On April 10, the second session of the seventh CPPCC Shenzhen Municipal Committee opened. Yu Hao, member of Zhigong party and director of Shenzhen Innovation Investment Group Co., Ltd., suggested that in order to build an international venture capital and venture capital center city and realize the catch-up and anti surpassing of Beijing and Shanghai, Shenzhen needs to take the ESG sustainable development concept of Guangdong, Hong Kong and Macao Dawan district as the guide to promote the great development of venture capital investment banking industry.
Yu Hao believes that from an international perspective, the ESG concept has become a common practice. ESG is the abbreviation of environmental, social and corporate governance. It was first proposed by the United Nations Global Compact in 2004. ESG pays attention to sustainable development, advocates that enterprises pay more attention to environmental friendliness, social responsibility and corporate governance in the process of operation, and has gradually become an important indicator for international investors to fulfill their responsibilities. On November 3, 2021, the international financial reporting standards Foundation (ifrsfoundation) announced the establishment of the international sustainability Standards Board (issb) during the 26th conference of the parties to the United Nations Framework Convention on climate change (cop26). The board is committed to developing a comprehensive global benchmark standard for high-quality sustainable information disclosure (ISDS), so as to promote the implementation of ESG concept.
From the perspective of China, Shenzhen has the foundation and advantages to develop venture capital. The first is the policy advantage. As the forefront of reform, Shenzhen is facing the historical opportunity of "double zone" construction, followed by location advantages. Adjacent to Hong Kong, Shenzhen is a large port city and a window for the mainland to open to the outside world. The third is the development advantage of the industry. The stock scale of private equity funds in Shenzhen is second only to Beijing and Shanghai, and there are many local institutions and industry talents. Finally, capital advantage. Shenzhen has a developed private economy and strong private capital.
Shenzhen government issued the "Shenzhen Venture Capital Development Plan" on August 27, 2018, and put forward a number of measures to promote the development of Shenzhen as an international venture capital center. Therefore, relying on the Great Bay area of Guangdong, Hong Kong and Macao and guided by the concept of ESG sustainable development, Shenzhen will be able to achieve the goal of building an international venture capital city.
In this regard, he suggested that:
First, strive for the pilot of the national financial reform pilot zone and take venture capital as the focus of financial reform. Make use of the policy advantage of first try, apply to the central government for the establishment of a financial reform pilot zone in Shenzhen, take venture capital as the key area of financial reform, and improve the strategic position of venture capital. It is reported that Shenzhen has requested the Guangdong provincial government to submit to the State Council the overall plan for the construction of a scientific and innovative financial reform pilot zone in Shenzhen, Guangdong Province. If the overall plan can be approved by the State Council, it will open a new pattern for Shenzhen's financial reform.
Second, increase financial support for venture capital institutions. In order to support the development of venture capital industry in Shenzhen and solve the problem of raising funds for local venture capitalists, it is suggested to establish a normalized capital contribution mechanism for the municipal guidance fund, and to guarantee a certain scale of investment for the new market oriented sub fund every year, thereby playing a basic role in ensuring the source of funds and stabilizing the confidence of the industry, and thereby contributing to the contribution of social capital. At the same time, rewards will be given to head institutions and head projects in Shenzhen to form the agglomeration effect of high-quality venture capital institutions.
Third, accelerate the development of green venture capital and boost high-quality development. In August 2020, the Standing Committee of Shenzhen Municipal People's Congress issued the regulations of Shenzhen Special Economic Zone on green finance, which is the first national law and regulation in the field of green finance and has been implemented since March 1 this year. Venture capital is an important part of green finance. We should encourage the development of green venture capital and improve the quality of economic development. First, give play to the guiding role of venture capital. Guide scientists and entrepreneurs to invest in R & D, innovation and entrepreneurship in the direction of reducing carbon emissions, and do not invest if it does not meet the concept of green investment. Second, give play to the supporting role of venture capital. Find and invest in green science and technology projects with potential commercial value, fully enable the invested green projects to grow rapidly.
Fourth, actively implement the ESG concept and help achieve the dual carbon goal. With the deepening reform of the capital market and the strengthening of the linkage between the primary and secondary markets, venture capital institutions have gradually become one of the practitioners and leaders of ESG. At present, there are three major pain points in the implementation of ESG concept in China: first, the basic data of ESG is relatively weak, lacking quantifiable indicators and data; Second, the disclosure standard, evaluation system and assessment mechanism are not unified; Third, the policy guidance is insufficient. It is suggested to give play to the advantages of Shenzhen's "first try" policy, explore and promote the implementation of ESG concept in China's investment industry, such as accelerating the research and promulgation of industry standards and policies in line with ESG concept, and supporting projects or institutions in line with ESG concept.
Fifth, carry out cross-border investment pilot of private equity investment funds. In May 2020, the people's Bank of China and other four departments jointly issued the opinions on financial support for the construction of Guangdong, Hong Kong and Macao Bay area, clarifying the opinions on "carrying out cross-border investment pilot of private equity investment funds". At present, the cross-border investment of RMB funds needs to be approved according to the project, involving multiple departments such as the State Administration of foreign exchange, the national development and Reform Commission and the Ministry of Commerce. The approval process is long, the investment quota is limited, and it is easy to miss the best investment window. In view of these problems, it is suggested that when carrying out cross-border investment pilot in Shenzhen, the approval shall be carried out according to the fund, the internal decision-making of the project shall be made and reported to the regulatory unit, so as to simplify the decision-making process and improve the investment efficiency.
Sixth, support the listing of excellent local venture capital institutions. Private equity funds have very mature experience in listing abroad, such as Blackstone, Apollo, Carlyle, KKR, etc. Many US dollar funds use the capital market to obtain the optimal capital with low capital cost and long investment cycle, so as to establish investment advantages. The listing of local venture capital institutions can optimize GP capital structure, supplement working capital, enhance brand awareness and attract talented people. At the same time, it can also increase the demand for letter and strengthen supervision. It is suggested that Shenzhen stock exchange actively explore the listing path of qualified venture capital institutions on the gem, take the lead in communicating with the CSRC and promote the implementation of policies.
The Seventh Party Congress of Shenzhen pointed out that it is necessary to give full play to the "dual zone" drive and the "dual zone" superposition effect, carry forward the spirit of the special zone, always maintain the spirit of "pioneering", the momentum of "creating" and the style of "doing", and be a "pioneer" in the new era. To build Shenzhen into an international venture capital center city, we must adhere to the "five development concepts", rely on the Great Bay area of Guangdong, Hong Kong and Macao, take the concept of ESG sustainable development as the guide, have the courage to break through and innovate, and break a broad road belonging to China's venture capital.
