Effectively connecting with green finance, transforming finance from a "call" to gradually moving towards practice-瞭望新时代网-瞭望时代，放眼世界

Effectively connecting with green finance, transforming finance from a "call" to gradually moving towards practice

2024-10-16

It has been four years since the proposal of the "dual carbon" target, and China's economic and social development has entered a new stage of green, low-carbon, and high-quality development. While vigorously developing green industries, it has become an important direction to promote the low-carbon transformation of traditional high emission or difficult to reduce emissions industries such as electricity, industry, transportation, and construction in a steady and orderly manner. Transitional finance has emerged as a result. "In practice, the necessity of studying and developing transitional finance has become increasingly prominent," said the relevant business head of the Research Bureau of the People's Bank of China. Compared to serving "pure green" or nearly "pure green" green finance, transformational finance focuses on serving industries and projects with significant carbon reduction benefits, providing reasonable and necessary financial support for low-carbon transformation in high emission or difficult to reduce emission areas, and promoting the continuous increase of the proportion of green industries and projects in economic activities while ensuring "safe carbon reduction". This has gradually become a consensus in the industry. Benefiting from the rapid expansion of green finance business, China's transition finance practice is also accelerating. In the future, transition finance and green finance are expected to jointly form the 'dual pillars' of financial support for the' dual carbon 'goal, "said Zhang Ming, Deputy Director and Researcher of the Institute of Finance at the Chinese Academy of Social Sciences, and Deputy Director of the National Laboratory of Finance and Development. In recent years, with the promotion of international organizations such as the G20, significant progress has been made in formulating international standards for transitional finance at the national level after multiple rounds of argumentation. According to the research of the China Finance 40 Forum, the newly released or updated transformational financial standards at the international level show a clear, strict, and integrated trend, and tend to adopt a directory based approach, fully reflecting a scientific based transformational approach. Most of them have quantitative thresholds and strong international comparability and interoperability. The research work on relevant domestic standards is also being vigorously promoted. The reporter of the Financial Times learned that the financial standards for the transformation of four industries, namely coal power, steel, building materials and agriculture, drafted by the People's Bank of China have been demonstrated for many times. In addition, the development of financial standards for the transformation of several industries is being promoted. At the local level, places with conditions are developing transitional financial standards based on local development needs and industrial characteristics, in accordance with common principles. Some local financial standards for transformation have been implemented and used, promoting local economic transformation and upgrading through the development of related financial products. In fact, according to industry insiders, in order to provide financial support for the low-carbon transformation of high carbon industries as soon as possible, following the principle of "urgent needs first", many regions have formulated local transformation financial standards based on some common principles. As of May 2024, Shanghai, Hebei, Zhejiang, Chongqing and other places have formulated 31 local transformation financial standards, of which 23 have been officially released. The 15 standards that have been released to define the scope of economic activities supported by transformational finance are all in the form of a directory list, which basically covers important traditional high carbon industries such as non-ferrous metals, chemicals, building materials, etc. However, Ma Jun, Director of the Green Finance Professional Committee of the China Financial Society, told the Financial Times reporter that there are still some problems and contradictions in the formulation and use of local transformation finance standards, such as insufficient authority, immature statistics, lack of comparability between transformation standards in different regions, insufficient incentive policies, and urgent need to strengthen the construction of transformation finance capabilities, which have affected the enthusiasm of enterprises to participate in transformation. At present, multiple local standards for transitional finance have been introduced, but there is a lack of unified national authoritative standards, "said Ma Jun. Developing national standards for transitional finance is an urgent task. Strengthening information disclosure to reduce concerns about "greenwashing". In the process of encouraging the development of transformational finance, the most common question is how to avoid "greenwashing". From a policy perspective, under the guidance of the "dual carbon" target, the total amount of loans for high carbon industries has been compressed, and transformational finance aims to support the economic activities that can be transformed in these industries. Regarding this, Ma Jun stated that he will continue to reduce loans for non convertible parts of high carbon industries and provide more loan support for convertible economic activities. This also presents a technical challenge - how to identify whether high carbon industries are truly reducing carbon emissions. In the eyes of industry insiders, proper disclosure of relevant information is a crucial step. In November 2022, the G20 Leaders' Summit approved the '2022 G20 Sustainable Finance Report', which includes important content such as the 'G20 Transition Finance Framework', covering various aspects of transition finance and imposing stricter requirements on financing entities (enterprises) involved in transition activities in terms of information disclosure. In terms of disclosure details, the ISSB guidelines are becoming a "common language" at the international level. At the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP28) at the end of 2023, nearly 40 organizations from 64 jurisdictions pledged to adopt or use the ISSB guidelines. Important international organizations such as the International Monetary Fund (IMF), the Organization for Economic Cooperation and Development (OECD), the Green Finance Network of Central Banks and Regulatory Agencies (NGFS), the International Organization of Securities Commissions (IOSCO), and the G20 Financial Stability Board (FSB) have all expressed support for the ISSB guidelines. Industry insiders generally believe that the Guidelines for Environmental Information Disclosure of Financial Institutions being revised by the People's Bank of China is highly consistent with the ISSB standards, with the same overall structure and core elements. In Ma Jun's opinion, China should quickly develop a Chinese version of sustainable information disclosure standards based