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    Green Trust Research (1)

    2019-02-11 15:43:30

    China Trust Industry Association China Trust Industry Association

    The definition and significance of green trust

    (1) The origin and development of green trust

    At the UN Conference on Sustainable Development held in June 2012, more than 130 heads of state reached the outcome document of “Our future” on the two themes of “green economy” and “sustainable development mechanism”. The conference established the theme of global sustainable development and opened the “post-Rio era” of global green development.

    After 40 years of reform and opening up, China has developed into the world's second largest economy, but it has too much debt in the ecological environment. To achieve sustainable development, we must do a good job in building ecological civilization. At the Fifth Plenary Session of the 18th CPC Central Committee, the system discussed innovation, coordination, greenness, openness, and sharing of the "Five Development Concepts", and became the decisive strategy for China to build a well-off society in an all-round way, focusing on solving problems in China's development and enhancing development momentum. The advantages of thick plant development. Comrade Xi Jinping re-emphasized in the fortieth collective study of the Political Bureau of the CPC Central Committee that promoting the formation of a green development mode and lifestyle is an inevitable requirement for implementing the new development concept. It is necessary to put ecological civilization construction in a prominent position in overall work and persist in conserving resources. And the basic national policy of protecting the environment, adhere to the policy of saving priority, protecting priority, and restoring nature, forming a spatial pattern, industrial structure, production mode, and lifestyle that conserves resources and protects the environment, and strives to achieve economic and social development and ecological environmental protection synergy. Work together to create a good environment for production and living for the people.

    Green development is both a national policy and a public opinion. Accelerating the development of green finance and serving the green economy have become the goals of the financial industry and the cornerstone of the sustainable development of the financial industry. At the same time, green finance provides resources for environmental protection, environmental protection, green transformation, green investment, and guidance to the development of a more green and clean economy.Power sourcespring. Green development and green finance complement each other. From the perspective of value chain transmission, “public movement – ​​green consumption – green production – green finance” is the general law of green financial development. Due to the environmental pollution and resource shortage caused by the rapid economic growth, public environmental protection movements have emerged in the society to protest the environmentally-friendly production and production behavior. These public campaigns have made green environmental protection a value orientation that gradually affects the public's consumption choices, thereby stimulating the demand for green consumption. Demand will stimulate supply, and enterprises will provide green products to meet the needs of green consumption in their own interests, thus giving birth to the concepts of green manufacturing and circular economy. As more and more companies begin to focus on green production and green manufacturing, investors are gradually becoming aware of the importance of corporate environmental benefits, so green finance will enter the public eye.

    In the field of green finance, green credit has achieved rapid development due to its early start and large scale. The most notable ones are the World Bank's International Finance Corporation and the Dutch Bank, according to the World Bank's environmental protection standards and the International Finance Corporation. The social responsibility policy established the Equator Principles (EPs). This principle requires financial institutions to consider environmental, social, health and safety issues when investing in projects, and to promote the project to play an active role in environmental protection and social harmony development, and to abide by the Equator Principles. Commitment to only provide loans to standards-compliant projects. At present, the Equator Principles have become an international practice. In its regulations, we can see the clarification and specificization of environmental and social standards. While regulating the development of the banking industry, we can also achieve the improvement of social benefits.

    Global green trusts start later than green credit, and China's green trust is a trust development model that has only gradually emerged in recent years. It is still in its infancy. Based on the consistency of the development of the financial industry, the development experience of green credit is bound to be a valuable asset for the development and growth of green trust.

    Internationally, Goldman Sachs released a research report in 2006 that integrates corporate governance factors with traditional responsible investment factors (environmental factors plus social factors), namely Environmental, Social and Corporate Governance (ESG). After entering the 21st century, with the global resource shortage, ecological damage and other environmental issues becoming more and more prominent, the sustainable development strategy has rapidly spread, ESG investment has also entered a stage of vigorous development, and the concept of green finance is deeply rooted in the hearts of the people.

    In 2015, the UN Principles for Responsible Investment (UN PRI) and other organizations collaborated to publish a research report, Trust Responsibility for the 21st Century, which introduced Canada, the United States, Brazil, the United Kingdom, Germany, and South Africa. The trust experience of eight countries in Japan and Australia, the impact of environmental, social and corporate governance (ESG) factors on the value of assets is rapidly increasing, highlighting the value of investment, and asset management institutions bear fiduciary responsibility for asset owners, so it is necessary to Social and governance factors are included in the investment decision-making process. Even policy makers need to introduce relevant policy measures as a support, and impose environmental, social and governance factors into the framework of fiduciary responsibility in a mandatory or encouraging manner, and integrate them into investment practices. Obligations and responsibilities. As a result, the green low-carbon concept is increasingly popular in the trust industry, and the green trust that actively assumes social responsibility and practices the concept of sustainable development is gradually accepted by the public.

