Products

All
Products
News
Introduction
Enterprise Site
Common
Enterprise Video
Map

Enterprise News

News Center

Home

The biggest business opportunity is coming: carbon neutrality requires a billion dollars of investment, where do green assets come from?

Release time:

2021-05-20 16:19

Source:

Source: Finance Magazine

Original title: the biggest business opportunities hit: carbon neutral needs a billion dollars of investment, green assets where to come from? | "Finance" cover

Wen: Caijing reporter Zhang Wei Zhang Yingxin Yang Xiuhong Tang County

The significance of carbon peak and carbon neutrality is not only green environmental protection, but also the transformation of human social and economic growth mode behind it, which also means a gradual change for the financial industry attached to the real economy.

Cover Design/Li Li

"Since studying green finance, I have never used the hotel's disposable toiletries on business trips." A financial regulator said that green finance became his research focus in 2015, which triggered the awakening of environmental awareness.

It was also in October of this year that the Fifth Plenary Session of the 18th CPC Central Committee put forward the concept of green development and sustainable development.

But feelings outweigh actions, and the person laments the difficulty of practicing green finance in the first few years.

In real life, an early data of hotel supplies industry associations in various provinces shows that more than 15000 star hotels in the country consume 1.2 million sets of toiletries every day, of which 70%-80% are eventually directly wasted and mixed with domestic waste to become an environmental pollution source.

Another research data shows that if the plastic bags produced every year are tied together, they can circle the earth 7 times. More than 50 kinds of fish have eaten plastic garbage by mistake, and about 1 million seabirds die every year due to plastic pollution.

From the land to the sea, the change that can be felt by human beings all over the world is that the temperature is rising year by year and the climate is getting warmer and warmer. Another study shows that if human beings continue to follow the current carbon emission norm, the global climate will rise by more than 4 degrees Celsius in 2100, and the probability of this trend will exceed 90%.

Excessive carbon emissions, which lead to the destruction of the ozone layer, are identified by the climate community as a major culprit of global warming.

In December 2015, nearly 200 parties to the United Nations Framework Convention on Climate Change reached the Paris Agreement at the Paris Climate Change Conference. Its long-term goal is to control the increase in global average temperature within 2 degrees Celsius compared with the pre-industrial period. Efforts to limit the temperature rise to 1.5 degrees Celsius.

"Before that, China's attitude towards climate change was relatively negative, mainly emphasizing that it could not restrain economic growth, and as a developing country, it could not commit to binding hard targets." Zhou Xiaochuan, former governor of the People's Bank of China and president of the China Institute of Finance, said.

Zhou Xiaochuan said "before this" the watershed has come.

In September 2020, Chinese President Xi Jinping proposed at the 75th UN General Assembly: "China will increase its national independent contribution, adopt more powerful policies and measures, and strive to peak carbon dioxide emissions by 2030 and strive to achieve carbon neutrality by 2060."

"This is an important change worthy of deep understanding and implementation. This change is not a fine-tuning of expression or a continuous renewal of policy, but a change in concept, understanding and position." Zhou Xiaochuan commented.

On December 12, 2020, the biggest business opportunity is coming: carbon neutrality requires a trillion dollars of investment, where do green assets come from? At the "30-60" carbon target, President Xi Jinping further refined several total indicators for China's response to climate change on the basis of the "30-60" carbon target: by 2030, China's carbon dioxide emissions per unit of GDP will drop by more than 65% compared with 2005, non-fossil energy will account for about 25% of primary energy consumption, and forest stock will increase by 6 billion cubic meters compared with 2005, the total installed capacity of wind power and solar power generation will reach more than 1.2 billion kilowatts.

With the clear goal of "carbon peak, carbon neutral", green finance ushered in the development opportunity; but under the world's commitment, practitioners also feel the pressure of pressure.

"Under the conditions of carbon neutrality and constraints, there are two tasks that are particularly urgent." Yi Gang, Governor of the People's Bank of China, rarely systematically explained the current priorities of China's green finance at the China Development Forum on March 20. And policy system planning.

First, the realization of carbon neutrality requires huge investment, and the financial system should be guided to provide the required investment and financing support in a market-oriented way; second, climate change will affect financial stability and monetary policy, which needs to be assessed and responded to in a timely manner. Yi Gang said that around these two requirements, the people's Bank of China has identified green finance as a key task this year and during the 14th five-year Plan period.

In fact, in the past five years, the balance of green financial loans in China has reached 12 trillion billion yuan, ranking first in the world; the stock of bonds is about 800 billion billion yuan, ranking second in the world.

Nevertheless, compared with the huge amount of capital required for carbon neutral goals, the current scale of development of green finance is slightly embarrassing.

Data from the National Climate Strategy Center show that in order to achieve the goal of carbon neutrality, the scale of investment demand in China's new climate field will reach about 139 trillion yuan by 2060, with an average annual rate of about 3.5 trillion yuan, and the long-term funding gap will be more than 1.6 trillion yuan a year.

A person close to the regulator told the Caijing reporter that in view of my country's financing structure based on indirect financing, green finance means reshaping the credit structure of commercial banks. In this process, whether it is the regulatory authorities or the financial market, financial institutions One of the biggest challenges facing is the challenge of ability.

