Building a Green Commercial Bank

Friday, January 19, 2018

On December 12th in Beijing, China, Carolyn Szum participated in a panel discussion entitled, “International Green Finance Experience Exchange,” alongside representatives from Citibank, HSBC, and the Green Climate Fund, to advise leading Chinese banks and government agencies, such as Ministry of Finance, National Development and Reform Commission), People’s Bank of China, China Banking and Regulatory Commission, and China’s Green Finance Committee on strategies for “building a green commercial bank.”

Szum discussed technical barriers to building energy efficiency financing in China, including lack of public information on building energy performance; lack of legally enforceable measurement and verification (M&V) standards and tools; and lack of technical capacity for building energy efficiency. She also discussed how the fragmentation of the energy efficiency marketplace (by building type, energy efficiency measure, etc.) makes it difficult to achieve sufficient scale, contract standardization, and efficient credit quality assessment – thereby inhibiting capital market engagement.

To address these barriers, she offered thoughts on policy measures that could be utilized in the Chinese marketplace to promote demand for energy efficiency financial products, such as “green tagging,” which helps lenders compare the default rate of loans for energy efficiency projects to typical bank loan default rates.  To the extent that analysis demonstrates borrowers for energy efficiency projects have lower non-performance rates, banks can offer improved financing terms based on a lower risk profile, thereby driving the flow of capital for energy efficiency. Thus far, very little research has been conducted in this area, and findings would be impactful for banks and regulators worldwide.

For more information on building energy efficiency financing research being conducted by Lawrence Berkeley National Laboratory (LBNL) under the U.S.-China Clean Energy Research Center Building Energy Efficiency (CERC-BEE) program, please contact ccszum@lbl.gov or view the recent LBNL paper, Lessons from Europe, North America, and Asia: Financing Models that are Facilitating Building Energy Efficiency at Scale.