    In 2016, China wrote green finance for the first time in the G20 summit agenda and annual bulletin. During the meeting, the People's Bank of China and the Bank of England submitted the “G20 Comprehensive Report on Green Finance” to the G20 Summit and passed it to develop green finance issues globally. Achieve important consensus. Therefore, it will bring good enlightenment to the development of green trust: Green Trust can guide and stimulate more social capital to inject into green industry, innovate green financial products and services, promote the process of greening global financial institutions, and help promote the low carbonization of traditional industries. Promote green emerging industries and become the main force of green development.

    Throughout the development of the trust industry, the China Trust Industry Association has published industry reports on trust companies fulfilling their social responsibilities since 2013, among which “green trusts” have already begun to emerge. According to the “China Trust Industry 2017 Social Responsibility Report”, as of the end of 2017, the trust company had 564 green trust projects, and the scale of the remaining funds was 1,693.19 billion yuan, which was larger than the total amount of 55.57 billion yuan in 2014. Super 2 times. Among them, the green industry represented by energy conservation, environmental protection and new energy is a strategic emerging industry. In addition, the trust industry is actively involved in various green projects such as air pollution control, ecological environment restoration, resource recycling, and environmental energy efficiency improvement. It can be seen that the development of China's green trusts is rapid.

    (2) Green Finance and Green Trust

    As the core of the modern economy, finance plays a major role in promoting green development. In recent years, with the concept of green development gradually becoming an important social consensus, the development of China's green finance has been comprehensively accelerated, mainly as follows: the policy system is becoming more and more sound, the service channels are expanding, the reform pilot results are remarkable, and the support for the development of the real economy is highlighted. The ability is constantly strengthening and so on.

    In a good development environment, green financial products such as green credit, green bonds, green funds, green trusts and green insurance have developed steadily and healthily. According to the China Green Finance Development Report (2017) released by the People's Bank of China, as of the end of 2017, the green credit balance of 21 major domestic banks reached 8.53 trillion yuan, and green credit has become the most important sector of green finance. In addition, in 2017, China's green bonds issued at home and abroad exceeded 250 billion yuan, making it one of the world's largest green bond markets; including public funds, private equity investment funds, and government and social capital cooperation (PPP) models. The size of the green fund is about 180 billion yuan; the company provides more than 160 billion yuan of risk protection through green insurance such as environmental pollution liability insurance. After nearly five years of development, the green trust has grown rapidly from 46.883 billion yuan at the end of 2013 to 176.319 billion yuan at the end of 2017, which has become an important part of the green financial system.

    (3) Conceptual definition of green trust

    In the development of green projects, the concept of green finance is proposed earlier, and internationally, it is often mixed with concepts such as environmental finance (Financing), sustainable finance (Sustainab1e Finance), and green investment (Green Investment).

     [Special Study] Green Trust Research (1)

    Source: China Green Finance Development Report (2017), China Trust Industry Social Responsibility Report 2017

    Figure 1 The size of funds for green financial instruments at the end of 2017

    Foreign scholars Labatt and White (2002) believe that green finance is a financial instrument based on the market, improving environmental quality and transferring environmental risks. PwC’s 2013 report on “Exploring China’s Green Financial Opportunities” pointed out that green finance refers to financial institutions that provide financial considerations beyond the ordinary investment and financing decisions, post-supervision and risk management processes. Products and services designed to promote environmentally responsible investment and stimulate the development of low-carbon technologies, projects, industries and markets. Domestic scholars Lu political commissar and Tang Weijun (2016) define green finance as: the financial sector takes environmental protection and resource conservation as the goal, and with the relevant policies, the potential returns, risks and costs of environmental impact are taken as important factors into investment decisions. In the daily business, it is an innovative financial model that guides the integration of social and economic resources into the fields of protecting the environment and promoting sustainable development.

