By Liang Bin, Chief Information Officer, General Manager of Information Technology Department, and General Manager of Big Data Department, Bank of Jiangsu
Dong Shanning, Deputy General Manager of the Green Finance Department and Deputy General Manager of the Corporate Business Department of Bank of Jiangsu
The report of the 20th National Congress of the Communist Party of China made a strategic deployment for "promoting green development and promoting the harmonious coexistence of man and nature", proposing that "we must firmly establish and practice the concept that lucid waters and lush mountains are invaluable assets, and plan for development from the perspective of harmonious coexistence between man and nature" and "promoting green and low-carbon economic and social development is the key link to achieve high-quality development". Finance is an important part of financial integration and resource allocation, and the development of green finance is an inevitable requirement for promoting green development. The healthy and orderly development of green finance is of positive significance for promoting the green and low-carbon transformation of the economy and society, and effectively realizing the transformation of lucid waters and lush mountains into gold and silver mountains.
Liang Bin, Chief Information Officer, General Manager of Information Technology Department, and General Manager of Big Data Department of Bank of Jiangsu
Dong Shanning, Deputy General Manager of the Green Finance Department and Deputy General Manager of the Corporate Business Department of Bank of Jiangsu
Pain points in the development of green fintech
China's "dual carbon" strategic goal contains huge economic growth potential and technological innovation vitality, bringing historic opportunities for the rapid development of green finance and financial technology. Both the State Administration of Financial Supervision and the People's Bank of China (PBoC) have clearly affirmed the indispensable role of fintech in promoting the development of green finance.
1. It is difficult to obtain and integrate data
In the field of green finance, the quality and availability of data is critical for financial institutions to conduct risk assessment, project screening, and decision-making. At present, the data foundation in the field of green finance is relatively weak, which is mainly reflected in the low data quality, insufficient data samples and inconsistent data formats. The data required for the evaluation of green finance projects involves many fields and links, including environmental assessment, energy utilization, carbon emissions, etc., and it is difficult to collect and integrate data. On the one hand, there are barriers to data sharing and interoperability between different departments and institutions, resulting in limited data availability. On the other hand, green finance projects have a wide variety of data in different formats, which requires a lot of data cleaning and conversion, which increases the difficulty of data collection and integration. Limited availability and high difficulty in data processing make it difficult for financial institutions to conduct access review and risk assessment of green projects, which is not conducive to investment and financing decisions.
2. High requirements for system application professionalism
With the gradual clarification of domestic green investment and financing standards, the scope of business that can be identified for green identification has also been expanded, and the corresponding financial technology implementation and application standards have also risen. In order to empower business development, developers need to have rich experience and professional knowledge reserves in business identification, and realize intelligent green business identification and risk determination at the system level, so as to ultimately achieve the goal of improving quality and efficiency. At present, there is no unified standard for the identification of the system in this area, and it is necessary for financial institutions to develop and research on their own, but due to its high technical threshold, the investment of financial institutions in this area is limited.
3. ESG risk assessment and management are challenging
ESG risk assessment and management unique to green finance business is an important aspect of green fintech application. However, ESG risks are quite different from the traditional risks that financial institutions are familiar with, and it is difficult to apply traditional risk assessment models, so it is necessary to build an ESG risk management system separately and incorporate it into a comprehensive risk management system. Among them, rating models, business process management, stress testing, information disclosure, etc. are new fields for most financial institutions. With the tightening of regulatory requirements and information disclosure requirements, financial institutions urgently need to fill in the gaps in the field of ESG risks.
"One body, two wings" digital and intelligent management system for the whole process of green finance business
In the wave of digitalization, Bank of Jiangsu attaches great importance to the digital and intelligent construction of green finance business processes, takes data as the core, explores the application path of digital intelligence, and empowers the development of green finance business. Bank of Jiangsu has independently developed a professional system of "Green Finance Intelligent Service Platform", which drives the construction of the platform with business needs, and realizes the customization of business functions and the digital intelligence of the whole business process. After nearly three years of R&D work, the green finance intelligent service platform has formed a platform architecture with "intelligence as the main body, data cabin and cockpit as the two wings".
