Banking regulator proposes incorporation of ESG guidelines for bancassurance

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The China Banking and Insurance Regulatory Commission (CBIRC) recently issued the Green Finance Guidelines for the Banking and Insurance Industry (the Guidelines), which for the first time proposed the incorporation of ESG (Environmental, Social, and Corporate Governance) guidelines into the management of bancassurance institutions.

Bancassurance is an arrangement between a bank and an insurance company whereby the bank allows the insurance firm to sell its products to the bank’s customers.

The guidelines require these institutions not only to assess the ESG risks of their clients, but also to pay attention to the risks of upstream and downstream contractors and suppliers.

The banking and insurance industry should adjust credit and investment policies to focus on key environmental protection fields, such as the construction of clean and low-carbon production systems, energy conservation technologies, and pollution reduction mechanisms.

Relevant institutions must resolutely curb the development of projects with high energy consumption, high emissions, or low technology content, and should strengthen risk identification, assessment, and management of high-carbon assets.

The guidelines clarify the duties of personnel at all levels. The board of directors or council of bancassurance institutions should take the responsibility of determining the ESG strategy of green finance, and the senior managers should be responsible for formulating specific goals, establishing mechanisms, and practicing operational procedures.

A decade ago, China Banking Regulatory Commission (the predecessor of the CBIRC) issued the Green Credit Guidelines, requiring banking institutions to promote green credit. Subsequently, the Green Financing Statistical System was released in 2014, and the Key Rating Indicators for Green Credit Implementation were released in 2016.

CBIRC emphasized that the guidelines issued this year are the development and continuation of the above-mentioned policies. Their next step will be to further improve the policy framework in the field of green finance, and strengthen supervision.