Based on the analysis of the total sample of A-share banks and non-listed banks with ESG-related reports that issue bonds, the overall performance of banks is at the upper middle level.
Disclosure: There are 42 A-share listed banks in China, and the disclosure rate of ESG-related reports (including social responsibility reports, sustainability reports, and environmental information disclosure reports) in 2023 is 100%.
Environment (e): The overall environmental score of banks is at the upper middle level, and accelerating the development of green finance and promoting green transformation have become the main tone of bank development. Among them, the indicators of climate change response and green finance performed well, while the performance of environmental protection management was poor, which was mainly affected by the characteristics of the industry.
Society(s): The performance of banks' social responsibility is at the upper middle level, the quality and efficiency of the banking industry in serving the real economy have improved, and the social responsibility is prominent. Among them, special responsibility, employee development and welfare performance are better.
Governance (g): The corporate governance performance of banks is at an upper level. The banking industry is subject to strict supervision, has a sound governance structure, and has performed well in terms of risk management, compliance and information disclosure quality, and needs to be further improved in ESG governance in the future.
First, the environment
Environmental management
Environmental management mainly examines the top-level design of the bank in environmental management, mainly including the environmental management system and climate change response.
Environmental management systemAccording to the ESG-related reports disclosed by the banks, the performance of the environmental management system is weak, mainly because the bank belongs to the financial services industry and has a limited impact on the environment, compared with other industries, the lack of demand for banks to establish an environmental protection system has lowered the environmental management score to a certain extent, and the average overall score of this indicator is 3167 points.
Tackling climate changeThe banking industry actively responds to the national dual carbon policy and responds to climate change through climate change response actions and environmental risk management and control mechanisms. The increasing impact of climate change on the global economy and finance requires banks to play their role in addressing climate change, such as resource allocation, market pricing, risk management, and transition advisory. At present, many banks have taken action on issues such as the identification of environmental and climate risks and opportunities, credit stress testing, and state-owned commercial banks and joint-stock commercial banks have disclosed all environmental and climate management-related issues, while urban commercial banks and rural commercial banks have performed relatively weakly.
Environmental actions
Environmental protection actions are mainly reflected in the bank's carbon emissions, resource management, and environmental protection public welfare and publicity.
Carbon emissionsCarbon emissions are mainly qualitatively examined through the quantitative investigation of the total amount and emission intensity of greenhouse gas emissions generated by the bank's own operations, and the qualitative investigation of greenhouse gas emission management policies and targets and greenhouse gas emission reduction measures. On the whole, the carbon emission performance of the banking industry is average, mainly due to the different disclosure standards of carbon emission data of various banks, and the comparability is not high.
Resource managementBanks actively practice energy conservation and emission reduction by strengthening energy conservation management, improving energy efficiency, and controlling total energy consumption. The performance level of resource management is mainly qualitatively and quantitatively examined through the bank's energy management and water resource management. Up to now, some urban commercial banks and rural commercial banks still need to raise their awareness of their responsibility for environmental protection.
Green operations
Green operation mainly examines the green finance and green operation of banks.
Green FinanceUnder the dual carbon strategy, green finance has become an important driving force for China's high-quality economic development, and banks, as leaders in the green finance market, play a pivotal role. We examine banks' performance in terms of green credit, sustainability bond issuance and investment, and green financial product innovation.
Banks vigorously develop green credit business, invest loans in green infrastructure upgrading industries, clean energy industries, energy conservation and environmental protection industries, and further expand the scale of green credit, enriching and innovating green credit products and services. Banks can raise funds through green bonds to finance or refinance eligible green assets that contribute to environmental protection, sustainable economic development and the fight against climate change. Banks actively participate in the underwriting of new varieties of pan-green bonds, and attract international funds and foreign investors through green bonds.
In terms of the proportion of green credit balance, the average of large state-owned banks is close to 12%, followed by joint-stock banks and urban commercial banks, with an average of nearly 8%, and the average of rural commercial banks is 5%.
In addition, 20 banks disclosed the scale of issuance and investment of sustainable development bonds to help the development of green finance. From the perspective of green financial product innovation, commercial banks are actively improving the construction of green financial system, improving product innovation, and exploring innovative businesses in carbon finance and transition finance. In terms of overall scores, banks scored an average of 55 for green finance86 points.
Green managementThe Bank actively practices the concept of green development and strives to reduce the impact of its operations on the environment by advocating the concept of green office. Banks continue to promote paperless, electronic and intelligent business, and promote energy conservation and emission reduction through practical actions. The relevant content of the bank's green office has been fully disclosed, and on the whole, the bank's green operation has performed well.
Second, the social aspect
In terms of the social dimension score of the banking industry, on the whole, banks, as an important role in the financial intermediary system, actively fulfill their social responsibilities, implement national strategies, serve the real economy, and promote the sustainable development goals of the society, and are at the upper middle level in terms of social responsibility scores.
Public benefits
Public benefits mainly look at the bank's tax payment and employment settlement. According to the nature and scale of banks, state-owned banks and joint-stock banks are generally stronger, while urban commercial banks and rural commercial banks are affected by their smaller scale, and there is a certain gap between their ability to pay taxes and solve employment problems with large banks.
Employee Responsibility
fromPaying taxesand resolvedEmploymentOn the whole, the total amount of tax paid and the amount of employment solved by the banking industry is relatively large, and the overall performance of public benefits is relatively good. Employee responsibility is analyzed in a qualitative and quantitative way from four aspects: employee development, employee safety, employee compensation and benefits, and fair employment, and the banking industry as a whole is at a medium level.
