HomeMioTech ResearchArticle Detail

Weekly ESG Express Mar 14 | China's Two Sessions creates super financial regulator and data bureau

MioTech Research2023-03-14
Two SessionsEUREITs

En Cover

En Imgs7 1

China’s State Council released its much-anticipated Institutional Reform Plan last week during the 2023 ‘two sessions’, establishing the National Financial Regulatory Administration (NFRA), marking the biggest overhaul to China’s financial regulatory system in years.

Under the ‘one bank, one administration, one commission’ motto, the State Council announced on March 7 that the new financial regulatory structure NFRA will absorb CBIRC (China Banking and Insurance Regulatory Commission), the top government agency regulating banking and finance currently.

The proposed super administrative body will sit directly under the State Council and be in charge of regulating the financial industry except the securities sector, and will also take over parts of PBoC (People's Bank of China) and CSRC (the China Securities Regulatory Commission).

The Plan will also form a National Data Bureau directly managed by the National Development and Reform Commission (NDRC) to both balance and promote the digital economy.

En Imgs7 2

US and EU officials launched discussions on trade in critical minerals when European Commission president Ursula von der Leyen visited the White House last Friday. US officials said the talk would help both sides build secure supply chains for electric vehicles. The EU side would make its supplies of raw and processed critical minerals eligible for green subsidies under Biden’s Inflation Reduction Act, aimed at reducing greenhouse gas emissions to half their 2005 levels by 2030.

Currently, the US allows tax credits for materials sourced from countries that it has free trade agreement with, which excludes the EU and Japan. The goal of the agreement would be to establish an official channel for the US and EU to maximize the deployment of clean energy over time.

En Imgs7 3

The EU approved conclusions reaffirming that EU climate and energy diplomacy is a core component of EU’s foreign policy,and to guide joint EU diplomatic outreach in 2023 ahead of COP28 in the United Arab Emirates. The 34 point texts repeated EU’s COP26 commitments to accelerate “the phasedown of unabated coal.”

Other stated goals include the drive to halve global greenhouse gas emissions by 2030 as indicated by IPCC, and urgently calling global action to limit global warming to around 1.5C by reaching emissions peak by 2025 at the latest and be reduced with 43%by 2030 compared to 2019.

En Imgs7 4

Ant Group Co. recently announced that the company has closed a $6.5 billion sustainability-linked loan, the largest in Asia-Pacific and the third largest in the world last year.

The transaction was supported by more than 20 banks globally. All of the money will be used for achieving the company's ESG strategic goals and net zero targets, said the company.

As a financial support tool to incentivize carbon neutrality, the sustainability-linked loan, priced at a variable interest rate, is tied to predefined ESG performance targets disclosed by the company. Corporates can only secure a lower interest rate if they pass the bank’s stringent examination of sustainability performance targets (SPTs) setting, scientific reporting data, and third-party performance verification.

En Imgs7 5

The two REITs raising US$1.5bn include a wind power REIT initiated by State Power Investment with China Securities as the fund manager and a solar energy REIT project by Beijing Energy International Holdings (00686.HK).

The electricity generation assets of the two projects provide an asset securitization path. The underlying assets of the wind power REIT project by State Power Investment are based in Yanchang, known as “China's first offshore and wind power city.” The underlying assets of Beijing Energy International’s REIT are a 300-MW solar power station in Yulin, Shaanxi province, and a 100 MW station in Suizhou, Hubei province. The solar plants have operated for more than three years with annual generation capacity of 576m kWh and Rmb400m (US$58m) a year.

Currently there are 25 REITs available and the estimated available amount for distribution for the two REITs would reach Rmb327m and 334m in 2023 and 2024 respectively.