on ISSB. At present, the Ministry of Finance has released a draft for soliciting opinions and hopes to release an official version as soon as possible. He added that these guidelines should be based on the two guidelines of ISSB and include a specific timetable and roadmap. This will clearly inform companies when they must disclose relevant information, including carbon emission data and transformation plans, to force them to take action and ensure timely disclosure of information. Simply put, market entities should disclose a detailed plan, including the current carbon emissions situation of the enterprise and how the entire process of achieving zero carbon emissions is progressing. For example, when a company announces a 30% reduction in carbon emissions within 3 years, it should break down the target into specific years and business lines, clarify corresponding reward and punishment measures, monitoring methods, and disclose detailed carbon emission data, estimation methods, and specific emission reduction measures. For example, whether a company achieves net zero emissions solely through its own efforts or purchases carbon credit products to offset them, this information must be disclosed clearly. It should be noted that many financial institutions have established relatively sound green finance systems, but are still in the initial exploration stage in terms of transitional finance and fair transformation, in order to promote the implementation of rich policies and tools to support green transformation. From the perspective of the scale of transitional financial products, China's current transitional financial products mainly rely on debt financing tools such as green medium - and long-term loans and sustainable development bonds. There is still a considerable room for growth in financial innovation and support compared to the actual market demand for transitional finance. He Xiaobei, Deputy Director of the Macro and Green Finance Laboratory at the National Development Research Institute of Peking University, believes that commercial banks should actively explore the establishment of a fair and transitional financial management system based on fully drawing on the green finance management system. Some places have already had positive practices. For example, on September 10, 2024, under the guidance of Guangdong Branch of the People's Bank of China, Guangdong Institute of Finance and Guangdong Institute of Financial Science and Technology jointly released the first provincial group standard for transformation finance in the ceramic industry, the Implementation Guide for Transformation Finance in the Ceramic Industry of Guangdong Province (hereinafter referred to as the Implementation Guide). For this reason, Yunfu Branch of the People's Bank of China and Yunfu Development and Reform Bureau, in accordance with the standard framework of transformation finance in the Implementation Guide, recently instructed Yunfu Branch of Agricultural Bank of China to issue the first supporting loan of 7.25 million yuan for transformation finance in the ceramic industry to Yunfu Huipeng Ceramics Co., Ltd. There are currently 20 ceramic enterprises above designated size in Yunfu City, with an annual output of approximately 110 million square meters of ceramics. In recent years, financial institutions in Yunfu City have continued to increase their support for green finance. However, in the new field of financial support that promotes the transformation of traditional high carbon industries, they also face the problem of lack of operational standards and evaluation mechanisms Some banking industry insiders have stated that the "Implementation Guidelines" have addressed the pain points and difficulties that financial institutions face in providing transformational financial services. The reporter learned that after the release of the "Implementation Guidelines", the Agricultural Bank of China Yunfu Branch quickly took action. Under the framework of the Implementation Guidelines, Yunfu Huipeng Ceramics Co., Ltd. has been recognized as a transformation enterprise by third-party professional evaluation agencies Menglang Sustainable Digital Technology (Shenzhen) Co., Ltd. and Guangzhou Carbon Emission Trading Center Co., Ltd., and has issued a "Transformation Subject Recognition Report". The company will transform through the low-carbon transformation technology path in the building ceramics industry as outlined in the Implementation Guidelines, and promises not to build new projects with "carbon locking" effects, gradually achieving green production and energy conservation and carbon reduction for ceramic enterprises. The Agricultural Bank of China's Yunfu Branch has issued a transformation finance linked support loan to the company, agreeing on short-term, medium-term, and long-term carbon emission intensity targets with the enterprise. For example, in subsequent loans, if the company is still recognized as a transformation enterprise by a third party, it can enjoy a loan interest rate discount of 5 to 10 basis points under the same interest rate conditions, further stimulating the motivation of the enterprise's low-carbon transformation. It can be seen that the release of the "Implementation Guidelines" provides strong support for the transformation of financial innovation products, but at the same time, it cannot be separated from the evaluation of third-party companies. This also means higher costs. Without sufficient incentives, banks and enterprises may lack the enthusiasm to carry out transformational finance. Industry insiders say that optimizing incentive and constraint mechanisms is urgent. In this regard, He Xiaobei suggests that commercial banks should establish a systematic and comprehensive internal incentive mechanism to mobilize the enthusiasm of various branches to carry out transformational financial business and support fair transformation in carbon intensive industries such as coal, coal-fired power, steel, and chemical. Commercial banks can increase their resource allocation efforts in areas such as performance evaluation, credit scale, internal fund transfer pricing (FTP), review and approval, economic capital, and internal auditing. Ma Jun stated that the construction of financial infrastructure is also crucial. For example, some regions in Zhejiang Province have already established enterprise carbon accounting systems, which can provide free carbon measurement services for enterprises, help reduce their costs, and improve the quality and consistency of carbon emission data. In addition, he emphasized that financial institutions must strengthen their capacity building to ensure that they can provide appropriate transformational financial services. Many companies have the willingness to transform, but lack the ability to develop transformation plans. "Ma Jun said that financial institutions need to have standardized processes and capabilities to determine which companies or projects meet the requirements of transformation finance. In addition, financial institutions should provide corresponding guidance and tools to enterprises, such as transformation planning and guidelines, to help them reduce transformation costs. (New Society)

Edit：Yao Jue Responsible editor：Xie Tunan

Source：Financial Times

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