Ma Jun, director of the Green Finance Professional Committee of the China Finance Society, pointed out more directly that if financial institutions do not participate in the process of reaching carbon peaks and carbon neutrality, they will lose the greatest investment and business growth opportunities. "If equity investors have stakes in these high-carbon industries and companies and these companies do not transform, the valuation of these stakes will likely become very small or even zero in the future. If banks lend to high-carbon companies and these companies do not transform, then some long-term loans will become bad debt."

In response to the pressure, Yi Gangluo listed the central bank's green finance worksheet: improving the green finance standard system; strengthening information reporting and disclosure; fully incorporating climate change factors in the policy framework; encouraging financial institutions to actively respond to climate challenges; deepening international cooperation ...... At the same time, the central bank has initiated the establishment of a national carbon accounting system.

Behind each work is a systematic project. Under the clock reversal of the "30 · 60" dual carbon index, the roadmap of China's green finance is gradually becoming clear.

Top-level design: standards and letters

The two sessions are working to improve the top-level design of green finance.

On the evening of March 20, Yi Gang, governor of the people's Bank of China, pointed out at the China Development High-level Forum that the people's Bank of China has identified green finance as a key task this year and during the 14th five-year Plan period. One of the key tasks in the future is to improve the green financial standard system.

The so-called green finance, according to the guiding opinions on building a green financial system issued by the people's Bank of China and other seven ministries and commissions in August 2016, is defined as economic activities to support environmental improvement, climate change and resource conservation and efficient utilization, That is, financial services provided for project investment and financing, project operation and risk management in the fields of environmental protection, energy conservation, clean energy, green transportation, green buildings, etc.

The green financial system refers to the institutional arrangements that support the transformation of the economy to green through financial instruments such as green credit, green bonds, green stock indices and related products, green development funds, green insurance, carbon finance and related policies.

Yi Gang revealed that the central bank will delete fossil energy-related content in the "Green Bond Support Project Catalog" that is about to be revised.

In terms of the construction of the green financial standard system, the central bank mainly follows the principle of "domestic unity and international integration". Since 2018, the People's Bank of China has negotiated with the Development and Reform Commission, the China Securities Regulatory Commission and other ministries and commissions to form a basic consensus and unify the green bond catalog. At present, the newly revised green bond catalogue also excludes clean coal and fossil energy utilization projects that are not recognized internationally.

A green finance professional close to the regulatory authorities said in an interview with Caijing that the new green bond catalogue is expected to be officially issued within the year. This move is also in line with international standards on green standards.

In addition, the central bank is working with the European side to promote the international convergence of green classification standards. Yi Gang revealed that he is striving to introduce a set of common classification standards within the year. In his view, green financial standards are the basis for identifying green economic activities and directing funds to accurately invest in green projects.

In this regard, some regulators have suggested that China did a relatively early classification of green industries, but from a complete and systematic point of view, the European green classification standards are more comprehensive, and China can further learn from them when improving relevant standards in the future.

In addition to the standard, the industry is generally concerned about the mandatory information disclosure system is also approaching.

According to the reporter of Caijing, the central bank will establish a mandatory information disclosure system step by step to cover all kinds of financial institutions and financing entities, and realize the unification of disclosure standards.

In tandem with the central bank, the CBI is also studying the relevant content of the disclosure guidelines.

Banks and other institutions are concerned about the level of detail of the disclosure required by the New Deal, as opposed to the gradually tightening of the regulatory system.

Some regulators and relevant responsible persons of large state-owned banks told Caijing that the early disputes were mainly focused on the scope of information disclosure. From the perspective of environmental protection organizations, it is certainly hoped that banks will disclose specific enterprises and specific projects in as much detail as possible, but this is not realistic because it is likely to harm the interests of enterprises. At present, the relatively consistent view is that the disclosure of loans to specific industries can be. In addition, according to the "Finance" reporter, the letter is currently in the drafting stage of the guidelines.

The above-mentioned professionals pointed out that both financial institutions and enterprises need to actively disclose environmental information to the society. On the one hand, this is the basis for relevant subjects to obtain corresponding rewards; on the other hand, market subjects must also accept social supervision. In the past, market entities generally conducted information disclosure in accordance with internal templates or relevant international templates, but the content, scope, text standards, etc. disclosed by various institutions were not consistent and lacked comparability. At present, the Research Bureau of the People's Bank of China is taking the lead in developing uniform and standardized standards for information disclosure. This is a very urgent matter and is expected to be launched this year.

In recent years, the SFC has also been studying and formulating specific rules for ESG disclosure of listed companies. In 2016 and 2017, the CSRC revised the Annual Report Guidelines and the Semi-Annual Report Guidelines twice, setting out clear requirements for the specific content and methods of environmental information disclosure of listed companies.

In September 2018, the CSRC revised the Code of Governance of Listed Companies to put forward requirements for listed companies in environmental protection and other aspects, as well as to provide for the disclosure of environmental information by listed companies in terms of information disclosure, forming the basic framework for ESG information disclosure. On February 5, 2021, the China Securities Regulatory Commission publicly solicited opinions from the public on the "Guidelines for the Management of Investor Relations of Listed Companies (Draft for Comment)". In the main revised items of the guidelines, the China Securities Regulatory Commission added information on "corporate environmental protection, The communication content of" social responsibility and corporate governance (ESG) information "(investor relationship management).

