Financial support is indispensable for achieving the “double carbon” goal. As a wide-ranging and profound reform of the economic and social system, many institutions estimate that China’s future investment to achieve carbon neutrality is at the level of one million billion yuan. Where do these funds come from? How to play the “leverage” role of financial support? In 2021, with the opening and operation of the national carbon market, a series of innovation and exploration such as carbon finance will be “accelerated”, and the development of green finance will enter the “fast lane”.
financial instruments continued to innovate, and the volume of green finance further expanded
In recent years, with the acceleration of green transformation, the volume of China’s green finance has ranked among the top in the world.
Among green financial products, green credit is an important main force. Data show that in the first three quarters of 2021, the green credit balance of China’s 21 major banking institutions reached 14.08 trillion yuan, an increase of more than 21% over the beginning of the year.
In order to adapt to the green development trend, major banks have increased the innovation of green loan products. For example, Shanghai Pudong Development Bank Co.Ltd(600000) launched sustainable development related loans to creatively link the enterprise’s sustainable development goals, carbon emission reduction goals and financing interest rates. If the enterprise achieves the targets of the previous year, the loan interest rate will be reduced step by step, and some enterprises can finally enjoy a preferential interest rate as low as 3.2%.
In addition to green loans, green bonds have also increased significantly. Statistics show that China’s green bonds issued in 2021 have exceeded 560 billion yuan, exceeding the whole year of 2020. Especially with the operation of the national carbon market, a series of “carbon finance” products such as carbon neutral bonds have been intensively issued, which has become the focus of market innovation.
According to the data of Shanghai clearing house, as one of the important infrastructure for bond registration and custody, the total amount of green bonds supported by Shanghai clearing house in the first 11 months of 2021 reached 304.2 billion yuan, a year-on-year increase of more than 500%. By the end of November 2021, the custody balance of green bonds of Shanghai clearing house had reached more than 380 billion yuan.
In addition, green financial means such as green insurance, green fund and green equity financing have been continuously expanded, which also further supports the transformation and upgrading of the industry. According to the introduction of China Pacific Insurance (Group) Co.Ltd(601601) , at present, it has provided environmental pollution risk protection for more than 4000 enterprises in China, transformed the traditional insurance into “safety responsibility + environmental responsibility” protection, and helped enterprises realize green environmental protection, safe production, energy conservation and consumption reduction.
Behind the substantial growth in volume is the comprehensive upgrading of policy support since 2021: the opening of the national carbon market has declared the value of reducing carbon emissions to the whole society. At the same time, green finance supports the adjustment of Industrial Catalogue, the creation of carbon emission reduction support tools and the innovation of carbon neutralization bonds, which have promoted the further “emission” of green finance.
green finance is a “three-dimensional” investment
In many public impressions, finance does not matter “color”. Is green finance a “labeling” behavior to adapt to the “double carbon” goal?
From the perspective of investment, Qiu Ciguan, a professor at Shanghai Jiaotong University, gave his understanding of green finance and traditional finance. “In the traditional investment mode, investors mainly focus on the two dimensions of risk and return, while green finance includes the impact of funds ignored by traditional investment on the natural ecological environment, which is a ‘three-dimensional’ investment.”
“Green finance is based on green economy.” Rui Meng, Professor of China Europe International Business School, also said that an important term involved in the development of green finance is “externality”, that is, the impact on the outside world in the process of production and service provision, especially the environment. In the past, enterprises and individuals considered less “externality” and needed the whole society to “pay for it”. However, in the process of realizing green economy, this “externality” needs to be reflected in the cost of enterprises or individuals through some mechanism or measure.
The opening of the national carbon market is one of the important mechanisms. “The carbon price traded in the carbon emission right market means that carbon reduction will be rewarded, and continued carbon emission will pay a price.” Li Zhiqing, executive director of the green finance research center of Fudan University, said that the carbon price not only provides a pricing reference for the restoration of “green” to the cost of capital, but also guides the reallocation of capital and resources.
Under the green financial mechanism, some assets that are traditionally easy to be ignored are “transformed” into green assets. “We took the expected income of 300000 tons of carbon sequestration products as the subject matter of pledge and borrowed 20 million yuan from Industrial Bank Co.Ltd(601166) .” Zhan Xuanchang, general manager of the state-owned forest farm in Shunchang County, Fujian Province, introduced that the ecological resources of the state-owned forest farm in Shunchang have been efficiently transformed by using forestry carbon sequestration as a pledge, reflecting the value of green economy.
has a long way to go, and “transitional finance” still needs to be “overweight”
The central economic work conference pointed out that it is necessary to correctly understand and grasp the carbon peak and carbon neutralization. Realizing carbon peak and carbon neutralization is the internal requirement of promoting high-quality development. It should be unswervingly promoted, but it is impossible to accomplish its work in one battle. In the view of industry experts, green finance should do more to serve the “hard battle” of transformation.
At present, green financial innovation has been extended to the personal market, and many places have piloted innovations such as carbon credits and carbon accounts. For example, Shunchang County, Nanping City, Fujian Province launched the “1 yuan carbon sink”, which uses Shunchang’s rich forest carbon sink resources to buy 10kg carbon sink for only 1 yuan to offset daily travel and living emissions and realize personal carbon neutralization.
However, the broader target is still entity enterprises, especially those enterprises that have transformed from “high carbon” to “low carbon”, which urgently need the strong support of green finance. According to Ma Jun, director of the green finance professional committee of China Financial Society, green finance should pay attention not only to “pure green” projects, but also to current “high-carbon” projects that may be transformed into “low-carbon” or even “zero carbon” projects in the future. It is necessary to vigorously develop and promote “transformation finance” products.
As the reduction of carbon emissions has become an international consensus, the international financial support for carbon containing projects has become more and more cautious. In addition to canceling the follow-up financial support for coal mining and coal power projects, many financial institutions have successively withdrawn funds from some projects containing carbon emissions.
In this regard, Li Zhiqing believes that it is impossible for China to exclude carbon emission projects from the scope of financial support at this stage. How to provide effective support will undoubtedly test the innovation ability of financial institutions. “For large economies and financial institutions, it is undoubtedly not a multiple-choice question, but how to provide better support.” In Li Zhiqing’s view, green transformation is bringing great development opportunities to financial institutions.
“This field has huge imagination space in the future. If we further subdivide the traditional financial demand, a new field will appear.” Rui Meng said.
(Xinhua News Agency)