Employee developmentThe banking industry has performed well in terms of employee development, and both state-owned banks and urban commercial banks have a complete system of employee development and promotion path mechanisms, but the disclosure of quantitative data such as training duration and employee turnover rate by some urban commercial banks and rural commercial banks needs to be further improved.
Employee compensation and benefitsThe welfare of bank employees is very important to the development of the bank, and the bank formulates reasonable welfare policies according to its own actual situation and employee needs, so as to improve the satisfaction and work efficiency of employees and promote the long-term healthy development of banking business. Overall, employee compensation and benefits performed well.
Fair Employment: The banking sector performed better in terms of fair employment, with the lowest percentage of female employees in the sample that disclosed data at 4297% and a maximum of 65%. Banking institutions are also actively employing ethnic minority employees, employees with disabilities, veterans, etc., but overall disclosure is low.
User Responsibilities
The overall performance of user responsibility in the banking industry is at the upper middle level. As the banking industry has a large amount of customer information and has a greater demand for data security and information confidentiality, banks have actively established and improved user information management and confidentiality systems, product quality management systems, etc. At the same time, the banking industry actively implements the national scientific and technological innovation and development strategy, lays out financial technology, and has launched a number of distinctive and influential financial products and services, such as Internet finance, mobile payment, digital currency, first-chain finance, robo-advisory, etc., to meet the diversified and personalized financial needs of different customers, improve the availability and convenience of finance, and enhance the efficiency and effectiveness of finance.
Special Responsibility
As an important subject of China's financial system, commercial banks play a role in implementing national macroeconomic policies and fulfill more social responsibilities with Chinese characteristics. The special responsibilities of banks are mainly reflected in the response to national, regional, industry and other policy documents, and the performance of specific missions or obligations, such as helping rural revitalization, supporting the development of the real economy, promoting regional coordinated development, inclusive finance, charitable donations, etc. From the perspective of score distribution, the overall special liability of banks is at the upper middle level.
3. Corporate governance
In terms of corporate governance in the banking industry, as an important part of the country's financial system, banks are facing stricter requirements and constraints from regulators and self-regulatory organizations, and their governance scores are generally at the upper level.
esgGovernance
ESG governance mainly measures the banking industry's examination of ESG in terms of governance structure, strategic planning and business landing layer, and is also reflected in ESG information disclosure. In terms of performance, the performance of the banking industry is relatively differentiated, with large Chinese banks and joint-stock banks scoring higher, and urban commercial banks and rural commercial banks still need to strengthen ESG system construction and information disclosure.
ESG governance system and organization: In recent years, banks have incorporated ESG into their development strategies and corporate governance, and have set up special organizations or departments at each level such as the board of directors and managers, and are equipped with a comprehensive ESG risk management system. The setting of ESG governance system and organization will help banks better improve ESG governance, promote communication with relevant stakeholders, and improve ESG governance performance. At present, state-owned commercial banks and some leading city commercial banks have performed well in terms of ESG governance system and organization, with 375% of the banks in the sample did not disclose or did not establish relevant governance systems and organizations, mainly urban commercial banks and rural commercial banks.
Quality of ESG information disclosure: The quality of information disclosure is an important assessment indicator of corporate governance, and in order to encourage enterprises to disclose ESG information, the quality of information disclosure is taken as an important indicator in the United Credit ESG rating system. On the whole, the quality of information disclosure in the banking industry is relatively good.
Governance system
The governance system is an important part of bank governance, focusing on the governance structure and compliance and risk. With the deepening of financial reform, China's listed banks have improved their corporate governance structures and continuously improved their compliance and risk management and control levels, jointly promoting the high-quality development of the banking industry.
On the whole, the performance of the banking governance system is at a high level. Specifically, the corporate governance of the banking industry is subject to stricter supervision, and its governance structure performs better; Banks attach great importance to compliance management and risk management, and have established relatively complete compliance systems and risk management systems, and have performed relatively well.
Governance performance
The governance performance of the banking industry is mainly examined through the aspects of hierarchical efficiency, process efficiency and output efficiency, and attention should be paid to the rewards it has received in terms of environmental and social governance achievements.
On the whole, the governance performance of the banking industry is at the upper middle level, with state-owned commercial banks, joint-stock banks and urban commercial banks performing well, while rural commercial banks need to be improved.
Fourth, the banking industryesgFuture outlook
The ESG ratings of banking companies are mainly distributed in the range of A-BBB ratings, and the ESG risk of the industry is low.
As an important part of the national financial system and a participant in the capital market, the banking industry bears more social responsibilities, and at the same time faces the requirements and constraints from the banking industry, the leading industry regulators and self-regulatory organizations, and the information disclosure is relatively comprehensive, so the ESG performance of the banking industry is at the upper middle level. From the perspective of dimensions, the performance of environmental responsibility and social responsibility of the banking industry is at the upper middle level, and the performance of governance responsibility is at the upper level. Judging from the disputed events, banks are prone to penalties in terms of internal control, risk control and performance of duties in accordance with the law.
At the end of October 2023, the ** Financial Work Conference was held, which proposed that finance should provide high-quality services for economic and social development, clarify the key investment direction of financial resources, and do a good job in five major articles: science and technology finance, green finance, inclusive finance, pension finance, and digital finance. In the future, under the guidance of regulators, commercial banks will further play an important role in green finance, ESG information disclosure will be more perfect, and the ESG outlook of the industry will remain stable.