According to Liu Feng, executive deputy director of the Green Finance Cooperation Committee of the Asian Financial Cooperation Association and chief economist of China Galaxy Securities, the primary problem for the development of green finance in the future is not from green finance itself, but from top-level design. "To achieve the goal of carbon peak and carbon neutrality, a very huge system construction is needed. From a policy perspective, there are currently several difficulties, including the need for a more comprehensive top-level design in the early stage, the formulation of a set of rules and systems, evaluation standards, etc., and the need for relevant talents to implement it before it can be gradually developed. At the same time, behind these designs, strong technical support is needed."

He explained this by giving examples. In the relevant policies of green finance, the regulatory authorities have introduced some measures, such as IPO financing, which will provide more support for green enterprises. However, the question is how to determine whether a company is a green company? In the case of a hydroelectric power plant, for example, in China, it is considered that hydropower power generation reduces carbon emissions, but in some foreign countries, hydropower destroys the ecological environment, so it cannot be counted as a green enterprise. Therefore, comprehensive top-level design, rules and systems, evaluation standards, etc. need to be planned and designed in advance in order to promote the development of green finance in the later stage.

He believes that financial pricing can only be given after detailed indicators are available. From a financial point of view, some standards have been introduced, but they are still not detailed enough. They should be continuously improved. The shortcomings or missing areas should be passed as soon as possible. Legislation makes up. "If the standard setting is not detailed enough, it is easy to arbitrage at the operational level. At present, some enterprises arbitrage by 'brushing green."

Urgent task one: billions of dollars in demand

Yi Gang pointed out that under the constraint of carbon neutrality, there are two tasks that are particularly urgent. One of the important tasks is the huge investment demand.

A number of studies believe that China needs more than 100 trillion yuan to achieve the goal of carbon peak and carbon neutral "30-60. Yi Gang also pointed out at the above-mentioned forum that there are many estimates in various aspects, and the scale level is 100 trillion yuan.

The report "Research on China's Long-term Low-Carbon Development Strategy and Transformation Path" led by Tsinghua University estimates that the energy system will require an additional investment of about 138 trillion billion yuan from 2020 to 2050, more than 2.5 per cent of annual GDP. For such a huge amount of investment, the government provides only about 10% of the financial support, and the rest depends on social capital.

"In the future, the goal of carbon peaking and carbon neutrality will inevitably need to be achieved with the help of financial means. In recent years, China has issued one of the highest volumes of green bonds in the world." Liu Feng told Caijing: "in all areas involved in carbon neutrality, the development of finance is ahead of schedule."

At the end of 2020, the balance of green loans in China's local and foreign currencies was about 12 trillion yuan ($2 trillion), the largest in the world, and the stock of green bonds was about 800 billion yuan ($120 billion), the second largest in the world.

According to the CBI, in terms of the cumulative size of green bond issuance, global green bonds increased by 51% in 2019 compared to 2018, with the top three countries in issuance being the United States ($51.3 billion), China ($31.3 billion) and France ($20.1 billion).

But in the overall scale of China's credit of more than 300 trillion billion yuan, green credit is only a drop in the dollar. Under the hard constraints of carbon peak in 2030 and carbon neutrality in 2060, a large number of high-carbon industries must have a clear carbon reduction path. The above-mentioned professionals pointed out that a large number of funding gaps actually come from transformation funds.

"Carbon peak, carbon neutral requires a lot of transformation and transformation funds, and the existing green finance alone is far from enough." The professional said that green finance has international consensus and strict standards, so it is rigid and all parties must abide by it. Many industries, such as steel, face huge transformational investment needs, but do not meet green finance standards. We can develop transformational finance to support such industries, because transformational finance allows investment in high-carbon, high-environmental-impact industries, but needs to develop a clear path to carbon reduction, transformation, and continuous and rigorous environmental disclosure. The significance of transitional finance is to greatly expand the financial industry's support for environmental and climate-friendly projects. It may not be green, but it meets the requirements of transformation and is beneficial to improving the ecological environment and mitigating climate change.

In terms of the composition of financing entities, 95% of the financing volume of China's green finance comes from banks, which is related to China's financing structure, which is dominated by indirect financing. Compared with China's total GDP 100 trillion each year, the investment rate is about 40%. These regulators believe that the market is not short of funds to supply green finance, the problem is the return on investment.

So how to mobilize the enthusiasm of financial institutions to carry out green investment?

The above-mentioned professionals believe that a better measure is to effectively reduce the financial expenses of financial institutions, and the most effective way is to reduce the risk weight of financial institutions. At present, the balance of China's local and foreign currency green loans is about 12 trillion yuan. If the risk weight is reduced by half, the maximum scale of green loans can be expanded to 24 trillion yuan in theory.

According to the reporter of Caijing, the content of adjusting the risk weight of green financial assets has been written into the relevant documents of the people's Bank of China, but the implementation of this measure is difficult, and the regulatory authorities need to reach a consensus. For the sake of risk control, if there are difficulties in implementing it nationwide, some participants suggested that six national green financial reform and innovation pilot zones should be piloted first.

In addition, a number of incentive measures have entered the discussion stage, including reducing the tolerance of green non-performing assets, carrying out green asset securitization business, and encouraging financial institutions to develop ESG products. It is not ruled out that the People's Bank of China will issue green financial rating or environmental and climate risk rating in conjunction with the regulatory authorities in the future, and reward and punishment will be given according to the rating.