Figure 1 Business architecture of the green finance intelligent service platform
1. "Intelligent" smooth business processes
Bank of Jiangsu is committed to improving the efficiency of business management with intelligence, and has independently developed special functions such as intelligent identification of green business, automatic calculation of environmental benefits, and hierarchical classification of green customers in the green finance intelligent service platform, so as to accurately identify "dark green" and "light green" customers and effectively prevent the risks of "greenwashing" and "greenwashing".
(1) Intelligent identification of green business: The intelligent green finance service platform makes full use of financial technology methods such as machine learning and big data analysis to continuously iteratively update the two expert rule bases of intelligent identification of green credit and automatic identification of project environmental and social risks, so as to realize the automatic identification and classification of green investment and financing business, improve the accuracy and timeliness of business identification, and help the management and control of green business processes.
(2) Accurate calculation of environmental benefits: The green finance intelligent service platform is embedded with 11 types of environmental benefit calculation models, and provides environmental emission reduction calculations under more than 60 sub-financing catalogues according to the customer's national standard industry and business scope, so as to realize the theoretical evaluation and accounting of the environmental benefits generated by the bank's green assets. The model combines the production and operation mode, main business income, main output, project fund scale, loan fund scale and other measurement factors, and gives specific index results such as carbon emission reduction, standard coal emission reduction, water saving, chemical oxygen demand saving, nitrogen oxide emission saving, etc., to provide data support for the low-carbon transformation of asset structure.
(3) Customer green "portrait": Relying on typical customer classification methods and machine learning algorithms, the green finance intelligent service platform establishes green customer classification standards, conducts green "portraits" of customers, automatically identifies "dark green" and "light green" customers, and accurately matches green financial products on the basis of insight into customer needs to meet customers' green financing needs.
2. The "data cabin" consolidates the data foundation
The "data cabin" is built based on the classification standards of green finance business of the regulatory authorities, and through access to multi-dimensional big data such as environmental protection rating, production safety, and corporate credit, it is integrated with business data to jointly build a bank-wide green finance data deck. Machine learning algorithms such as logistic regression and decision trees, as well as technical algorithms such as natural language processing and deep learning, are used for data processing and model training, and finally complete the screening, cleaning, and normalization of massive data, standardize unstructured data, realize the traceability, verifiability, and comparison of green data, and provide data support for business management, regulatory reporting, and external information disclosure.
3. The "cockpit" controls the business panorama
Relying on "intelligent" technical means and massive data analysis of "data cabin", the green finance intelligent service platform empowers the construction of corporate carbon credit, customer ESG rating, and forward-looking social and environmental risk management systems, and realizes the online and visual management of the whole process of green finance business.
(1) Build a "carbon credit" system for enterprises. Bank of Jiangsu independently developed the enterprise carbon account accounting model, carried out "carbon portraits" of enterprises in eight major industries included in the national carbon market, such as electric power, building materials and steel, and built a "carbon account" and "carbon credit" system for enterprises. Based on the adequacy of customer information entry, we provide calculation models with different accuracy. While accurately calculating corporate carbon emissions, the model further strengthens the risk identification, assessment and management of high-carbon assets, and promotes the reduction of the carbon intensity of asset portfolios. Relying on the "carbon credit" system, the "carbon account-linked loan" product was innovatively implemented, and won the first prize of the "Key Cultivation Project of Green and Low-carbon Finance Laboratory" in Suzhou.
(2) Customer ESG rating system. Bank of Jiangsu has long been committed to the research and development of ESG rating models, and is the first in the industry to launch an ESG rating system for credit customers. Through the linkage with the local development and Reform Commission, environmental protection, industry and information technology and other departments, with the support of massive data in the "data cabin", comprehensive data analysis is carried out on the production and operation of enterprises, social welfare, and R&D investment. The platform focuses on the performance of customers in three dimensions: environmental, social and corporate governance, and builds an ESG index system for a total of 60 topics. In the scoring stage, the evaluation weight of each index is dynamically adjusted according to the differentiated scoring logic of different index attributes (qualitative, quantitative, Boolean), and then according to the industry classification to which the customer belongs, and finally the rating is delineated based on the relative score of all customers. In the information entry stage, big data collection is supplemented by due diligence of account managers, and an audit process is built within the platform to check the authenticity of data. In the daily maintenance stage, it supports all-round data visualization and analysis functions, including historical rating trends, ESG 3D performance radar chart analysis, branch customer entry summary, etc., and updates all external data involved in the rating system on a quarterly basis, effectively improving the timeliness of information.
