By: Tang Rui, Vice Executive President, Shenzhen Stock Exchange May 2023
To achieve carbon peaking and carbon neutrality is a major strategic decision made by the Chinese government. It is an inevitable choice to solve the salient problems of resource and environmental constraints and achieve sustainable development. It is also a solemn commitment to promote the harmonious coexistence between people and nature and to build a community with a shared future for mankind. As a major hub of the capital market, Shenzhen Stock Exchange (SZSE) attaches great importance to the “dual carbon” goal and has made solid strides. It highlights its platform role as an exchange, channels capital to low-carbon and sustainable areas, and provides more efficient and convenient direct financing support for green industries, facilitating the virtuous cycle of interaction between technology, industry and capital, which is mainly manifested in the following five aspects.
First, actively supporting direct financing of green industries.
At present, almost 300 SZSE-listed companies engage in green industry, with total equity proceeds of over $131 billion and a total market capitalization of over $897 billion, which accounts for 20% of the total market capitalization of all the SZSE-listed companies, covering new energy batteries and materials, new energy vehicles, energy conservation and environmental protection industries, with significant industrial agglomeration effect and distinct innovation attribute. Shenzhen market has distinct advantage of a complete new energy industry chain, covering lithium ore resources, chemical materials of lithium battery, new energy vehicles and components, new energy power, resource recovery and utilization. There are also a number of rapid-growing industry leaders, including CATL, a global leader in power batteries, BYD, a global leader in new energy vehicles, and Tianqi Lithium, the supplier of core materials for lithium batteries in China. Overall, the green industry is growing rapidly. After listing, companies can use capital market tools such as refinancing, M&A and reorganization to effectively promote their sustainable development, improve their structures and product quality, thus broadening their development prospects.
Second, continuously refining the ESG information disclosure requirements.
SZSE issued the Guidelines for Social Responsibility of Listed Companies in 2006, which was incorporated into the Guidelines for the Standard Operation of Listed Companies in 2010. In January 2022, the self-regulation rules have been further improved. SZSE continues to improve the system of corporate governance rules to make them more targeted and effective. We have implemented the hierarchical and differentiated information disclosure system, urging the heavy polluters to disclose environmental information. SZSE is also encouraging listed companies to set up social responsibility strategic planning and working mechanism, and integrate ecological and environmental protection requirements into the company's development strategy and corporate governance. The ESG disclosure performance is considered according to the SZSE information disclosure assessment system. In 2022, more than 2300 SZSE-listed companies disclosed their social responsibility performance in their annual reports, nearly 1600 companies disclosed pollution prevention, resource conservation and ecological protection information, and over 550 companies issued CSR reports or ESG reports. In February this year, the SZSE released the White Paper on Environmental Information Disclosure by SZSE-Listed Companies, to strengthen the awareness of environmental information disclosure and to pursue green development by sharing outstanding cases.
Third, continuously increasing the supply of sustainable financial products.
By the end of March, SZSE had issued 91 green corporate bonds totaling $10.4 billion and 31 green ABS totaling $6.2 billion, and the proceeds raised were mainly used for clean energy, biomass power generation and environmental governance. SZSE has issued 19 bail-out bonds totaling $3.4 billion; 52 poverty relief and rural revitalization bonds totaling $4.5 billion; 35 green-themed ETFs, including ESG, carbon neutral, photovoltaic, new energy vehicles and lithium batteries, totaling $3.1 billion. In July 2022, China’s first infrastructure REITs in the clean energy field was listed on SZSE, which has facilitated the virtuous cycle of the circulation of existing assets and new investment in the field of clean energy.
Fourth, forming a sustainable development index system.
Shenzhen Securities Information Co., Ltd. (SSIC), a wholly-owned subsidiary of SZSE, released China’s first corporate governance stock index in 2005, the first environmental protection stock index in 2008, and the first low-carbon stock index in 2010. In recent years, SSIC has accelerated the development of sustainable development index system. It launched green indexes such as Green Finance Index, Carbon Technology 60 Index, Carbon Neutrality 50 Index and Carbon Neutrality Green Bond Index, and built a multi-level ESG index system based on the CNI ESG ratings methodology and with SZSE core index as the parent index. SSIC has launched 48 sustainable development indexes covering environmental protection, responsibility, governance, etc. In 2022, SSIC launched the CNI ESG ratings methodology, and became a signatory of the United Nations’ Principles for Responsible Investment.
Fifth, deepening international exchanges and cooperation in sustainable development.
SZSE is a member of the United Nations Sustainable Stock Exchange Initiative (UN SSE), the WFE Sustainability Working Group. In recent years, various connections have been built with overseas exchanges. In July 2022, the China-Switzerland Stock Connect was launched and two representative green and low-carbon A-share companies, GEM Co., Ltd. (GEM) and Gotion High-tech Co., Ltd. (Gotion), issued global depository receipts (GDR) and officially listed on SIX Swiss Exchange (SIX). SZSE also actively communicated with London Stock Exchange (LSE), Singapore Exchange (SGX) and Japan Exchange (JPX) on sustainable financial capacity building, green index and bond product development and information disclosure. Moreover, SZSE carried out cross-border activities such as carbon neutrality project roadshows and sustainable industry salons through its V-Next platform, encouraging enterprises and projects in the low-carbon sustainable field to connect with high-quality industries and resources at home and abroad. SZSE has also included the theme of sustainable investment in the Shenzhen Stock Exchange Global Investors Conference for three consecutive years to fully demonstrate to international investors its low carbon sustainable development concept and progress.
In May 2022, we formulated the Special Work Plan of Shenzhen Stock Exchange on Supporting Carbon Peaking and Carbon Neutrality. Next, we will strive to guide financial capital to the low-carbon field and establish a sustainable exchange brand in about five years.
First, attracting more high-quality enterprises that conform to the concept of low-carbon sustainable development.
We will improve the cultivation and guiding mechanism to support IPOs of core technological enterprises in the low-carbon field. We will refine the disclosure requirements for sustainable related information, encourage voluntary disclosure of carbon reduction information, andassist listed companies in ESG capacity building.
Second, building a low-carbon sustainable investment and financing product platform.
We will enhance the system of green bond rules, research and develop innovative products such as low-carbon transformation performance linked bonds, actively develop low-carbon stock indices and green bond indices, promote the development of carbon neutral and green hybrid funds, and niche fund products, and support the launch of more low-carbon REITs.
Third, improving the financial market ecology for low-carbon sustainable development.
We have already established the ESG rating standard, expand the ESG rating application, and enhance market influence. We will also build a SZSE low-carbon and sustainable financial information platform, strengthen themed investor education, and actively foster ESG investors.
Fourth, continuing to deepen domestic and overseas cooperation in sustainable finance.
We will encourage domestic entities to strengthen communication with international institutions, participate in the setting of international sustainable standards, and promote the building of the global sustainable financial system.
Fifth, striving to build a sustainable exchange.
We will actively apply new technologies and materials to achieve energy conservation and emission reduction, advocate low-carbon working and energy conservation, play a leading role in fulfilling social responsibilities, and orderly promote the building of a low-carbon sustainable exchange.
To promote sustainable economic and social development calls for joint efforts from all parties, SZSE looks forward to deepening exchanges and cooperation with global market participants, upholding green development, bearing in mind our social responsibility, promoting global governance, and contributing to the building of a community with a shared future for mankind.