Previously, the People's Bank of China had included the green credit performance of financial institutions in the macro-prudential assessment (MPA), and later suspended the inclusion of green credit performance in the MPA, considering that monetary policy objectives should not be excessive. However, with the further completion of the green financial policy system under the new target, the strength and feasibility of incentive measures are bound to be strengthened.

A survey by international institutions provides a relatively optimistic outlook. Standard Chartered Group found in a survey of the world's 300 largest investment companies last year that 53% of institutions investing in emerging markets listed China as a key investment market. Its recent "Sustainable Investment Assessment" currently shows that up to 90% of high-net-worth investors are interested in sustainable investment, of these, 42% are considering investing 15% of their money in sustainable investments over the next three years.

Urgent task two: to deal with climate risks

"Another more urgent task is that climate change will affect financial stability and monetary policy, which requires timely assessment and response." Yi Gang pointed out.

International studies generally believe that climate change may lead to an increase in extreme weather and other events and economic losses; at the same time, green transformation may reduce the value of assets with high carbon emissions and affect the asset quality of enterprises and financial institutions. Yi Gang believes that, on the one hand, this will increase the credit risk, market risk and liquidity risk of financial institutions, and then affect the stability of the entire financial system. On the other hand, this may affect the monetary policy space and transmission channels, disturbing economic growth, productivity and other variables, leading to more complex assessment of monetary policy stance. This is a new issue in maintaining financial stability and implementing monetary policy.

Ma Jun, director of the Green Finance Professional Committee of the Chinese Society of Finance, has previously said that "carbon neutrality" is expected to bring more than 180 trillion green financial investment in the next 30 years, bringing huge investment and business opportunities in energy, transportation, construction, industry, forestry and other industries, but it also brings physical risks and transformation risks that need to be faced in dealing with climate change.

Among them, physical risk refers to the risk of abnormal climate, environmental pollution and other events, which may cause serious damage to the balance sheets of enterprises, households, banks, insurance institutions, etc., and then affect the financial system and macro-economy. Physical risk affects financial stability through three main channels: first, through the insurance company balance sheet channel, affecting individual financial institutions and the financial system as a whole. The second is to amplify financial risks in the banking system through collateral channels. Third, through economic and trade and sovereign debt channels, foreign physical risks spread to the domestic.

Transition risk refers to the risk of re-pricing of high-carbon assets and financial losses due to sudden tightening of carbon emission reduction and other related policies, or technological innovation, in order to cope with climate change and promote the low-carbon transformation of the economy. Transition risks affect financial stability in two main ways: first, they amplify financial system risks through asset revaluation. Second, policy outperformance and low credibility have contributed to the accelerated transmission of risk from the real economy to financial markets.

Ma Jun made a set of risk climate transformation model, analyzed the coal power industry, continued to lend to the coal power industry, the probability of non-performing loans rose from about 3% now to more than 22% 10 years later, and this 22% is the probability of annual default, rather than the cumulative concept. If the probability of default is accumulated for 10 years, it is far more than 20%.

In Ma Jun's view, this conclusion is obvious. There will be many financial risks in these areas. Financial institutions and investors need to identify, predict, and prevent these risks.

According to a reporter from Caijing, financial institutions such as Industrial and Commercial Bank of China, Industrial Bank of China, and Bank of China, which were involved in green finance earlier, have made models of the risks brought about by climate and various environmental factors. Internationally, the circle of financial institutions represented by Europe has also done a lot of work.

Wang Yao, Dean of the International Research Institute of Green Finance of the Central University of Finance and Economics and Deputy Secretary-General of the Green Finance Professional Committee of the Chinese Society of Finance, told the Caijing reporter that for financial institutions, the risk that needs to be identified and quantified most is the risk of transformation. Assets that may face risks in the future need to be identified; secondly, financial institutions need to quantify this risk, and only have the ability to quantify, the cost of risk can be incorporated into pricing.

According to Wang Yao, risk quantification requires two tasks: one is to collect information to understand relevant climate and environmental information; the other is to have methodology to help understand the degree of business risk value and conduct differential pricing.

According to the report of carbon Trust, China's current climate risk stress testing methods mainly include three: ICBC's "scenario analysis method", the "portfolio method" of the International Institute of Green Finance of the Central University of Finance and Economics, and the "financial risk transformation analysis method" of Tsinghua University ".

"Some pilot areas have pushed financial institutions to do climate risk stress tests." Wang Yao said that the demand of banks in this area is also increasing. Wang Yao believes that the biggest risk of China's green finance is policy risk, but the probability of this risk is very small.

Given that climate change affects monetary policy, there is international controversy over the inclusion of climate change in the monetary policy framework. Some central banks are more active in this regard and believe that they should be included in the policy framework of the central bank.

The above-mentioned professionals believe that green finance can definitely be included in the central bank's policy framework, such as credit policy, financial stability policy, etc., but it has not been included in monetary policy. Monetary policy should be clearer and simpler, with more transparent rules and clearer objectives, with less consideration for less important variables.

Central banks should indeed consider environmental and climate risks when conducting financial stability assessments. The above-mentioned professionals said that some financial institutions appear to have healthy regulatory indicators, but 7% 80 of the assets on the balance sheet are concentrated in high-carbon industries, and the risk of future transformation is very high. In the event of a revaluation of assets, these financial institutions could face huge losses. For example, a study by Tsinghua University shows that the current non-performing rate of the coal industry is about 3%, and it is estimated that it will rise to more than 10% in 10 years. Therefore, the transformation will bring about a systematic revaluation of many assets.

