China Citic Bank’s green finance moves require more finesse

It aligns with international frameworks, but some have indirect ties to fossil fuels.

China Citic Bank’s (CNCB) green financing framework represents significant efforts made towards building a low-carbon client resilient (LCCR) future, but still require further improvements for long-term solutions, according to a report by S&P Global Ratings.

The bank’s sustainability reporting reportedly “demonstrates strong market practice” with commitment to aligning with international frameworks for impact reporting, S&P noted in a report, where it graded the CNCB’s green financing framework as a “medium green.”

“China Citic Bank intends to prioritize funding to projects such as renewable energy and clean transportation that are important for the country's decarbonization. The implementation of the framework is likely to support the Chinese government's "carbon peak and carbon neutrality" objective,” S&P said.

Notably, CNBC is aligning its impact reporting with the International Capital Market Association's (ICMA) Harmonised Framework for Impact Reporting of June 2023. The bank has also reportedly disclosed the methodology and assumptions used in its impact calculations. 

CNBC also reportedly will also engage a third party for post-issuance verification of both its funding allocation and impact reporting. This adds transparency to its undertakings, according to S&P.

However, some projects may have indirect linkages to fossil fuel, it warned.

“For instance, the financed energy storage and transmission and distribution projects will be connected to the coal-dominated grid, and charging infrastructure using blue or grey hydrogen is considered eligible,” the ratings agency said.

CNBC’s green buildings projects have no minimum energy performance thresholds, and also show limited consideration of indirect emissions such as the carbon emissions of the building materials used in construction, S&P said. This reportedly brings uncertainty to the projects' actual environmental impact.