With the 2030 Carbon Peak and 2060 Carbon Neutrality Targets being set, all sectors will need to advance in technology to achieve carbon reduction, and with this will come a huge demand for investment and financing, in which the financial markets will play an indispensable role.
A panel discussion on"How to Provide Financial Support for Carbon Neutrality Targets" was organized at the 2021 China SIF Summer Summit on July 15, where professionals from government departments, the market and industry organization discussed how to fill the funding gap and how to effectively allocate social capital to support the achievement of carbon neutrality targets. A lively discussion was held on how to fill the funding gap and how to effectively allocate social capital tosupport the achievement of carbon neutrality.
The following content is based on the actual transcripts of the guests' speeches.
Dr. CHAI Qimin, Director of Strategic Planning, National Climate Strategy Centre:
Firstly, in the presentation by Dr. CHAI Qimin, Director of Strategic Planning, National Climate Strategy Centre, he mentioned that in order to achieve the 2060 target, it is conservatively estimated that more than RMB 139 trillion investment is needed, averaging at more than RMB 3.5 trillion per year, however, public funding is expected to be able to invest no more than RMB 500 billion per year, meaning that more than 85% of the funding needs to be channeled and leveraged into the private sector. Bridging the funding gap is a major issue if the carbon neutrality target is to be achieved.
Dr. AN Guojun, Associate Professor at the Institute of Finance, Academy of Social Sciences, and Vice President of China SIF：
Dr. AN Guojun, Associate Professor at the Institute of Finance, Academy of Social Sciences, and Vice President of China SIF, pointed out that bonds are currently a comparatively good tool forproviding funds for green development, in addition to green funds, carbon neutrality funds, government-guided funds, private equity investment, venture capital funds, bank investment and lending linkages, and guarantee funds, with which the power of social capital can be fully driven. At present, several provinces and local governments have set up green development funds, which may become very good and innovative tools to achieve carbon neutrality in the future. In addition to innovative financial tools, the development of green andlow-carbon technologies is also key to achieving carbon neutrality, so the intellectual property rights system and green technology assessment standards system should be further improved.
HAN Ning, Director of the Market Innovation Department of National Association of Financial Market Institutional Investors (NAFMII):
HAN Ning, Director of the Market Innovation Department of National Association of Financial Market Institutional Investors (NAFMII), introduced product innovations in the bond market in the context of the 2060 target. In terms of issuance volume, China's green bond market has become the world's second largest green bond market and is still developing at a rapid pace, with the issuance volume in the first half of this year already exceeding that of the entire previous year. In order to promote the achievement of the double carbon target, the Institute of Traders has also launched several innovative products, starting with the launch of carbon neutrality bonds in February, dedicated to supporting projects and enterprises with a strong emission reduction and carbon reduction effects. In addition, the market has turned its attention to the green sector since the introduction of the 2060 target. In order to support the development oflow-carbon transition in high-carbon industries, the Dealers Association has also launched sustainability-linked bonds, which are designed to help low-carbon transition by setting a transition target and linking it to the issue price and issue rate.
Boris KAN, Vice President and Senior Credit Officer at Moody's Investors Service:
Boris KAN, Vice President and Senior Credit Officer at Moody's Investors Service, also shared the development trend of the international green bond market. From 2016-2020, according to the Climate Bonds Initiative, global green bond issuance increased from roughly $90 billion tonearly $300 billion, with a growth rate of more than 30%. Last year, despite ofthe pandemic, the global issuance of green bonds did not decline either, which is primarily the result of continued high demand for environmental projects, especially in Europe. In addition, in the context of carbon neutrality, Moody's has incorporated climate change factors into its credit rating system for issuers as part of its ESG assessment system. A current study on issuers in the global regulated power sector found that, in general, environmental factors (including climate change) have limited impact on their current ratings. But over an extended period of time, there may be negative impacts in the future.
MEI Dewen, President of Beijing Green Exchange:
MEI Dewen, President of Beijing Green Exchange, reviewed the three stages of China's carbon market development and mentioned the need for a more effective carbon price to facilitate the achievement of carbon neutrality targets. He noted that China's carbon market has gone through seven years of CDM markets, seven years of regional pilot markets and leading up to this year, in which the national carbon market will be officially launched. In terms of the ultimate goal of the carbon market, the carbon market should promote low-cost and high-efficiency emission reduction, by incentivizing new energy sources and constraining fos sil energy to achieve emission reduction. Carbon pricing needs to reflect the externality costs of carbon emissions. Whether comparing to the US and European carbon markets, or comparing the cost of carbon per kWh of electricity, China's carbon market price is on the lower side. An internationalize, financialized carbon market with standardized information disclosure is needed to guide, incentivize and stabilize expectations of the huge funding gap for carbon neutrality targets in the future.
This year's China SIF Summer Summit attracted more than 200 participants from government agencies, investment institutions, banks, listed companies, academic institutions, NGOs and the media, and over 400 participants from overseas join the Summit by zoom. Around 200,000 people watched virtual live show through internet platforms such as Sina Finance, Wind and iFinD. This year's Summit was organized by SynTao Green Finance and co-hosted by AIGCC; Sponsored by Moody's and AXA SPDB Investment Managers; Partners included Lujiazui Finance City Green Finance Development Center (GFDC), Green Finance Committee of China Society for Finance and Banking (GFC) and Sina Finance.