The Research Bureau of the People's Bank of China has taken the lead in building a green financial information management system in the Huzhou Green Finance Reform and Innovation Pilot Zone, which can realize the transaction-by-transaction, real-time, and penetrating supervision of the green loan business of financial institutions, and is also reserved for other green financial products and businesses. The port. The system was built in 2018, started trial operation in 2019, and is now preparing to expand to the entire Yangtze River Delta region.

According to the above-mentioned professionals, the system is an after-the-fact management system, not prior approval. Green finance needs some additional encouragement and incentive measures so that financial institutions can have the enthusiasm to develop the industry; but at the same time, it is necessary to prevent moral hazard and avoid "green washing. The system can play a role in wind control to a certain extent. It is worth noting that within the system, financial institutions can monitor each other, further reducing the occurrence of moral hazard.

In addition, the non-performing green financial assets are also of great concern. From the current data point of view is very controllable. "China's green loan balance is the largest in the world, the market size of green bonds is the second in the world, and the quality is relatively good. So far, there has been no case of default." Liu Guiping, deputy governor of the People's Bank of China, pointed out.

Market Launch: Capture the Biggest Business Opportunity

Green finance has been practiced in China for several years, and its main forms include green credit, green bonds, green funds, green insurance, carbon finance, green index products and ESG information disclosure.

In terms of the volume of green finance, it is also beginning to take shape, but the structure is still dominated by indirect financing, with green credit and green bonds accounting for a relatively high proportion, while in the field of direct financing, such as green IPO and refinancing, the scale is relatively small.

The comparative data of CICC shows that as of 2020, the People's Bank of China has announced that the domestic green financing scale is about 12 trillion yuan, of which the green credit investment scale exceeds 11 trillion yuan, and the balance of domestic labeled green bonds is about 870 billion yuan, while the green equity market The scale is still small, and it is in its infancy in terms of PE/VC equity investment, green IPO and green enterprise refinancing, the average annual investment in green equity in China from 2018 to 2019 was $42.4 billion, much smaller than the average annual increase of $550 billion in green credit and bonds.

In terms of growth, the growth rate of green financing has slowed in recent years. CICC statistics show that the balance of green loans of banking financial institutions nationwide increased from 4.9 trillion yuan at the end of June 2013 to 11.01 trillion yuan at the end of June 2020, with a compound annual growth rate of 12.3. However, in recent years, the year-on-year growth rate of green credit balances has not been as fast as that of overall financial institution loan balances. Taking the first half of 2020 data as an example, green loan balances grew at a year-on-year rate of 3.9 per cent, while overall financial institution loan balances grew at a year-on-year rate of 13 per cent.

Despite the growth rate, the investment opportunities brought by green finance cannot be ignored, especially after the two indicators of carbon neutrality and carbon peak are clear, the market prospects are particularly promising.

Recently, Ma Jun said publicly that the Chongqing green investment research led by him shows that Chongqing alone, a provincial economy, is expected to have a green investment demand of 13 trillion yuan in the next 30 years to achieve carbon neutrality. If this figure is mapped to the whole country, the green investment required for national carbon neutrality may be close to 500 trillion yuan. Therefore, Ma Jun estimates that it is between 100 trillion and 500 trillion yuan, which is an opportunity for green and low-carbon investment to implement carbon neutrality in the next 30 years.

"For financial institutions, if they don't participate in this process, they will lose the biggest investment and business growth opportunities. From an industry perspective, there are many areas to invest in." Ma Jun said that the core of carbon neutrality is energy zero carbonization. In the future, almost 100% of energy will be composed of renewable energy, which requires a lot of investment. In addition, transportation and construction are very important areas.

Investment institutions have smelled business opportunities. Recently, Zhang Lei, founder and CEO of Investors Capital, said at the 2021 Economic Summit of the China Development Forum that when green transformation becomes the greatest certainty in the future, it will effectively guide a large amount of social capital to the carbon-neutral field, and green equity (PE/VC) investment is at the right time. In this direction, market-oriented PE/VC institutions have a lot to offer.

Hillhouse Capital replied to a reporter from Caijing that we must realize that achieving the goal of carbon neutrality is extremely challenging, requiring a large amount of upfront resource investment, and more practitioners to provide innovative solutions. On this basis, PE/VC has a high risk tolerance, which can help early innovative companies to successfully survive the death valley. "From the perspective of equity investment, we are continuing to lay out the whole industry chain."

As the "main force" to promote the development of green finance, commercial banks have shown the spirit of "giving up others" on the road of green finance.

In recent years, some large and medium-sized banks have made active explorations in green finance. Through the comprehensive use of green credit, green bonds, green asset-backed securities, green leasing, green trust and other financial instruments, they have successively launched innovative green financial products and services, including energy conservation and emission reduction, clean energy, clean transportation, pollution prevention and control, etc.

According to the statistics of Caijing, as of the end of 2020, the balance of green loans of the six major state-owned banks totaled 6.27 trillion yuan, about half of the current domestic stock. Among them, the balance of green loans of Industrial and Commercial Bank of China, Agricultural Bank of China and Construction Bank all exceeded 1 trillion yuan.

Among the joint-stock banks, such as Industrial Bank, Huaxia Bank, China Merchants Bank, Shanghai Pudong Development Bank, Hengfeng Bank, etc., also occupy a certain market share. Among them, Societe Generale, the first equatorial bank in China, performed well, with a green financing balance of 1.16 trillion billion yuan and 26400 corporate customers by the end of 2020.

