Explain ＂zero carbon finance＂ in detail： how to participate in global governance？ What are the pain points to be solved？

With the full implementation of carbon neutrality, the financial industry has entered the era of zero-carbon finance.

On May 21st, at the 2023 Wudaokou Global Finance Forum in Tsinghua, Zhu Min, former vice president of the International Monetary Fund and former vice president of the People’s Bank of China, once again emphasized his concern about zero-carbon finance. He proposed that as finance entered zero-carbon finance, the cooperation and competition of global zero-carbon finance had begun. China has been leading the world in the field of green finance, and zero-carbon finance is also ahead. Therefore, we should continue to actively participate in the construction of global governance mechanism of zero-carbon finance, and promote the further reform and opening up of China’s financial industry in the construction of global governance mechanism.

So, what exactly is zero carbon finance? What attempts have China made in the field of zero-carbon finance? How to participate in global governance? What are the pain points to be solved? Beijing business today reporter integrated the discussions of many authoritative figures and made a detailed interpretation in one article.

Concept: The financial industry has entered a zero-carbon era.

"With the rapid landing of carbon neutrality and global development, finance has entered the era of zero-carbon finance, which is a very important financial industry upheaval." Zhu Min emphasized at the meeting.

From early gas finance to sustainable finance, green finance to zero-carbon finance, Zhu Min pointed out that zero-carbon finance covers many concepts horizontally, and its depth can be measured and defined, because it directly serves the real economy, conforms to carbon neutrality, and the corresponding assets are very clear. Therefore, at the Glasgow meeting, everyone basically formed a consensus that the financial industry should begin to enter the zero-carbon era.

Nowadays, zero-carbon finance includes a series of concepts. First, the financial industry should finance carbon neutrality, which is the first concept. According to Zhu Min, it is estimated that China’s financing volume will be about 180 trillion yuan by 2050, and McKinsey Consulting recently said that the global financing volume will be 9.7 trillion dollars per year. According to the proportion of China’s emissions, China will need 3 trillion dollars a year, which is about 20 trillion yuan. This scale is undoubtedly huge.

At the same time, zero carbon should serve the transformation, because the change of carbon price, all financial prices and all balance sheets, including stocks, is also a huge challenge.

In addition, the financial industry itself should regard itself as a zero-carbon enterprise, that is to say, the balance sheet of financial enterprises is zero-carbon, that is, the financing liabilities are zero-carbon and the operation is zero-carbon, which is actually a very high requirement, and thus a global zero-carbon financial enterprise alliance has been established. Generally speaking, Zhu Min believes that "the concept of zero-carbon finance is taking shape, which has rich connotation, broad coverage and depth, and it is a very important sign that finance has entered the era of zero-carbon finance".

Trend: Cooperation and competition have begun.

The global road to zero carbon emissions is accelerating further. Zhu Min also pointed out that finance must be global, and the cooperation and competition of global zero-carbon finance has also begun.

The first is the standard, which is to make global unified and sustainable financial disclosure. Zhu Min said that there are various standards on financial disclosure, and each place has its own standards and requirements, and it is also competing and cooperating with each other. If the world wants to support carbon neutrality, zero-carbon finance also faces a huge funding gap.

Zhu Min further revealed, "For example, at this meeting in Egypt, what was discussed most was how to meet the funding gap and how to strive for zero-carbon financial funds to come to my market. Now everyone is arguing about how to establish zero-carbon finance. For example, the bond market of zero-carbon finance is at the forefront of discussing commercial real estate. Because REITs have long-term income and the nature of debt, but in the long run, because the carbon premium is gradually rising, it has the content of equity income, so it well meets the dual characteristics of zero-carbon finance as carbon-neutral financing. "

Building REITs market, fund pool and carbon neutral science and technology innovation fund pool is another major event. Zhu Min said that the core of carbon neutrality is science and technology, and the driving force is science and technology. But where does the high-tech investment fund of carbon neutrality come from, where is the market and where is the standard? A series of global competition and cooperation on zero-carbon finance have begun. This ecology is very active, and various initiatives and products are emerging, which will also be the commanding heights of the future.

Initiative: Actively participate in global governance.

When the competition and cooperation in the financial market are formed, the core problem is how to build the governance mechanism.

Zhu Min believes that China should continue to actively participate in the global governance mechanism. A major feature of zero-carbon finance is that after the regulatory system came out, various financial institutions appeared various ecology, cooperation and platforms, especially in risk management, transitional finance, valuation of high-carbon assets, and many spontaneous activities in different details of pricing, capital flow and disclosure.

