Green finance is an important part of my country's financial system and an important practice of finance in environmental protection and sustainable development. Its important goal is to promote the harmonious coexistence of man and nature. At present, whether it is at the policy level, financial institution level, or micro-enterprise level, green finance innovation continues to help new energy achieve high-quality development of enterprises.
New energy companies urgently need green financial innovation support
As one of the most active industries in the green economy, the new energy industry is the main force in promoting the realization of the "double carbon" goal. However, it also has the characteristics of high technical threshold, large initial investment, and high transformation costs. First of all, the new energy industry is a technology-intensive industry. Without certain scientific and technological strength, it is difficult to occupy a place in the new energy market. Technology research and development requires continuous investment of talents and funds. Secondly, new energy enterprise projects require large capital requirements in the early stage of construction, including land purchase, civil engineering, equipment procurement, etc. Finally, with the acceleration of energy transformation and upgrading and the replacement of fossil energy by renewable energy, new energy companies need to continuously develop new technologies and carry out industrial upgrades, which has great uncertainties, resulting in high transformation costs and large funding gaps.
These industry characteristics of new energy companies jointly determine that their development requires diversified financial innovation support and continuous financing support. Relevant data shows that the annual funding gap for domestic green investment and financing is more than 1.6 trillion yuan. By 2060, the scale of new demand will reach 139 trillion yuan. The innovative development and widespread use of green finance are necessary tools to fill this funding gap.
At present, new energy companies are mainly financing through bank loans and bond issuance. Due to the high investment in technology research and development of new energy enterprises and the uncertainty of the transformation of results, it is difficult to obtain a return on high capital investment in a short period of time. In addition, most of the participants in the new energy market are small, medium and micro enterprises, and these enterprises have relatively low credit ratings. Therefore, the scale and proportion of credit extended by my country's commercial banks to new energy enterprises are at a low level, and the loans are mostly short-term, and the interest rates are relatively high. The mismatch between corporate needs and bank credit requirements, coupled with complex bank credit approval procedures and cumbersome procedures, has led to most new energy companies facing financing constraints. Especially in the early stage of project construction, corporate capital needs are large, and financing constraints are particularly prominent.
A package of green finance innovation models has been implemented and achieved
In recent years, my country has continuously increased the investment of green funds, encouraged capital to empower new energy companies, and continued to explore innovation in financial support models. A package of green finance innovation models has gradually been implemented and achieved results.
First, establish a full life cycle support system in which capital effectively empowers new energy companies. First, increase the support of green finance in promoting technological research and development and innovation, innovate financial support methods, accelerate the pace of technological innovation in enterprises, and promote the improvement of product quality of new energy enterprises. Secondly, broaden financing channels, enrich financing methods and expand the sources of capital supply for new energy companies according to the needs of different types and development stages of new energy companies for different capital natures. Finally, we must promptly adapt to the latest business formats of new energy companies integrating and investing in upstream and downstream industrial chains, focus on the resource development potential of the new energy industry chain, innovate the financing support functions of the new energy company's industrial chain, and improve the efficiency and quality of the entire industrial chain.
Second, improve the policy guidance and support system to support industrial greening and green industrialization. The current policy system has clearly proposed to support qualified enterprises and financial institutions to issue green bonds and green asset-backed securities, and to support enterprises that raise funds for the construction and operation of green and low-carbon projects to list, raise funds or refinance at home and abroad; Encourage enterprises to issue carbon-neutral bonds and bonds linked to sustainable development; support the issuance of real estate investment trust (REIT) products for eligible infrastructure projects such as clean energy. At the same time, it will also include qualified construction projects in the field of ecological and environmental protection into the scope of local government special debt support; strengthen financial support for the ecological and environment-oriented development model (EOD), and improve relevant investment and financing models.
Third, promote financial institutions to actively participate in green finance and proactively innovate. In 2023, large state-owned banks will deeply explore and cultivate the green credit market and comprehensively promote the development of green investment and financing businesses such as green loans, green bonds, and green wealth management. Data from the People's Bank of China at the end of 2023 showed that the balance of green loans in domestic and foreign currencies in my country was 30.08 trillion yuan, a year-on-year increase of 36.5%, much higher than the growth rate of other loans. In terms of financing model innovation, on March 29, 2023, the first batch of new energy infrastructure publicly offered REITs were listed on the Shanghai Stock Exchange. Some of the newly added local government bonds already have green attributes and can be issued in the form of green bonds. The new green bond issuance projects will not only reduce a large amount of carbon emissions, but will also stimulate local economic growth and provide more employment space.
Green debt helps high-quality development of new energy companies
Green bonds refer to bonds that raise funds specifically used to support green industries, green projects or green economic activities that meet specified conditions. As an important part of the green financial system, green bonds have an expanding market scale. As of the end of 2023, a total of 481 labeled green bonds have been issued in China, with an issuance scale of 854.854 billion yuan. Most of the funds have been invested in new energy fields, including new energy projects such as wind power, photovoltaic power generation, hydropower, and biomass power generation. The total fund scale in the energy sector accounted for 44.25%, ranking first. As another important area of carbon emission reduction, the field of green infrastructure upgrading ranks second in issuance scale, mainly invested in green buildings, sewage treatment and other projects.