At the same time, some small and medium-sized banks are also actively involved. According to incomplete statistics from Caijing, some small and medium-sized banks, such as Bank of Jiangsu, Bank of Nanjing, Bank of Gansu, Bank of Huzhou, Bank of Hangzhou and other small and medium-sized banks, have actively carried out green financial product innovation in recent years, looking for profit growth points while realizing characteristic operation.

The steady progress of green finance development does not mean that there are no challenges in the process. "On the one hand, the imperfect market mechanism restricts the development of green credit business. The price evaluation standards and market trading mechanism for energy use rights, carbon emission rights, emission rights and energy-saving project revenue rights are missing, and banks lack further guidance and guidance. On the other hand, the in-depth promotion of the green financial market system is still facing a talent bottleneck, especially the lack of high-quality and compound financial talents." The relevant person in charge of the corporate finance department of Hengfeng Bank said in an interview with a reporter from Caijing.

A number of senior industry personages close to supervision confessed to Caijing that at present, some large banks and joint-stock banks are doing well, and some banks have established specialized institutions, professional departments and professional teams of green finance. gather professionals in such fields as water conservancy and environment, and then form a synergy with the financial team.

However, according to the reporter of Caijing, although many banks are actively participating in the green financial market, the banks that have established specialized institutions, professional departments and professional teams of green finance are relatively limited. At the same time, the banks that have established a green finance professional department from the head office level are mainly Industrial Bank and Huaxia Bank.

On the other hand, the green financial market system needs to be further improved. The above-mentioned relevant person in charge of the financial department of Hengfeng Bank pointed out that the existing green financial service entities are single. Compared with the participation of banks, other financial institutions such as securities, insurance, and funds have less participation. The joint innovation mechanism of the financial entities of the Bank Securities Guarantee Foundation is not smooth, and the supply of green financial products and services is single, which cannot meet the multi-level and diversified investment and financing needs of green enterprises (projects). In addition, the bank's internal green finance coordination efforts need to be further strengthened.

A number of people in the banking industry said bluntly that there is a long way to go to achieve the goal of carbon peak and carbon neutrality, in which green finance can play an important role, but greater support is needed in incentive policies.

According to the "Finance" reporter, for commercial banks to carry out green financial business, policy incentives include the central bank to issue re-loans, local governments timely interest subsidies and project guarantees. Overall, it is mainly self-motivated within the bank, such as for green credit, the bank's internal transfer pricing when giving certain concessions, financial resources to a certain scale of support and so on.

In this regard, Luo Shiyi, general manager of the Green Finance Department of Industrial Bank, said in an interview with a reporter from Caijing that first, it is recommended to increase support for the issuance of green financial bonds; second, it is recommended to reduce the risk weight of green loans on a pilot basis; second, it is recommended to promote the environment of the financial system And the introduction of relevant standards and systems for social risk management.

With regard to the proposal to reduce the risk weight of green loans on a pilot basis, Luo Shiyi further pointed out that China is the country with the most sound statistical monitoring system and the richest historical data in the world, and the asset quality of green loans is obviously better than that of various loans. it has the basic conditions to reduce the risk weight, and in the context of carbon neutrality, it is necessary to encourage financial institutions to increase the investment of green loans by reducing the risk weight. It is suggested that the green financial organization management system is perfect, the green loan statistical system is standardized, the professional statistical system and statistical team are mature, and the level of green loan non-performing rate is low, the banking institutions should first pilot to reduce the risk weight of green loans.

In addition to policy incentives, how banks themselves do their best is also crucial.

The Bank of Communications has upgraded its green credit policy system, including the implementation of a differentiated credit strategy of "support and control" to support the development of low-carbon green transformation such as energy and manufacturing. Carry out stock business investigation and sorting on key carbon emission industries to promote structural optimization; At the same time, we will strengthen policy tracking and business guidance to optimize credit strategies related to carbon peak, carbon neutral and carbon neutral.

Relevant personnel of CCB's green finance business said in an interview with Caijing that in terms of organization and promotion, the green finance business objectives should be incorporated into the annual comprehensive business plan and decomposed into various lines and branches; in terms of resource allocation, green credit should be listed as a key area of loan scale allocation; in terms of assessment and evaluation, green credit indicators should be included in the annual KPI assessment system.

"Banks should formulate a green finance development strategy based on the Bank's actual situation, set up an overall goal of green finance, and promote the healthy development of their own green finance business by improving the top-level design of green finance and optimizing the allocation of resources. At the same time, they should strictly implement green finance standards, innovate products and services, strengthen information disclosure, and adjust the allocation of credit resources in a timely manner." The relevant person in charge of the corporate finance department of Hengfeng Bank told Caijing that it should also focus on business development opportunities in low-carbon transformation industries. On the one hand, the low-carbon industry will enter a period of rapid growth, the competitiveness of the photovoltaic and wind power industries will continue to improve, and there is a broad space for the development of green buildings and green building materials; on the other hand, the intelligent and low-carbon upgrading of high-energy-consuming industries will also create new market opportunities for the financial industry.

The rising star: carbon trading market

In addition to green credit, in the field of green finance, another market with a scale of trillions is being built. This is the national carbon emissions trading market (hereinafter referred to as the "national carbon trading market") that has attracted much attention this year.

