Risk mitigation, innovative products are among the main recommendations
China should improve the risk mitigation mechanism of green finance and develop innovative financial products whose underlying assets are energy equity such as emission credits and energy consumption quotas, to achieve a peak carbon emissions by 2030 and achieve carbon neutrality by 2060, officials and experts said.
“The majority of ecological projects are medium and long term projects. If the guarantee and collateral mechanisms are imperfect, banks will withdraw from support for these projects because of the higher risks associated with long-term loans and investments. Better risk-sharing mechanism will attract more investors and market players to participate in the valuation of green products, ”said Wang Xin, general manager of the Research Bureau of the People’s Bank of China, the central bank.
Wang said China should continue adopting laws and regulations to ensure the valuation of green products, establish special mechanisms for ecological compensation, transfer payment and government procurement, and establish and improve mechanisms for payment for eco-environmental services. In addition, it is also important to further clarify the right to use, exploit and earn green products.
He urged financial institutions to redouble their efforts to innovate in financial products in this area.
“As long as there is a positive market environment and the prices for carbon and green products are good, financial institutions will give full play to their initiative and launch various types of financial products, including loans, stocks, contracts, etc. term and insurance, to adapt to the market, development needs, ”he said recently at the Tsinghua PBCSF Economic Forum on carbon neutrality in Beijing.
Xiao Gang, former chairman of the China Securities Regulatory Commission, said financial institutions should strengthen environmental risk assessment, carry out pressure testing, improve their ability to identify, monitor, analyze and early warning of risks, and use a range of analytical methods to make decisions about the project. selection.
It is also important for listed companies and financial institutions to gradually move from voluntary disclosure of environmental information to mandatory disclosure. At the same time, the country is expected to create a public environmental and climate data platform and further strengthen the rating and certification of green finance projects, Xiao said at the forum.
He underscored the need to further unify regulatory standards and step up regulatory coordination on green finance innovation.
China is not alone in meeting the challenge of regulatory unification. Leslie Maasdorp, vice president and chief financial officer of the New Development Bank, suggested that the global financial industry should come up with uniform and widely accepted green standards in various jurisdictions.
“Businesses can function better when the rules of the game are clearly defined. So what we are seeing today is the emergence of policy makers proposing new regulatory frameworks. The challenge, however, is that there is now a proliferation of executives. We have so many green standards in the world… The biggest challenge today is to harmonize these standards, to make them easier, more coherent, to have references that the private sector can understand and to which it can respond ” , Maasdorp said.
The private sector will play an essential role in financing carbon neutral projects and optimizing the allocation of factors of production in society. The development of green finance will spur private capital to enter the fields of green growth and environmental protection, said Zhang Xiaohui, dean of the PBC School of Finance at Tsinghua University.
China has said it will use innovative financial institutional arrangements to encourage private capital investment in green industries while effectively limiting investments that contribute to pollution.
“In the process, for China to meet its dual carbon reduction targets, it is particularly important that policymakers make rational decisions, take prudential measures, and conduct production capacity risk monitoring and oversight. early warning to ensure long-term and constant green development, ”said Zhang. .