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On September 27, On the Development of ESG in Banking Industry (2024) (hereinafter referred to as the Report) was officially released at the “ESG Development Forum of the Banking Industry 2024” to reveal the above findings.

The Report was initiated by China Financial Media Co., Ltd., with full technical support provided by GoldenBee Consulting. It aims to systematically show the ESG development of China’s banking industry, objectively evaluate its current development level, and continuously track its future progress. It intends to further promote the better implementation of ESG-related policy requirements in the banking industry and improve its ESG performance through the accumulation and sharing of ESG practical experience.

At the release of the Report, Yin Gefei, Founder and Chief Expert of GoldenBee Consulting, mainly shared his insights on ten major findings and trends of ESG development in China’s banking industry.

01 The level of ESG development in the banking industry is at "catch-up" stage, with significant improvement of its ESG performance compared with the previous year.

Considering that the range and indicators of the control sample are consistent with those in 2023, the ESG score increases by 10.73% compared with the previous year, with an increase of 25% in the environmental score, an increase of 16.67% in the social score, and an increase of 4.35% in the governance score. Compared with 2023, the scores of the banking industry in various topics are basically increasing.

02 The ESG scores of large state-owned commercial banks, joint-stock commercial banks, city commercial banks and private banks have all increased year on year, and the level of ESG development of rural commercial banks included in the evaluation for the first time is at the "catch-up" stage.

Compared with 2023, there are significant increases in the scores of large state-owned commercial banks on such topics as green finance, transition finance, supply chain sustainable management, inclusive finance, and employee rights and development.

There are significant increases in the scores of joint-stock commercial banks on such topics as green finance, climate change, biodiversity finance, supply chain sustainable management, and inclusive finance.

Urban commercial banks have shown significant improvements in scores for green operation, green finance, data security and privacy protection, and financial consumer rights protection.

Great improvements were observed in the scores of private banks for green operation, climate change, data security and privacy protection, and ESG transparency.

03 ESG performance of listed banks have basically achieved "excellence" stage, with significant improvement of its performance on biodiversity finance, sustainable supply chain management and inclusive finance, especially on technology finance and digital finance.

In 2024, ESG performance of listed banks basically achieved "excellence" stage. Compared with 2023, its score on biodiversity finance increases by 41.92%; that on sustainable supply chain management by 23.97%; and that on inclusive finance by 20.75%.

Listed banks have played a leading role in technology finance and digital finance with outstanding performance. As estimated, 24.00% of the sample banks disclose balances of loans for strategic emerging industries, of which listed banks account for more than 70%. In addition, the average investment of listed banks in financial technology reaches CNY 6.624 billion, accounting for 3.40%, which shows that listed banks have continuously increased their investment in digital transformation and technological innovation, laying a solid foundation for promoting the high-quality development of the financial industry.

04 The ESG performance of non-listed banks is at "development" stage, with significant improvement on green operation, climate change, data security and privacy protection, and ESG transparency.

In 2024, the overall ESG performance of non-listed banks included in the evaluation is still at "development" stage, but their ESG risk and opportunity management ability is lower than the overall level of the banking industry.

Compared with 2023, the score on green operation increases by 67.54%; that on climate change by 116.34%; that on data security and privacy protection by 68.39%; and that on ESG transparency by 98.21%.

05 The banking industry has achieved outstanding performance in green finance, in which large state-owned commercial banks have significantly improved their practices.

The average score of the sample banks on green finance is the highest among the scores on environmental topics, and that of large state-owned commercial banks reaches 0.88, with a year-on-year increase of 24.60%, which indicates that these banks have made remarkable progress in promoting the development of green finance.

06 There is significant year-on-year improvement of the performance of the banking industry on climate change, biodiversity finance and green operation.

The scores on green finance, climate change, biodiversity finance and green operation increase by 11.75%, 31.97%, 45.55% and 26.13%, respectively, on a year-on-year basis, and the disclosure rate of three-level indicators under each topic also increases compared with the previous year.

07 The banking industry has improved its performance on inclusive finance, with large state-owned commercial banks and joint-stock commercial banks performing well in this field.