(3) Forward-looking social and environmental risk management system. Bank of Jiangsu has incorporated environmental and social risks into its comprehensive risk management system, and strengthened the online management of environmental and social risks throughout the life cycle in business processes such as due diligence, credit review, fund disbursement and post-loan management by relying on the "Project Loan Environmental and Social Risk" management module of the green finance intelligent service platform. In the post-loan management process, by embedding social and environmental risk monitoring information, using intelligent computing and decision-making models, a real-time early warning mechanism for potential risks is established, and a list management is implemented for customers who do have environmental and social risks, so as to effectively strengthen the forward-looking prevention and control of environmental and social risks.
Technology-driven green finance talent cultivation
Green fintech interdisciplinary talents are the core driving force for the digital and intelligent transformation of green finance, and the key to promoting the digital and intelligent upgrading of green finance in product design, risk assessment, customer service, etc., and improving the intelligent level of green finance business. At the same time, talents with innovative spirit and digital intelligence skills can develop more innovative and practical green financial products and services based on market demand and green development trends, meet the diversified needs of customers, and promote the prosperity and development of the green financial market. With the continuous expansion and deepening of green finance business, there is an increasing demand for talents with cross-disciplinary skills such as green finance knowledge, data analysis, and artificial intelligence. Bank of Jiangsu attaches great importance to the cultivation of compound talents, strengthens the transformation of employee training from "focusing on training" to "focusing on education and training", from "focusing on business knowledge and skills training" to "focusing on both ability and political integrity, and improving comprehensive ability and literacy", and cultivates a team of high-quality green finance professionals with both ability and political integrity around strategic priorities, scenario applications and the improvement of employees' comprehensive literacy.
Bank of Jiangsu further refined the green finance training system - "Suzhou Bank Green Gold Wings" plan, focusing on "green finance policy, green industry development and service, environmental and social risk management, green finance intelligent service platform" and other contents, carefully designed including: green finance line leaders and business backbone centralized training, green finance policy and product cross-line training, green finance series of micro-courses, green financial product manuals and case teaching materials, green financial intelligent service platform user manual training and other training programs. It has achieved "all-round and multi-channel" green finance training and guidance covering "cross-line and head office", and has been supported by expert think tanks from many universities and research institutes, including the International Institute of Green Finance of Central University of Finance and Economics, the School of Environment of Nanjing University, the Nanjing Institute of Environmental Sciences of the Ministry of Ecology and Environment, the Evaluation Center of Jiangsu Provincial Department of Ecology and Environment, and the Jiangsu Engineering Consulting Center.
Green fintech interdisciplinary talents are the core driving force for the digital and intelligent transformation of green finance, and the key to promoting the digital and intelligent upgrading of green finance in product design, risk assessment, customer service, etc., and improving the intelligent level of green finance business. At the same time, talents with innovative spirit and digital intelligence skills can develop more innovative and practical green financial products and services based on market demand and green development trends, meet the diversified needs of customers, and promote the prosperity and development of the green financial market. Bank of Jiangsu continues to implement the relevant strategies of talent training, improve the training system, and provide a more powerful talent guarantee for the digital and intelligent transformation of green finance.
Figure 2 The green finance talent training system of Bank of Jiangsu
Summary and outlook
Since its establishment in 2007, Bank of Jiangsu has always adhered to the mission of "creating a better life", actively implemented the strategic deployment of "carbon peak and carbon neutrality", built a strategic system driven by the "Principles of Responsible Banking" and ESG, and promoted the collectivization, specialization, internationalization and high-quality development of green finance. As of the end of 2023, the scale of green investment and financing of Bank of Jiangsu will exceed 450 billion yuan, and the scale of green financing in the province will remain among the top three. The balance of green credit exceeded 280 billion yuan, and the proportion of green credit in various loans ranked first among the 21 commercial banks directly managed by the People's Bank of China.
No accumulation of steps, no thousands of miles; If you don't accumulate small streams, you can't become rivers and seas. In the future, Bank of Jiangsu will further promote the in-depth integration of green finance and emerging technologies, introduce more cutting-edge technologies, cultivate compound talents in related fields, continue to improve the automation and intelligence level of the whole process of green financial services, contribute to the "dual carbon" strategy, and promote the harmonious coexistence of man and nature.
(This article was published in the first half of April 2024)