In early March this year, Minister of Ecology and Environment Huang Runqiu said that the construction of the national carbon trading market has reached the most critical stage. It is necessary to reverse the construction period, carry out docking tests in an all-round way, realize system operation as soon as possible, and ensure that online trading will be launched before the end of June this year.

As technical support, Shanghai Environmental Energy Exchange will specifically participate in the construction of the trading system. Lai Xiaoming, chairman of the exchange, said in January this year that the future trading platform of the national carbon market will be operated by an independent trading institution. According to the unified national deployment, this institution will be jointly established by seven pilot provinces and cities, Jiangsu and Fujian provinces. The establishment programme is still being submitted for approval and has not yet been finalized.

Public information shows that the construction of the national carbon emissions trading market will adopt an innovative "two cities" model-the Shanghai United Property Rights Exchange is responsible for trading, and the Hubei Carbon Emissions Trading Center is responsible for registration.

While the carbon trading market is in full swing, the relevant supporting documents involved in carbon trading have also been issued. On January 5 this year, the Ministry of Ecology and Environment announced the "Administrative Measures for Carbon Emissions Trading (Trial)", and issued a quota allocation plan and a list of key emission units. The measures will come into effect on February 1, 2021. As a result, 2225 power generation companies took the lead in being included in the national market.

On March 30, the Ministry of Ecology and Environment issued a notice on publicly soliciting opinions on the "Interim Regulations on the Management of Carbon Emissions Trading (Draft Revised Draft)" (hereinafter referred to as the "Regulations").

According to the "Regulations", the distribution of carbon emission quotas includes two methods: free distribution and paid distribution. In the initial stage, free distribution is the main method. Paid distribution is introduced in a timely manner according to national requirements, and the proportion of paid distribution is gradually expanded.

The regulations also mention the regulatory agencies of the national carbon trading market: the competent department of ecological environment of the State Council, together with the market supervision and administration department of the State Council, the people's Bank of China, the securities regulatory authority of the State Council, and the banking regulatory authority of the State Council, supervise and manage the national carbon emission registration institutions and the national carbon emission trading institutions.

Liu Feng told Caijing: "This is a very important document. It is still in the consultation stage, and one of the important issues it will address in the future should be if the fairness of the allocation of carbon emission allowances is guaranteed."

Prior to this, China's carbon trading pilot has gone through 10 years of history. In October 2011, the National Development and Reform Commission issued the "Notice on Carrying out the Pilot Work of Carbon Emissions Trading", approving seven provinces and cities including Beijing, Shanghai, Tianjin, Chongqing, Hubei, Guangdong and Shenzhen to carry out the pilot work of carbon trading. Since the launch of the pilot, carbon trading has covered nearly 3000 key emission units in more than 20 industries, including electricity, steel and cement. By the end of 2020, the cumulative turnover of the carbon trading pilot exceeded 0.4 billion tons, with a cumulative turnover of more than 9 billion yuan.

Many institutions predict that in the initial stage of carbon trading, transactions may not be active enough, and carbon trading volume is also low. But in the long run, the trading volume of the carbon market may reach the trillion level.

"According to the goal of achieving carbon peak by 2030 and carbon neutrality by 2060, the size of China's carbon emissions trading market may reach 100 billion yuan in the future." On March 18 this year, Wang Zhongmin, former vice chairman of the National Social Security Fund Council, said.

According to previous estimates by Haitong Securities, it is expected that China's carbon quota turnover will reach more than 26 billion tons at the peak. Calculated at the lowest carbon price of 30 yuan/ton, the future transaction amount of my country's carbon market will reach more than 800 billion yuan; based on the EU carbon price of 120 yuan/ton, the future transaction amount of my country's carbon market is expected to reach 3 trillion yuan. However, the future carbon trading market still faces many challenges. Wang Linjing, president of Tianfeng Securities, told Caijing: "the government's laws and regulations and institutional rules are the basis of the carbon trading market, but the formulation and implementation of laws and policies is a gradual process. At present, there are regional carbon trading markets in many places. After the establishment of the national carbon trading market, it can solve the current problems such as market fragmentation and inconsistent rules. However, it is still necessary to solve the problems such as the scale and distribution of carbon emission quota, the single structure of participants, the imperfect pricing mechanism and the insufficient transparency of enterprise data, The enthusiasm of enterprises to participate in carbon trading and the formation of professional investors also need some time to cultivate."

The carbon trading market has not yet landed. In the-share market, related carbon trading concept stocks have started to warm up.

After the Spring Festival this year, the trend of related industries, including electric power, environmental protection and clean energy, has obviously outperformed the market. Among them, Nanwang Energy, a new stock engaged in energy-saving services, became the first stock to rise 10 times this year. New shares engaged in tap water production and sale business and waste incineration power generation business have also risen continuously after listing. Since their listing on March 8, 2021, their stock prices have increased by 869.80 during the suspension of trading verification on April 6. Power stocks Changyuan Power (000966.SZ) and Huayin Power (600744.SH), its share price also doubled after the Spring Festival. The extent of the heat of carbon trading-related concept stocks is evident.

At a time when the carbon trading market is accelerating, domestic social security funds, public funds and private equity funds are also laying out, and many funds that only involve the concept of carbon neutrality are launched.

In the field of green industry funds, at the end of March this year, China's first "carbon neutral" fund with a scale of 10 billion was also announced. The fund, established by Envision Technology Group and Sequoia China, will invest in and nurture leading technology companies in the global carbon neutral sector.

