On July 15, the 2021 China SIF Summer Summit was held in Beijing on-site with online access and simultaneous interpretation available to remote participants. Domestic and international experts engaged in in-depth discussions and exchanges on transition risk opportunities and corresponding ESG investment opportunities under carbon neutrality target.
The Summit was opened by Wang Zhongmin, former Vice Chairman of National Council for Social Security Fund and Honorary Chairman of China SIF, and Rebecca Mikula-Wright, Head of Asia Investor Group on Climate Change (AIGCC). In his speech, Wang Zhongmin pointed out that the question of how to price in climate factors and thus form an effective market regulation mechanism is very crucial; under the 2060 target, the financial behaviours of financial institutions and consequently those of individuals need to be adjusted accordingly.
Rebecca stated that numerous investors are trying to align their portfolios with net-zero emissions and that market expectations are increasing; the AIGCC has already collaborated with six other organizations around the globe to develop the framework of Investor Climate Action Plans (ICAPs) to help investors address climate risks and contribute to achieving carbon neutrality through investment, corporate engagement, policy engagement and disclosure.
The Summit was divided into two halves. The first half took a macro perspective and explored the risks and opportunities of transition under the carbon neutrality target. Liu Yanhua, former Vice Minister of the Ministry of Science and Technology, Director of the National Expert Committee on Climate Change, and Ma Jun, Chairman of China Green Finance Committee and President of Beijing Institute of Green Finance and Sustainable Development, delivered keynote speeches. Liu Yanhua pointed out that on a global scale, there are three major gaps in the implementation of the Paris Agreement and the achievement of the 2oC temperature target: the commitment gap, the technology gap and the funding gap; According to the People's Bank of China, China will need to invest trillions of RMB to support carbon neutrality. It is necessary to find a balance between green and finance. Both green development scheme and the financial system need to be adapted.
Dr. Ma Jun analyzed the opportunities and challenges faced by financial institutions in the context of carbon neutrality, and introduced the progress of China's international cooperation in green finance. He stressed that with all parties making carbon neutrality commitments, the transition risks will be more significant compared to the physical risks; suggesting financial institutions to accelerate the establishment of ESG governance structures, set green investment targets, allocate relevant resources, optimize processes, carry out environmental and climate risk analysis and measurement, and strengthen environmental and climate risk disclosure. Ma Jun pointed out that information disclosure, especially the disclosure of climate risks for brown assets, is a global regulatory trend; Currently, China and Europe are jointly developing common ground taxonomy; At the same time, it calls for an acceleration of the innovation of financial frameworks and products for low-carbon transition while focusing on green assets.
In the panel discussion on "How to Provide Financial Support for Carbon Neutrality Targets", moderated by Dr. Guo Peiyuan, Chairman of China SIF and Chairman of SynTao Green Finance, the Director of Strategic Planning, National Climate Strategy Centre, Dr. Chai Qimin, pointed out that in order to achieve the 2060 target, it is conservatively estimated that over RMB 139 trillion will have to be invested, averaging at over RMB 3.5 trillion per year. In addition to the estimated RMB 500 billion of public funding per year, there is a need to guide and leverage private sector funding. In response to the current social funding gap, Dr. An Guojun, Associate Professor at the Institute of Finance，Academy of Social Science and Vice President of China SIF, introduced the financing tools in the market to help achieve the 2060 target, including green funds, carbon neutrality funds, government-guided funds, private equity investment, venture capital funds, bank investment and lending linkages, guarantee funds, etc. She also emphasized the importance of green and low-carbon technologies, and the need to further improve the intellectual property rights system, green technology assessment standards system. Han Ning, Director of Market Innovation Department of the National Association of Financial Market Institutional Investors (NAFMII), introduced product innovations in the bond market in the context of the 2060 target, including the recently launched carbon neutrality bonds and sustainability-linked bonds to help reduce emissions and brown-to-green transition. He also indicated that the green bond market has developed rapidly this year and the issuance of green bonds in the interbank market in the first six months of this year has by far exceeded the annual issuance of last year. Boris Kan, Vice President and Senior Credit Officer of Moody's Investors Service, commented that the international green bond market and the domestic market are developing in line with each other, growing at a significant rate. Moody's has incorporated climate factors into its credit rating methodology, and current research on the power grid and integrated power sectors has found that climate change has had a limited impact on their ratings, but may have an even greater impact in the future. The President of Beijing Green Exchange, Mei Dewen, reviewed the three stages of the development of China's carbon market, saying that the ultimate goal of the carbon market is to promote low-cost and high-efficiency emission reductions, and that carbon pricing needs to reflect the externalities of carbon emissions; in comparison with the carbon markets in Europe and the US, the current pricing in the domestic carbon market is comparatively low, failing to establish the incentive role of carbon prices for new energy sources and constraints on fossil energy sources; In the future, there is a need to establish a carbon market that is internationalized, financialized and standardized in order to effectively promote the 2060 target.
