43703 - DCM BQD Blue Bond

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Summary of Investment Information

Project Number

43703

Company Name

Bank Of Qingdao Co., Ltd.

Date SPI Disclosed

Jun 20, 2022

Country

China

Region

East Asia and the Pacific

Projected Board Date

Jun 1, 2021

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Mar 19, 2025

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 1, 2021
Signed : Jun 23, 2021
Invested : Mar 9, 2023

Sector

Commercial Banking - General

Project Description

The proposed project entails up to US$40 million IFC A Loan investment in a syndicated senior blue loan for Bank of Qingdao (“BQD”). IFC will also mobilize other investors through IFC syndication. The proceeds of the blue loan will be on-lent to projects in line with IFC’s Blue Bond Criteria which BQD has developed as part of its own framework for blue financing with IFC’s assistance. The project will be one of the first blue loans in Asia and in the world, and will help China demonstrate its commitment to addressing the challenges of marine litter in other Asian countries, where the product may be replicated.

Associated Advisory Engagement

IFC advisory services supports BQD: (i) formulate a blue finance strategy based on an institutional diagnostic and market assessment; (ii) develop a blue bond/loan taxonomy under its blue finance framework in line with globally acceptable principles; (iii) formalize its practices into an environmental and social management system (ESMS) that has a specific focus on environmental and social risks related to the activities financed by the blue loan, such as marine pollution control and seafood supply chain risk.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	150.0
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Long Term Loans to Corporates

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

1) Increased funding for blue projects: IFC anticipates that this Project will increase access to finance for the blue economy through the targeted use of proceeds and expanding the green finance principles to include a new blue finance taxonomy. 2) Sustainability: IFC anticipates that the Project will promote sustainability by catalyzing the blue finance in China and more broadly in emerging markets.

1) Innovative financing instrument: IFC will be the arranger for the innovative syndicated blue loan to BQD. Although BQD has extensive experience in green finance in the domestic market, this will be the first time that BQD to receive a blue loan. 2) Resource mobilization: IFC’s anchor investor role is expected to help mobilize financing from international investors and DFIs, who are not familiar with the blue finance, but view IFC’s role and involvement as a stamp of approval. Bringing in these new investors will also help BQD broaden and diversify its investor base, making the Bank’s financial position more robust. 3) Knowledge, innovation, and capacity building: IFC will advise and support BQD in establishing its blue finance capacity, including preparation of the first syndicated blue loan and its future blue bond issuance, through a programmatic advisory service engagement. 4) Policy, sector, institutional, or regulatory change: Developing a blue loan instrument that supports sustainable marine development and combats marine litter and water related pollution, requires an integrated top-down policy dialogue and collaborative implementation. The World Bank Group has engaged with the government of China to increase awareness and has advised on data-gathering tools and analysis to prepare integrated policy, administrative, and fiscal reforms, and has identified opportunities for public sector investment. The Project, as a pilot blue loan, will leverage IFC’s and World Bank’s resources, as well as other global stakeholders to create the necessary conditions for a successful and scalable commercial blue finance.

E&S Category Rationale / Risks and Mitigation

The Project entails IFC investment in a syndicated blue loan for Bank of Qingdao. The proceeds of the blue loan will be on-lent exclusively to subprojects in line with BQD's Blue Bond/Loan Framework, which was developed with IFC's assistance and follows IFC's Blue Bond Criteria, and broadly includes activities such as sustainable fishing and aquatic farming, water supply and treatment, chemicals and plastics treatment, water and waste management in vessels and shipping yards, licensed sustainable tourism, and the manufacturing of ocean-friendly products and offshore renewable energy. For avoidance of doubt, any coal related activities, any ocean wild catch fishing as well as higher risk business activities involving involuntary resettlement, significant impacts on environment, community health and safety, biodiversity, cultural heritage, or poor occupational health & safety records, will not be eligible for financing from the blue loan proceeds. As such, the subprojects to be supported by the Project are expected to be of medium E&S risks in nature. The proposed investment is therefore categorized as FI-2 according to IFC Sustainability Policy. The applicable E&S performance requirements for this Project will be: i) the IFC FI Exclusion List; ii) the applicable national E&S laws and regulations; and iii) the IFC Performance Standards where applicable.

The overall E&S risks and impacts of the proposed investment, while medium as described above, may arise from the Project-supported activities such as ballast water treatment, sustainable seafood processing, plastics recycling, biodegradable plastic production, solid waste and wastewater management. The E&S risks may include those related to marine pollution control, occupational health & safety, labor and working conditions, as well as seafood supply chain risks, among others, which can be managed through proper mitigation measures. While Bank of Qingdao has instituted some good E&S practices for its early issued green bonds, it has not formalized such practices into an environmental and social management system (ESMS) for assessing and managing E&S risks consistent with the above applicable E&S performance requirements. Under this Project, Bank of Qingdao will be required to develop such an ESMS and implement it at the level of asset class supported by the Project. The ESMS should include the following key aspects: E&S policy, internal organizational capacity and competency development, E&S screening procedures and tools to identify the risks and impacts of borrower activities, and monitoring and review of the portfolio. The Bank will be also required to appoint an ESMS officer and maintain proper capacity to implement the ESMS, including training relevant staff in conducting E&S screening, assessment and monitoring of activities in accordance with the applicable E&S performance requirements. Through advisory services, IFC will provide guidance to BQD on identifying eligible subprojects for financing or refinancing that meet the E&S eligibility criteria. Bank of Qingdao's HR practices overall are in line with the requirements of IFC Performance Standard 2: Labor and Working Conditions.

Contacts

For Inquiries About the Project, Contact

Bank of Qingdao Co., Ltd.
Mr. Zhiqian Lin
Head of Blue Finance Program Office
+86 (532) 85709732
linzhiqian@qdbankchina.com
6 Qinling Road, Laoshan District, Qingdao, Shandong Province, PRC
http://en.qdccb.com/

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Fax: 202-974-4384

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This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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Task Title & Description	Anticipated Completion Date
Nominate officers	09/15/2022
Establish SEMS	09/15/2022
Staff Training	09/15/2022
Retain an E&S consultant	09/15/2022

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