What Should We Pay Attention To And Do About "Carbon Neutrality" In The 56Th Issue Of Shenzhen Regulation?

In this year's NPC and CPPCC sessions, "carbon peak, carbon neutral" was written into the government's work report, which was listed as the key task in 2021 and became the focus topic.

Low carbon, green and environmental protection development mode and lifestyle is the inevitable requirement of implementing the new development concept, and it is also an important part of ecological civilization construction. In March 2016, the outline of the 13th five year plan made it clear that "carbon dioxide emissions per unit of GDP will decrease by 18% within five years".

In September 2020, the central government officially put forward the goal of "striving to reach the peak of carbon dioxide emissions by 2030 and strive to achieve carbon neutrality before 2060".

Therefore, it is worth pondering over the implementation of the goal of "carbon neutrality" in the capital market, how to rationally treat the long-term and long-term impact of "carbon neutrality", and what roles should be played by listed companies, regulatory authorities and investors.

Debate on Influence

As we all know, China, as a big country of global greenhouse gas emissions, has not yet reached the peak of energy demand for economic growth. It is difficult to adjust the energy structure of power supply, decarbonization technology still needs to be broken through, and the development of regions and industries is not balanced. The realization of carbon neutral strategy requires a brand-new low-carbon development strategy, which is "a broad and profound economic and social systematic change". In this process, the adjustment of business model, the breakthrough of core technology and the realization of business performance of listed companies have to be tested, and they are faced with many uncertainties and risks such as backward technology elimination, competition and policy at any time.

For example, the electric heating and gas industry, as the center of energy structure adjustment, means that for the dominant traditional thermal power enterprises, it is urgent to gradually reduce the proportion of installed capacity and reduce the coal consumption per unit power supply. However, there is already a problem of overcapacity, and it is necessary to speed up the breakthrough of carbon reduction technology barrier, and the transformation is imminent. Another example is the steel industry, which itself is a major carbon emission producer in the manufacturing industry, accounting for about 15% of the total carbon emission in China. Therefore, it can be predicted that in the future, it will inevitably become a key control industry to achieve the goal of carbon neutralization. At the same time, the average carbon dioxide emission per ton of steel in China is about 2 tons, while that of American steel is about 1.2 tons. In contrast, there is still a big gap between China's steel industry and the developed countries in the United States and Europe. Shortening the steel-making process and improving the steel-making process will become a must for all listed companies in the steel industry.

Specifically, the impact of carbon neutral implementation on related industries can be divided into front-end energy substitution, middle end energy conservation and emission reduction, back-end recycling and ecological carbon sink and so on. Traditional energy enterprises need to gradually reduce unit energy consumption and transform to clean and renewable energy. The high energy consumption manufacturing industry needs to reduce production capacity, improve process flow, and strengthen the investment and application of energy-saving management and emission reduction equipment. The practical path and operation mode of recycling renewable resources such as waste classification, waste recycling, carbon capture and carbon sequestration forest planting industry should be gradually clear and clear, and cross validation should be carried out continuously.

Among them, both the improvement of process flow and the investment of energy conservation and environmental protection need a lot of financial support. To build and improve the green financial system and solve the problem of difficult and expensive financing for enterprises is the key to achieve the goal of carbon neutral. As an important platform for optimizing the allocation of resources, capital market has irreplaceable advantages and roles in increasing the proportion of direct financing, promoting scientific and technological innovation, supporting the development of real economy and promoting the adjustment of industrial structure.

The help of capital market

As for the role of capital market, it can be summarized as two points: one is support, the other is guidance.

In recent years, the capital market has played a positive role in supporting the development of green finance, promoting the financing of key industries such as steel and electric power, etc. Recently, Yi Gang, governor of the people's Bank of China, pointed out at the high-level seminar on "green finance and climate policy", that green finance can play an "accelerator" in achieving the goals of carbon peak and carbon neutralization.