Later at the Summit, SynTao Green Finance's PANDA Climate Data Platform and the Chinese version of UNEP FI's report Climate Risk Landscape were released. Zhang Rui, Managing Director of SynTao Green Finance, introduced the methodology, statistics of assessment results and application scenarios of PANDA Climate Data Platform. The platform includes assessments on the physical risks, transition risks, opportunities, carbon footprint and carbon neutrality management of listed companies, providing basic data support for financial institutions to disclose environmental information, measure carbon intensity of investment portfolios, conduct climate stress tests, assess climate risks, develop carbon neutral financial products and formulate carbon neutral strategies.
Dr. Guo Peiyuan, Chairman of China SIF, released the Chinese version of UNEP FI's report Climate Risk Landscape. The report introduces the progress of global climate risk disclosure requirements, provides an overview of the methodology for assessing climate change transition risks and physical risks, and provides a rich reference of tools for financial institutions to carry out climate risk analysis. The Chinese version was translated by the SynTao Green Finance team, with support from China Southern Fund and Bloomberg.
The second half of the summit was held from a micro perspective, where the guests discussed how financial institutions can systematically take climate change factors into account and carry out ESG investments under the carbon neutrality target.
Ma Xianfeng, Deputy Director of China Institute of Finance and Capital Markets, delivered a keynote speech on the progress of domestic and international capital markets in promoting ESG information disclosure of listed companies. According to him, the capital market needs to consolidate the data foundation in order to carry out ESG investment and facilitate carbon neutrality. At present, ESG information disclosure by listed companies in China is improving in both quantity and quality. In the future, it is recommended to continuously improve ESG guidelines for listed companies, develop industry-specific indicators, and encourage third-party assurance.
Tiffany Grabski, Senior Specialist at the United Nations Sustainable Stock Exchanges Initiative (UN SSEi), went on to present two recent UN SSEi reports related to climate disclosure: Action Plan to Make Markets Climate Resilient and Model Guidance on Climate Disclosure. She identified five key areas in which stock exchanges can contribute to carbon neutrality: reporting of climate related information, broader communication, evaluation and integration of risks and opportunities, climate data, and promoting change in each key area.
From the perspective of financial institutions, Yang Yuebin, Fund Manager of AXA SPDB Investment Managers Co., Ltd., and Chia-Yue Chang, Founding Investor and Executive Director of Noah Holdings Limited both mentioned the link between ESG and long-term value in their next presentations, where they introduced the initiatives of their respective institutions in ESG and climate risk management, from organizational structure to active management strategies. Yang Yuebin pointed out that ESG and value investing should be organically integrated, focusing on top-down analysis of company fundamentals. It is recommended to use a multi-thinking model to look at the cash-flow of a company throughout its life cycle, make good valuation judgments, and invest in long-term.
Chia-Yue Chang stated that while climate change brings economic losses, it also brings related opportunities, requiring collaboration among all parties in the financial sector. She pointed out that sustainable investment is a long-term value presenter and has become the new norm, and that data from international and domestic rating agencies such as MSCI and SynTao Green Finance reflect that corporate ESG scores are highly correlated with value returns; As a leading independent wealth management company in China, Noah is concerned about the growing awareness of ESG among high net worth clients, and has made advanced arrangements in two areas: wealth management and asset management.
The subsequent panel discussion was focused on "ESG Investment Strategies under Carbon Neutral Targets". The session was moderated by Grace Guan, Secretary General of China SIF and Deputy General Manager of SynTao Green Finance. Rob Neilson, Head of Product Strategy and Solutions, EMEA, Invesco Fixed Income, Li Xiao, Vice-President of ESG Business Dept., Huaxia Wealth Management Co., Ltd., and Dr. Tu Wubin, Member of the China Everbright Holdings' ESG Working Group, presented their respective ESG integration and low-carbon investment strategies and shared their practices on ESG disclosure. Rob introduced how Invesco has integrated zero carbon targets into its product strategies and built portfolios aligned with the Paris Agreement; Li Xiao introduced the ESG integration process of Huaxia Wealth Management in detail; Dr. Tu Wubin shared the social responsibility and ESG practices of Everbright Holdings since 2011 from the unique perspective of a Hong Kong listed alternative asset manager with a state-owned enterprise background. David Carlin, Head of the TCFD Working Group at UNEP FI, gave a detailed presentation on the TCFD disclosure framework, noting that in addition to disclosure, the TCFD framework can also provide an integrated system to help financial institutions effectively manage climate risk.
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.