From 2021 to 2023, the balances of inclusive loans for small and micro enterprises showed an upward trend year by year, while the interest rate of inclusive loans showed a downward trend. This indicates that the banking industry has not only enhanced its support for small and micro enterprises, but also effectively reduced the financing cost of these enterprises by lowering the loan interest rate, contributing much to their development.

Large state-owned commercial banks and joint-stock commercial banks have achieved outstanding performance on inclusive finance, with their average inclusive finance score close to or above 0.70, reaching its excellence.

08 The banking industry has significantly improved its performance on data security and privacy protection and financial consumer rights protection.

The banking industry attaches more importance to customer privacy and bank data security. As estimated, 58% of the sample banks have disclosed their protection measures for customer privacy, and the number of the banks increases by 24.2% year on year. Moreover, 56% of the sample banks have established their data security management systems, and the number of the banks increases by 22.9% year on year.

There is significant improvement of performance on financial consumer rights protection. Nearly one-third of the banks have disclosed their customer satisfaction, and the proportion of customer satisfaction in the range of 90% to 100% increases by 2% compared with the previous year. More than half of the banks have disclosed their measures for sustainable/responsible product promotion and consumer education, with a significant year-on-year increase.

09 The banking industry emphasizes on risk control and the construction of business ethics, and there is generally a downward trend in the non-performing loan ratio and an upward trend in the capital adequacy ratio.

The banking industry values risk control and the construction of business ethics to ensure the stability and compliance of the financial system through institutional improvement and management enhancement. Most banks have formulated strict anti-money laundering policies and integrity systems to strengthen their risk management and crisis response mechanisms, while improving employees’ professional ethics through inspections and anti-corruption education.

Among the sample banks, 89% have disclosed their non-performing loan ratio, with a year-on-year increase of 0.27% in the disclosure rate, and the non-performing loan ratios of most banks are lower than 1.7%. Besides, 90.5% of the sample banks have disclosed their capital adequacy ratios, which are all higher than 9%. Influenced by the decline in non-performing loan ratio and the increase in capital adequacy ratio, the banking industry has conducted sound preliminary work in risk management and capital replenishment to safeguard the stable operation of the financial system.

10 The banking industry emphasizes on the improvement of ESG governance structure, in which a few pioneering banks have formulated their ESG strategies, and there is significant year-on-year improvement of ESG transparency among non-listed banks.

The banking industry attaches more and more importance to ESG governance, with significant year-on-year increases in the scores on ESG governance, ESG transparency and ESG strategy. A few pioneering banks have taken their lead in formulating a clear ESG strategy and actively promoting the development trend of green finance. The disclosure rate of ESG reports of listed banks reaches 100%, while that of non-listed banks increases by nearly 40% on a year-on-year basis.

Based on these findings, the following two suggestions are proposed in the Report:

First, the sustainable development system of the banking industry shall be established in an all-round way. It is particularly necessary to take ESG evaluation as an important tool to influence the management and practices of sustainable development.

Second, the sustainable development path of the banking industry shall be followed in multiple dimensions. It is necessary to promote the integration and innovation of ESG governance and strengthen the capacity building of ESG supervision and management executives; to encourage more banks to strengthen the formulation and execution of ESG strategy; to strengthen risk and opportunity management, integrate ESG into the risk management system, and enhance the management and control of green finance business risk and daily ESG risk; and to develop new products and services around five major finance articles in an innovative manner to promote sustainable economic and social development.

As introduced below, the “ESG Development Forum of the Banking Industry 2024” was hosted by China Financial Media Co., Ltd., and co-hosted by China Minsheng Banking Corp., Ltd. Guest representatives from government departments, banking and non-banking institutions and technology companies had in-depth discussions and exchanges around topics such as “Interpretation of the Spirit of the Central Financial Work Conference: How to Do a Good Job in Green Finance”, “Interpretation of the Guidelines for Green and Low Carbon Transformation Industries”, “ESG Development in Globalization” and “Climate Transformation and Carbon Finance Practices”. Reports on other ESG-related topics and typical practice cases in the banking industry were also released at the forum.