Yingda International Trust Issues First Carbon Neutrality ABCP in China

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Yingda International Trust Issues First Carbon Neutrality ABCP in China

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State Grid-backed Yingda International Trust announced the issuance of the country’s first carbon neutrality-themed asset-backed commercial paper (ABCP), as reported by Sina on March 17. The ABCP is worth a total of RMB1.75bn. The raised funds will be used for three hydropower projects, two wind power projects, and a solar energy project, which could potentially lead to an annual reduction of 2.36m tons of carbon dioxide (CO2) emissions, 17,500 tons of sulfur dioxide (SO2) emissions, and 1.15m tons of standard coal equivalent. The projects aim to explore innovative green finance modes and to help achieve the country’s goals for carbon emission peaking and carbon neutrality.

As stated in a guideline published by State Council, China is currently pursuing the development of a green and low-carbon circular economy. By 2025, the country targets to see a significant improvement in its industrial, energy, and transportation structure, with a marked reduction in carbon emission intensity. Notably, the guideline reiterates the importance to develop green finance in China. Specifically, the central government stresses that it will support green credit and green direct financing, strengthen the green finance performance evaluation for financial institutions, establish a unified national standard for green bonds, and encourage qualified green firms to go public domestically or raise funds from the international market.

As of February 2021, the country had over 130 green investment funds and above 20 local government-supported green industrial funds, managing over RMB115bn in total. In addition, the issuance of green bonds in China has surged from RMB240bn in 2016 to RMB386bn in 2019, while that of green asset-backed securities (ABS) also hiked by 350% to more than RMB50bn. By the end of 2019, there were a total of 832 green trust projects in the country, up 101.45% YoY, with a total worth of RMB335.46bn, jumping 152.94% YoY. The country has also established a national green development fund in 2020, with RMB88bn raised in the first phase. However, according to the estimate from Tsinghua University, China would need around USD650bn and USD900bn each year in green financing to support its 2060 carbon neutrality goal, and the country still lags far behind this figure, reporting a financial shortfall. As the next step, the country should support private businesses and small and medium-sized enterprises to engage in green investments, enhance secondary market liquidity of green finance products, and accelerate global integration, referencing Deutsche Bank [DBK:GR].