"Therefore, financial institutions in our country should actively participate in these activities. More importantly, in the process of participating in global governance and zero-carbon financial governance mechanism, China should also bring this new experience to the Belt and Road Initiative, promote the capacity building and system construction of the Belt and Road Initiative and developing countries, and help developing countries enter zero-carbon finance. This is also China’s historical responsibility and international mission. More importantly, participating in the international governance of zero-carbon finance will in turn push China towards a new financial era of reform and opening up. Disclosure should be unified, standards should be unified, product research and development, market liberalization, and capital flow will all be reflected in the entire global governance mechanism. " Zhu Min said.

In this regard, Wang xin, director of the Research Bureau of the People’s Bank of China, also said that the development of sustainable finance in China and related international cooperation are mutually reinforcing and have formed a good virtuous circle; In addition, China participates in international coordination and cooperation, and the latest international progress is also a great guide and promotion for the domestic development of green finance, sustainable finance or zero-carbon finance.

According to Wang xin, in order to better support international coordination and cooperation, the People’s Bank of China has promoted the development of green finance-related fields in many aspects: First, it has strengthened the construction of sustainable financial standards system, including improving green financial standards and expanding and expanding the use of the China-EU Common Catalogue of Sustainable Finance.

The second is to strengthen the disclosure of climate and environmental information. The basic work is to carry out relevant standard statistics and strengthen the requirements of information disclosure of financial institutions. Third, expand the use of sustainable financial instruments. Financial institutions actively participate in the development and interconnection of related financial products and related financial markets. Green loans, green bonds, carbon neutral bonds and bonds linked to sustainable development will also be gradually developed.

Fourth, strengthen the incentive and restraint mechanism, including the formation of a reasonable carbon price. The People’s Bank of China has also launched a special mechanism to support the development of green finance and improve the evaluation and application of green finance results. Fifth, capacity building, and systematic training and capacity building.

In addition, give full play to the role of relevant institutions in the green finance reform and innovation pilot zone.

Pain point: where is the difficulty in achieving coordination?

The construction of carbon market will make China one of the main beneficiaries. However, in the process of achieving "carbon neutrality" and coping with climate change, the challenge of coordination is easy to say, but it is also complicated.

Bai Lefu, chief economist of Asian Infrastructure Investment Bank (AIIB), talked about his views. He mentioned that climate change is a global issue, regardless of national boundaries. Different countries are affected by climate change in different degrees, so their coping strategies are different. For example, some can reduce carbon emissions, or increase their adaptability and resilience, but their adaptability and resilience are more complicated, which may be exerted by the enterprise sector, thus making it more difficult to achieve coordination. After all, in the process of achieving coordination, countries bear different costs and benefits.

Bai Lefu believes that "to achieve global coordination, fairness and justice are very important in this transformation. We need strong governance, including financial governance and mandatory regulatory rules; In order to further develop the carbon market and distribute fair carbon quotas, it is necessary to understand the nodes and starting points reached by countries in the implementation process more accurately, so standards are needed to balance them. We need to gather national platforms to build a global architecture, so as to achieve a fair transformation and make the transformation sustainable. If such a transformation is not sustainable, it will not be supported by the public, it will not be able to achieve sustainable development, nor will it be able to achieve a fair and just transformation, and it will be even more impossible to move towards a zero-carbon future. "

In addition, Zhang Liqing, director of the International Finance Research Center of the Central University of Finance and Economics, believes that China’s leading and formulating international rules in the field of zero-carbon finance is itself a manifestation of financial openness. He also further mentioned the multi-level challenges faced by expanding opening up. First, China’s economy may encounter more external shocks. Affected by fluctuations in international economic growth, changes in monetary policies of major developed countries and some international emergencies, international capital may enter and exit in a short time. This situation is hard to avoid, which will lead to fluctuations in domestic asset prices and exchange rates. If the domestic macroeconomic fundamentals are not good, the probability of such an impact will be great.

The other is the impact of geopolitical conflicts and the tightening of Sino-US relations. Will the expansion of financial opening face greater risk of financial sanctions? Of course it’s possible. Zhang Liqing said, but unless there is an extreme situation, it is more likely that the opposite will happen. The deeper the connection between the two countries in the financial field, the higher the cost of financial sanctions, and the less likely it will happen. In addition, if residents are allowed to invest abroad more freely, it will also reduce the scale of China’s foreign exchange reserves to a certain extent, thus reducing the risk that foreign exchange reserves will be frozen in case.

As for the risk of capital outflow caused by the tension between China and the United States, Zhang Liqing believes that strengthening communication and exchanges and expanding the common denominator as much as possible in all aspects are the key to preventing the further decoupling of technology and trade between China and the United States, and also the key to preventing the risk of capital outflow. China’s economy still has great growth potential. If we can continuously improve the investment environment and do better in the construction of the rule of law and the protection of property rights, the result of expanding the two-way financial opening must be or the probability is that the net capital inflow will increase, not the other way around.

Beijing business today reporter Liu Sihong