Xing'an GE: Green financial products are developing rapidly

In recent years, against the backdrop of the "3060" goal, regulators began to advocate listed companies to pursue sustainable development. Therefore, the concept of value investment is becoming increasingly popular. More and more financial and investment institutions use environmental, social, and government (ESG) standard as an important reference while evaluating credit and investment decisions. Enterprises are also gradually applying ESG related standards to daily production and operation.

In December, Panorama Network interviewed Xing'an Ge, vice president of CASV. They had an in-depth conversation on China's green finance market. "Green financial products are rapidly developing in China, and there will be huge investment opportunities." Mr. Ge told Panorama Network, "in the future, China will need hundreds of trillions of investment to achieve the "dual carbon" goal, which will provide perfect investment opportunities for all types of financial institutions." He believes that the construction of green infrastructure will face vital historical investment opportunities, and green bonds will also become an ideal investment field.

In the financial market, green credit has attracted more and more attention. Its essence is to correctly deal with the relationship between the financial industry and sustainable development. For example, green credit raises the threshold for loan applications, that means, enterprises should constantly improve their ESG performance to meet the requirements for applying for loans. He said that the central bank proposed a monetary policy tool for carbon reduction that should be implemented later this year, and the policy will significantly reduce the cost of green credit funds of commercial banks and better serve the carbon reduction activities of enterprises. But he also emphasizes that financial institutions need to further innovate green credit products and better integrate with ecological construction goals such as the "dual carbon" goal, which will be the trend in the future.

Green Finance Develops Rapidly in China

Panorama Network: What is the developing situation of green finance in China? What are the characteristics of GBA (Guangdong-Hong Kong-Macao Greater Bay Area)?

Xing'an Ge: The development of green finance in China is very fast. It started in 2016 and has made remarkable achievements in China and the worldwide in just five years. According to the statistics of the People's Bank of China, by the first half of this year, the balance of green credit in China was 13.92 trillion, the stock scale was the largest in the world, and the growth rate was speedy; by the end of last year, more than 100 billion green bonds had been issued, with a balance of more than 800 billion. The total stock number is the second in the world. Such a development progress is mainly due to China's conducive system for green finance. Whether it is the govermental level document or green finance activity at local, the Chinese green finance system shows much support.

GBA has apprent strengths for green finance market. Hong Kong and Macao has robust industrial technology, rich financial resources, and open and mature financial markets. GBA also has many Chinese green finance pilot cities. For example, Guangzhou is one of the first batch of China's green finance reform and innovation pilot zone. Therefore, Guangzhou carried out green finance work much earlier than other cities in China. Due to Hong Kong's market advantages, GBA development plan also proposes to build Hong Kong into an international green financial center. Moreover, as a city of innovation and reform, Shenzhen has also made many breakthroughs in the field of green finance. For example, its green finance regulation is the first set of law in China and is also the first comprehensive green finance bill in the world. In addition, Shenzhen has made excellent achievements and progress in international green finance cooperation, from the government level to the association level. All Shenzhen's performance showcases its internationalization, innovation, and openness.

Exploring Credit Asset Securitization

Panorama Network: How about the liquidity of the green financial market?

Ge Xing'an: At present, whether it is top-down design or the bottom-up local practices, China's green finance development all present promising and fast progress. Most Chinese green finance opportunities are related to green credit and green bond markets. Because credit asset securitization is not particularly common in China, the way to improve its liquidity through green credit asset securitization is still at an exploratory stage. However, since there are many investment institutions, the construction of market system is relatively sound. As China's opening to the outside world is gradually getting better, the liquidity of green bond market is relatively good.

Green bond is a Good Investment Field

Panorama Network: What are the future investment opportunities for green financial products from your point of view?

Ge Xingan: In fact, there are many investment opportunities. Many authoritative research institutions have mentioned that China needs hundreds of trillions of investment to achieve the "dual carbon" goal in the future, which can provide perfect opportunities for all types of financial institutions in China. Credit financing is the main channel in China's financial system. Therefore, green credit has many investment opportunities. Especially, as a country with very large demand for infrastructure construction, China is facing a very important historical investment opportunity for green infrastructure. From the perspective of green bonds, although the current stock of green bonds in China is close to trillion, there is still a large gap compared with the actual demand. As the result, the whole green bond market will also be an ideal investment field. In terms of funds, public funds mainly invest in listed companies. With the continuous improvement of ESG standards and the continuous improvement of carbon reduction or other environmental related information disclosure requirements, enterprises with better ESG performance will be easier to become the investment targets of public funds.

Financial institutions Need to Further Innovate Green Credit Products

Panorama Network: What measures can promote the support of long-term funds for green projects?

Ge Xingan: At present, China's financial regulatory authorities are also trying to find out ways to promote the green credit. The central bank proposed that the monetary policy tool for carbon reduction should be implemented later this year. It is used to specifically support enterprises' economic activities of carbon reduction through commercial banks. This measure will greatly reduce the capital cost of green credit for commercial banks. Personally, I think it is a very powerful measure to better serve the carbon reduction activities of enterprises. From the perspective of financial institutions themselves, I think they still have a lot of things to do. To start with, they should further innovate green credit products, and better integrate them with ecological objectives, such as developing green loan products linked to the carbon reduction performance. I think green credit is bound to be the mainstream in the future.

Finally, financial institutions such as banks need to strengthen the calculation of the carbon footprint and emission reduction planning of their loans. From advanced world practices, the international leading financial institutions have also put forward carbon neutralization objective in their financing portfolio agenda. If Chinese financial institutions also follow the "dual carbon" goal, the realization of the goal should be around 2060. In achieving this, financial institutions, especially commercial banks, do have a lot of work to do. In the field of green bonds, it is necessary to strengthen the Environmental Information Disclosure (EID) on green bonds. At present, Chinese EID system is still not standardized and specified. But because the green attribute of the bond is precisely what attracts investors to buy, in the field of EID, green bonds still have a long way to go.