Chinese companies to be grilled on their environmental performance

Clare Saxon Ghauri
15 January 2014

BEIJING: Companies in China are going to be rated by the Chinese government for their environmental performance, in a new initiative aiming to reward the most sustainable businesses and limit finance access for the most polluting companies.

The government's ratings, or 'environmental credits', will be issued based on businesses' efforts in following rules on environmental protection and pollution levels, and will be given under a trial guideline to begin on March 1, 2014.

Credits will be used as a reference for public supervision as well as to determine the likelihood of loans from financial institutions. Companies that score too low will have to improve their environmental performance in order to secure funding from banks.

A document outlining the new rating was jointly released by the Ministry of Environmental Protection, China Banking Regulatory Commission, People's Bank of China and the National Development and Reform Commission last week.

The credit system was created as a way to offer incentives for greener companies through administrative approval, financial support and certifications, to help cut down on China's rising pollution levels.

According to the government document, target companies for the initial trial include those in heavily polluting industries or those which have been punished for environmental pollution in the past.

Changhua Wu, Greater China Director, The Climate Group, said: "Eco-civilization is becoming the string to hold companies accountable for their businesses’ impact on the environment. Environmental credits, as a useful tool, will force those non-compliant companies towards compliance and incentivize business leadership to enhance innovation and achieve net positive impact.

"This measure is in line with the on-going green credit lending policy in China, which was issued in 2007, to push the banking sector to invest in environmentally-friendly and resource-efficient sectors and industries. I am delighted to see such a step is being taken by government agencies together, to drive corporate strategic transformation and a clean revolution for a low carbon and prosperous future."

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By Clare Saxon

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