In March 2017, the China Securities Regulatory Commission (CSRC) issued the guiding opinions on supporting the development of green bonds. For corporate bonds that meet the requirements for the use of raised funds, the policy of "special person docking, special audit, immediate report and audit" is applicable. Shenzhen Stock Exchange has been promoting the development of green bond market since 2016. By the end of 2020, there are 118 green bonds in stock, with a total scale of 59.4 billion yuan. Recently, the first batch of carbon neutral special bonds in Shenzhen have been successfully implemented, with a total amount of 2.5 billion yuan. The funds raised are used for urban electrified rail transit, nuclear power projects, green building emission reduction and other projects. From 2018 to 2020, Shenzhen stock market successively supported CGNPC, the largest nuclear power developer and operator with the largest installed capacity, to raise 12.574 billion yuan for the construction of nuclear power units. It also supported Fuchun environmental protection, Benxi Steel, CITIC special steel and other companies to raise more than 10 billion yuan through non-public stock Issuance and major asset restructuring to improve green production efficiency.

With the deepening of the capital market reform, the relevant support policies and publicity work continue to strengthen, and I believe that the capital market is more and more important to carbon neutrality.

In addition to financing support, the core advantage of capital market is information disclosure, which can provide an important guarantee for enterprises to realize their own "carbon management" and "carbon constraint". In September 2018, China Securities Regulatory Commission revised the corporate governance standards for listed companies, focusing on strengthening the leading role of Listed Companies in environmental protection and social responsibility, and establishing the basic framework for information disclosure of environment, social responsibility and corporate governance (ESG). The standards for the format of regular reports formulated by the CSRC, the disclosure requirements for social responsibility reports of listed companies and the information disclosure guidelines for non-metallic building materials and other industries issued by Shenzhen Stock Exchange clearly stipulate the specific measures to be taken by Listed Companies in terms of disclosure of pollution discharge and reduction of energy consumption.

According to incomplete statistics by reporters, 10 listed companies in the household appliance heating industry and 5 listed companies in the iron and steel industry mentioned carbon dioxide emissions in the 2019 annual report or social responsibility report, accounting for 21.7% and 33.3% of the total number of Listed Companies in the industry respectively. Among them, Valin steel not only disclosed the total carbon emissions and carbon emissions per ton of steel in detail, It also disclosed various measures and effects in reducing carbon emissions, while new energy power generation enterprises such as CNKI, solar energy and Mindong Electric Power disclosed the equivalent carbon dioxide emission reduction of clean energy power generation.

In addition, it is understood that, while urging and guiding listed companies to strengthen the disclosure of ESG information, the regulatory authorities are still working on refining the rules and regulations of ESG disclosure in view of the inconsistency, incompatibility and difficulty in quantification of carbon emission information disclosure standards.

Although carbon neutrality is a relatively long-term target task and has different impacts on different listed companies, there are still short-term fluctuations in some concept stocks at the secondary market level. According to wind statistics, as of April 23, 2021, the average stock price of 40 carbon neutral concept stocks in Shenzhen stock market has increased by 28% since the beginning of the year, far more than - 0.8% of the Shenzhen Composite Index in the same period, showing a certain feature of speculation concept. Among them, southern power grid energy, sequence control development and Changyuan power increased by 435.6%, 419.0% and 174.4% respectively.

Although the stock price of listed companies reflects the possible development trend of the company in the future to a certain extent, in the short term, similar phenomena such as "8 times of shares", "10 times of shares" have seriously gone beyond the basic logic and become short-term arbitrage behavior of speculation. Obviously, the overestimation value without fundamental support is not sustainable. It not only has no contribution to the carbon neutral standard, but also is not conducive to the capital operation and strategic implementation of listed companies, and is not conducive to the stable and healthy operation of the capital market.

In the view of industry insiders, there is a long way to go before the goal of carbon neutrality is put forward and put into practice. It also needs all parties to work together to deeply understand the significance, long-term and long-term impact, realization path, challenges and opportunities of carbon neutral goal, so as to have a clearer understanding of the specific roles played by all parties on the road to carbon neutrality（ Editor: Li Xinjiang)

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