Research & Insights  | Low Carbon Transformation and Capital Technology

Regarding the way to help financial institutions promote low-carbon transformation and higher-quality development, Mr.Weihua Ma believed that we should jointly work on awareness guidance, top-level design, standard setting, and ecological promotion.

At present, green finance is developing rapidly. However, it is important to make people realize that it is a fundamental change in the way of human economic growth in essence, and a shift from high-speed development to high-quality development.The government can promote the top-level design from the policy level, and set a roadmap and timetable to achieve carbon neutrality. Third-party assessment agencies can also promote the formulation of industry standards and ecology.

In the process of achieving the carbon peaking and carbon neutrality, financial institutions should pay special attention to transformation risks because a large number of non-performing assets will be generated through asset value revaluation. They will turn the risk in the real economy into the financial market. If the company can finish the low-carbon transition, the mentioned problems will be greatly reduced.

How should financial institutions help enterprises transform? Mr.Weihua Ma believed that we should develop a low-carbon emission transformation fund for enterprises. Achieving carbon peaking and carbon neutrality are challenging, especially we need to break through technical difficulties and overcome the "impossible triangle" (referring to sufficient energy, cheap, and environmentally friendly) problems. More PEVCs with high risk tolerance should be encouraged to participate. In addition, government should come up with corresponding policies to support.

Regarding adverse selection of green financing and transaction costs, Mr.Weihua Ma said that adverse selection is a common phenomenon in the market economy. Due to information asymmetry, bad money will drive out good money. "Green washing" is an arbitrage behavior which is a problem caused by unclear standards and insufficient supervision. On one hand, it is necessary to have more punishment for “greenwashing” behaviors and establish clear evaluation standards. On the other hand, we should focus on supporting green enterprises and reduce financing transaction costs for them.

Among all, the most important thing is to establish a third-party evaluation system to identify the nature of financing objects. Mr.Weihua Ma said the CASVI has gathered more than 300 experts around the world to develop sustainable development evaluation systems for listed companies. Each year, "Social Value 99" will be used to track the performance of 99 of the CSI 300 Index companies. Based on data backtesting in the past 7 years, "Social Value 99" has outperformed China's mainstream indexes reagarding the evaluation of sustainable development. In the future, CASVI will continue to promote standard researches on green finance and carbon emission, and help the identification of "green washing" problems.