China ESG - Weekly News: 5 CSI ESG benchmark indices to be launched in April 12, 2021

Five indexes including the CSI 500 ESG benchmark index will be released on April 12, 2021

In order to further enrich the index system and provide investors with new analysis tools and investment targets, China Securities Index Co., Ltd. will officially release the CSI 500 ESG Benchmark Index, CSI 500 ESG Leading Index, and CSI 500 on April 12, 2021. ESG Value Index, CSI 800 ESG Leading Index and CSI 800 ESG Value Index.

The CSI 500 ESG Benchmark Index removes the 20% of listed company securities with the lowest ESG scores in the CSI Class I industry from the CSI 500 index samples and selects the remaining securities as index samples to provide performance benchmarks and investment targets for ESG investment.

The CSI 500 ESG Leading Index selects 150 listed company securities with the highest ESG scores from the CSI 500 index sample to provide investors with more diversified investment targets. The CSI 500 ESG Value Index selects 150 listed company securities with higher ESG scores and lower valuations from the CSI 500 index sample as the index sample to provide investors with more diversified investment targets.

Source: CSI

Trial release of the first ChinaBond "carbon neutral" green bond index

The first ChinaBond "carbon neutral" green bond index was released on a trial basis. The constituent bonds of the index are composed of carbon-neutral green bonds that are publicly issued and circulated in the country, which can be used as a benchmark for performance comparison and investment tracking of such bonds.

It is estimated that as of March 12, 2021, the green projects invested by the 15 constituent bonds of the index can reduce carbon dioxide emissions by approximately 68.21 million tons per year after they are completed and put into operation.

Source: CCDC

PBoC: Make Full Use of China’s Monetary Policy Space and Promote Green Finance

By the end-2020, outstanding green loans in China were about 12 trillion RMB, or 2 trillion USD, ranking the first in the world. Outstanding green bonds in China registered about 800 billion RMB, or about 120 billion USD, ranking the second largest in the world. Such rapid progress in green finance is giving strong support to China’s green transition.

First, we must mobilize massive green investment in line with market principles. According to various estimates, hundreds of trillions of RMB is needed to achieve the 30/60 goal. Public finance, however, could cover only a tiny fraction. It is therefore imperative to put in place sound public policy incentives to encourage market forces to fill in the gap.

Second, we must evaluate and address the potential impacts of climate change on financial stability and monetary policy. Studies show that climate change may make extreme weather more frequent and lead to greater loss. Meanwhile, green transition may cause the value of carbon-intensive assets to fall and sour the balance sheet of firms and financial institutions. This will heighten credit risk, market risk and liquidity risk, and further undermine the stability of the entire financial system. It may also affect the scope and transmission of monetary policy, and be a drag on key variants such as growth and productivity. These are new challenges to financial stability, as they make the evaluation of monetary policy more difficult.

Source: PBOC

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