Interview with Ma Jun, Director of the Green Finance Committee: It is a top priority to introduce national-level transitional financial standards as soon as possible

Recently, the 2024 Green Finance Professional Committee of China Financial Society (Hereinafter referred to as the Green Gold Committee) The annual meeting was held in Beijing.

As green finance continues to develop, what issues should we pay attention to in promoting the development of transitional finance and accelerating sustainable information disclosure by large enterprises and financial institutions, and how to carry out the work? A reporter from China Environment News interviewed Ma Jun, director of the Green Finance Professional Committee of China Financial Society.

Ma Jun, Director of the Green Finance Professional Committee of China Financial Society.

China Environment News:What do you think is the importance of developing transformation finance? What work needs to be strengthened next?

Ma Jun:From a risk perspective, if many high-carbon emission companies do not transform, they may be forced to withdraw from the market and bring social problems such as unemployment. From the perspective of achieving the "double carbon" goal,"non-green" industries, which account for 90% of total economic activity, must be made "green". This requires the use of transformation finance to promote and support steel, chemicals, and nonferrous metals. Many companies in other industries are accelerating their transformation. Therefore, transformation finance should become an important tool to accelerate the green and low-carbon transformation of high-carbon emission enterprises such as steel, cement, and nonferrous metals.

To promote the development of transition finance, it is a top priority to issue national-level transition finance standards as soon as possible. At present, there are many versions of the local transformation finance catalog. If national-level transformation finance standards are introduced, it will help eliminate the doubts of many local financial institutions and enterprises about the authority of the standards. The second is to resolve the contradiction between transition finance and the policy of restricting loans in the "two high and one surplus" industries. Under the current policy, the total loan volume in the "two high and one surplus" industries will be reduced, and the vast majority of our transformation activities are in these industries. It is recommended that differentiated credit policies should be clarified from the economic activity level rather than the industry level in the future. That is to say, it is necessary to clarify which activities are transformable and should be encouraged, and which high-carbon industries that cannot be transformable should continue to drop pressure. The third is to introduce an incentive mechanism for transition finance. If carbon emission reduction support tools can also cover transformation activities, the cost of transformation financing can be reduced. Local governments may also consider discounting on transformation financing. Fourth, banks should establish a low-cost carbon accounting mechanism. Without this mechanism, companies would need to spend their own money to do it, which would increase the cost of data and affect the quality of carbon emission reports. For example, Huzhou has developed a carbon account system to help companies complete carbon measurement for free. By taking unified actions, local governments can complete carbon measurement at one time for all large and medium-sized enterprises with transformation financing needs. Banks can obtain carbon information for free, thereby reducing transaction costs. Fifth, local governments and banks should guide enterprises in transformation planning and reduce the obstacles encountered by enterprises during the transformation process. Sixth, banks should design corresponding standardized processes and grasp the entry barriers for transformation entities.

China Environment News:How to accelerate the pace of sustainable information disclosure?

Ma Jun:In terms of accelerating policy formulation, in June 2023, the International Sustainability Standards Board (ISSB) issued two international sustainable disclosure standards: International Financial Reporting Sustainable Disclosure Standard No. 1-General Requirements for the Disclosure of Sustainability-Related Financial Information (IFRS S1) and International Financial Reporting Sustainable Disclosure Standard No. 2-Climate-Related Disclosures (IFRS S2). In May this year, the Ministry of Finance issued the "Corporate Sustainable Disclosure Guidelines-Basic Guidelines (draft for comment）》。This is in high consistency with the IFRS S1 standard. Currently, the standard based on IFRS S2 has not been prepared yet, and it is hoped that it can be introduced as soon as possible. I call for further clarifying the timetable and roadmap for implementing sustainable disclosure standards, stipulating which companies must disclose relevant information at specific points in time, and giving full play to the coercive role of regulatory policies.

In terms of capacity building, banks must conduct accounting for scope three (other indirect greenhouse gas emissions), that is, accounting for carbon emissions generated by banks 'investment and financing operations. For banks, scope 3 emissions are more than 90% of total emissions. Without scope 3 measurement and emission reduction plans, bank transformation is an empty talk. Therefore, the low-carbon transformation of the banking industry must first clearly measure the carbon emissions generated by its customers. However, most banks so far do not know how to do scope three measurements. If it is an emission control enterprise covered by the carbon market, it will naturally have ready-made carbon emission reports; many other non-emission control enterprises need bank help in calculation and guidance, and the corresponding capacity building still requires a lot of effort.

China Environment News:What is the current status of ESG investment in my country? How should we expand in the future?

Ma Jun:What my country can be called ESG asset management products is only about 1%-2% of the total size of the asset management industry. There are many reasons involved. First, there is a lack of mandatory disclosure requirements; second, many asset management institutions do not pay attention to ESG investment issues and have not invested sufficient human and material resources; third, asset owners have not yet become the main driving force for ESG investment. Therefore, the development of the ESG market should be promoted from multiple sources. Disclosure requirements should be strengthened at the regulatory level. Asset owners should use ESG investment as their KPI. Asset management institutions need to strengthen capacity building.

China Environment News:What are the challenges faced in developing diversified green financing? Any suggestions?

Ma Jun:The G20 Transformation Finance Framework proposes that the transformation financial toolbox needs to be further enriched and improved to include debt financing instruments, equity financing instruments, risk mitigation instruments such as insurance and guarantees, and other instruments such as securitization products. Many high-carbon companies have insufficient capital, particularly high leverage ratios, and asset-liability ratios are much higher than 65%. They are not qualified to issue bonds in the bond market. Therefore, there must be sufficient principal before debt financing can be considered. From this perspective, there is indeed a great need to develop diversified green financing, but it is not difficult in the current market environment. Relatively speaking, green insurance has more specific applications, and can help avoid many technical and operational risks in the transformation process of enterprises.