Green bonds have their distinctive characteristics and advantages, and they also need to write a new chapter to help the high-quality development of new energy companies.
First, expand the function of green debt and improve the policy system. As an emerging way of financing new energy companies, encouraging the issuance of green bonds and expanding the functions of green bonds will be of great help to reduce financing costs, effectively improve corporate reputation and image, and promote the country's green development, reform and introduction of corresponding policies. In view of the accelerating effect of low-carbon transformation and the expanding effect of green financing demand brought about by the goal of carbon peaking and carbon neutrality, my country's financial system is also actively expanding the functions of green finance. By issuing various green bond products, it is constantly innovating varieties, structures and uses to meet the diversified financing needs of green projects, support the development of green industries, promote the transformation of high-carbon fossil energy industries, and provide green financial guarantees for the high-quality and sustainable development of the real economy. In 2023, the China Securities Regulatory Commission and the State-owned Assets Supervision and Administration Commission issued a notice on supporting central enterprises in issuing green bonds, requiring further improvement of capital market services to promote green and low-carbon development such as carbon reduction, pollution reduction, and green expansion, and promote comprehensive green transformation. The main support measures include optimizing review arrangements for the issuance of green bonds by high-quality central enterprises, referring to the standards of well-known mature issuers, simplifying requirements for document signature and information disclosure, and appropriately extending the validity period of financial reports, and reviewing them immediately. It has improved the financing efficiency of green bonds.
Second, innovate bond varieties and expand investment directions. As policy support, the China Securities Regulatory Commission encourages innovative bond varieties and focuses on the advantages of green products. The first is to give full play to the advantages of products, including the flexibility in the use of funds. The raised funds can be used to replace the company's own capital expenditures for green-related projects within 3 months before bond issuance; simultaneous declaration with ordinary corporate bonds is allowed; the second is to give full play to procedural advantages, including high efficiency of issuance review, green channels for review, optimization of review efficiency, implementation of "special personnel docking and special review", and application of the "immediate review" policy; The third is to give full play to the cost advantage. The coupon rates issued are generally lower than ordinary bonds, and the government provides support such as fiscal subsidies and tax cuts for green bonds in terms of issuance and taxation. In terms of bond investment direction, 100% of the funds raised from green bonds must be used for green projects that meet the specified conditions.
Third, improve the review mechanism and highlight the review key points. First of all, it is necessary to determine that the issuer's investment should be qualified green projects and ensure that it conforms to the scope of support of relevant national departments on green and low-carbon projects. If invested in fixed asset projects, they should have good profitability. The income should mainly come from market-oriented sales or operating income, and should not come from the return of expected land transfer income. The proportion of financial subsidies in the income should not exceed 50% of the total project income., and raised investment projects shall not be sold back to government departments, and purely public welfare projects shall not be used as raised investment projects. Secondly, green certification is carried out through third-party independent review. In accordance with international practice, external review includes certification, third-party opinions (SPOs), green bond ratings, certified climate bonds, etc. Among them, third-party opinions are still the most commonly used external review method. Thirdly, obtain issuance qualifications and conduct credit rating of bonds. At present, as a special type of corporate bonds, green bonds are not mandatory for issuers to rate during issuance review. The main role of the rating results is to provide a reference basis for later sales. Many funding methods set access conditions through rating levels. Finally, track the investment status of the raised funds and issue quarterly reports on the use of the raised funds in accordance with regulations. Due to the long construction cycle of green projects and the continuous improvement of information disclosure requirements, the issuer's ability to manage funds needs to be continuously improved.
Fourth, enrich the issuing entities and closely follow the needs of enterprises. Encourage rich financial enterprises, industrial entities, urban investment platforms, private enterprises and other entities to issue green bonds, and increase support for green bonds of new energy companies. For projects or companies involving new energy and green enterprises with good development prospects and fund-raising needs, it is necessary to pay attention to whether the projects invested by the raised funds meet green certification requirements, whether shareholders have the intention to reduce their shareholding ratio, the current debt structure, and the company's development stage. As well as future development strategies and other issues, companies can use the above issues to measure whether they are suitable to issue green bonds. Only by having a full understanding and understanding of new energy companies can we make reasonable and appropriate judgments on the applicability of green bonds. Timely and targeted follow-up to the funding needs of new energy companies in terms of their own development, industrial chain expansion, new technology innovation, new product research and development, etc., and provide diversified green bond products to help new energy companies develop with high quality.
At present, my country's new energy industry is developing in depth, constantly spawning new industrial chains and industrial clusters, which need innovative support from green finance. Green bonds to help new energy companies develop high-quality is an important chapter in the big article of green finance, which requires the coordinated development of green industries and green finance.
The author is the managing director of Caida Securities