According to a reporter from Caijing, the Fund Industry Association will launch the revision and improvement of the "Green Investment Guidelines (Trial)" this year to promote the development of green investment funds.

Transformation Challenges: Bottlenecks and Breakthrough

With the proposal of the goal of carbon peak and carbon neutrality, the current carbon finance has gone beyond the concept of carbon market, but has reached the concept of green finance, Wang Yao analyzed, because this goal can achieve the synergy effect of coping with climate change, environmental protection and resource conservation and efficient utilization.

The blending of carbon finance and green finance, the commitment of 30 carbon peaks and 60 carbon neutrality, while opening up the market space, is also forcing bottlenecks to break through and innovate.

In Zhou Xiaochuan's view, in order to do a good job in green finance and carbon market, it is urgent to further clarify the total target, and establish a set of parameters, index system and measurement and measurement framework in carbon finance and green finance, so as to effectively do a good job in various task planning and investment guidance.

Capital for profit. Zhou Xiaochuan believes that a large amount of investment cannot come out of thin air, nor can it be realized by calling. Every investment needs guidance and accounts need to be settled. The accounts must be based on signals from the carbon market, involving a large amount of basic data and investment measurement related to carbon prices and research and development venture capital. If there is neither aggregate information nor carbon price information, it is difficult to make a real decision to invest.

Recently, Liu Guiping, deputy governor of the People's Bank of China, revealed that the central bank has initiated the establishment of a national carbon accounting system.

A senior regulator also told Caijing that one of the top priorities at the moment is to straighten out prices. The whole society must clearly understand that to achieve high-quality development, it must pay high costs. Any product is a penny for a penny. If you want good air quality and good water, the corresponding emissions must be small. You must use photovoltaic power generation, hydropower, nuclear power, etc., and the cost must not be low.

A bigger problem at the moment is that subsidizing prices leads to price inversions, and the above-mentioned regulator said, "It is important to rely on market mechanisms to make prices truly reflect its environmental costs. Among them, the government needs to remove the institutional barriers that are not conducive to the functioning of the market in certain key links in order to achieve a true and comprehensive green transformation."

In addition, behind the change of credit policy, the credit structure of commercial banks is facing adjustment, which will bring great challenges to the financial system. A number of regulators and bankers interviewed by Caijing said bluntly that a comprehensive green transformation means that financial institutions must not only support the real economy to complete the green transformation, but also achieve their own comprehensive green transformation. At present, the biggest challenge lies in the ability of financial institutions themselves.

A senior executive of a joint-stock bank told Caijing that the challenge of ability is whether banks can make corresponding adjustments in terms of system design, index assessment, mode of operation, risk control and so on in accordance with the requirements of the country's comprehensive green transformation. Taking credit policy as an example, how to continuously eliminate high-polluting and high-energy-consuming enterprises and continuously optimize the credit structure according to national requirements is a problem that commercial banks must think about.

As for how to promote the development of green finance in China in the future, more researchers believe that the key is to have more green assets ". If the asset itself is not green, it is difficult to carry out green financing, which also means that the transformation of the real economy is imminent.

With the development of green finance, which institutions can play a more important role in the future? A number of scholars and industry insiders interviewed by Caijing have formed a consensus that depends on the development of financial markets. On the one hand, if asset securitization is liberalized and institutions are encouraged to carry out green credit asset securitization, this will enable banks, rating agencies, investors, securities institutions, etc. to participate and form a linkage effect. On the other hand, with the subsequent development of the carbon market, if the coverage continues to expand, it can also mobilize the enthusiasm of all parties. Furthermore, if the capital control restrictions for foreign investors can be reduced, then related businesses such as green credit and green bonds can also be further developed.

Regarding the urgent task of how to achieve carbon peak and carbon neutrality, and promote the development of green finance, Liu Feng put forward a number of measures and suggestions: "First, relevant legislation should be established as soon as possible, such as establishing corporate carbon emission quotas through legislation, including how to measure, How to allocate, who will allocate, pricing mechanism, market rules, etc., need to formulate a clear system, which cannot be disputed. The second is to solve the problem of mismatch between investment and enjoyment of income. For example, the government and the market should establish appropriate incentive mechanisms to leverage private capital. The third is to reshape the standards for measuring economic development indicators. The current national economic accounting system can be reformed and the" green GDP "and other indicator systems can be used."

In addition to the comprehensive top-level design, Liu Feng believes that the quota system in carbon trading also has power rent-seeking space, which needs to be prevented. "Because this system has a quota system in the early stage and a market-oriented system in the later stage, there is a lot of room for policy arbitrage in between. Just like the previous coal quota, the quota system is prone to breeding power rent-seeking, how to ensure that the carbon quota system can operate effectively is some challenge to our current system." Liu Feng told the Caijing reporter that how to distribute carbon emission quotas fairly? This is a problem that needs to be carefully considered and carefully resolved.

In this regard, Zhou Xiaochuan believes that under the total quota constraints, if the market supply and demand relationship is allowed to determine the quota price and realize the market distribution, the general equilibrium with quotas will still be achieved, that is, the price system will move, but it is still determined by the market system, and the basic framework of the market economy can still operate.

(Our reporter Feng Yiying and intern Li Zixuan also contributed to this article)

What is carbon neutrality, a cartoon to see

What is plastic modification?