    With the continuous advancement of green financial practice, China's green finance has developed rapidly, especially since the launch of the green bond market at the end of 2015. After only one year, China has become the world's largest green bond market. Therefore, defining the definition and scope of green financial unification has become an urgent need. On August 31, 2016, the People's Bank of China, the Ministry of Finance, the National Development and Reform Commission, the Ministry of Environmental Protection, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission jointly issued the "Guiding Opinions on Building a Green Financial System," which gave China's "Green Finance" for the first time. "The definition of "green finance" refers to economic activities to support environmental improvement, address climate change and efficient use of resources, that is, investment and financing of projects in the fields of environmental protection, energy conservation, clean energy, green transportation, green buildings, etc. Financial services provided by risk management, etc. At the same time, the promulgation of this document marks the establishment of China's green financial policy system.

    In July 2018, the fund industry association issued the "Green Investment Guidelines (Trial)" (draft for comments), clearly defining the concept of "green investment": green investment refers to promoting corporate environmental performance, developing green industries and reducing environmental risks. For the purpose of adopting a systematic green investment strategy, investing in companies or projects that generate environmental benefits, reduce environmental costs and risks, or directly engage in environmental protection industries. The document clarifies the definition and implementation methods of green investment, promotes the development of green investment in the fund industry, and further improves the green financial policy system.

    Similar to the green financial development path, the theoretical study of Green Trust is exactly the response of the trust industry to its business development needs based on its industry perspective. The accurate definition of the green trust concept is considered to be the first step in the development of green trust. The concept of green trust determines its development mode and development direction, which is of great significance. However, there is currently no uniform definition of the concept of green trust in the industry.

    In the early days, some scholars in China defined green trust as a trust plan for financing environmental protection projects. However, the definition is more concise and only highlights the financing function of the trust for environmental protection projects. In the China Financial Forum held in May 2016, the Green Trust was defined as: “An important part of the green financial system, mainly refers to the use of various financial instruments such as loans, equity investments, bonds, asset securitization, etc. Type government and social capital cooperative industry funds, tradable green equity financing, charitable trusts and other means of providing trust products and services for green industry and green public welfare development." This concept is clearer and more comprehensive, and it is widely used in the trust industry, reflecting the deepening and comprehensive understanding of the industry's green trust in recent years. At the same time, some insiders believe that trust institutions should actively play their role in resource allocation, guide and incite social funds to flow and agglomerate in areas with low energy consumption, low emissions, low pollution and high efficiency, and promote sustainable development and financial ecology. Healthy build.

    According to the Green Finance Terminology 2018 jointly formulated by the People's Bank of China and the China Green Gold Committee, the Green Trust mainly refers to the trust products and services provided by the trust institutions to support economic activities such as environmental improvement, climate change and efficient use of resources. The definition defines Green Trust's products and services from the perspective of green performance, and comprehensively covers the three important aspects of current green development, but the specific breakdown of trust products and services has not been specifically defined.

    This topic believes that to understand the connotation of green trust, it is divided into two levels: narrow and broad. The narrow green trust focuses on the “green” nature and extent of the trust project, ie the size of the funds supported by the trust funds and the green efficiency of the green projects. The broad green trust is to consider the financial instruments and financial services used in the development of green trusts, including the use of specific financial instruments and business model innovation. Therefore, it examines the significance and value of the development of green trusts for the trust industry and the entire financial system, and analyzes the comprehensive significance of green trusts in promoting stable economic growth, facilitating economic restructuring, and serving the real economy.

    Formulating a green trust concept that is unified in the industry, in line with the development direction of the industry, and has universality and standardity is the primary basic condition for the development of green trusts. On this basis, the industry needs to establish a set of green trust project standard system as soon as possible. Relevant product standards and regulatory guidelines to better guide and promote the development of green trusts.

    (4) The practical significance of developing green trusts

    The development of green trust is an organic part of building a sound green financial system, which is of great significance to the sustainable development of the economy and the environment.

    First of all, from the perspective of macroeconomic development, the development of green trusts is the overall direction. In the “Thirteenth Five-Year Plan”, “green” is one of the five new development concepts. The 19th National Congress has repeatedly emphasized the important discussion of “consisting on the harmonious coexistence of man and nature”. The construction of ecological civilization has been promoted to the national strategy and has become The "Millennium Plan" for the sustainable development of the Chinese nation. Under the background of structural reform on the supply side, the traditional backward heavy polluting industries will inevitably be eliminated, and the emerging green environmental protection industry will occupy a dominant position and usher in new development opportunities. In 2016, the seven ministries and commissions including the People's Bank of China jointly issued the "Guiding Opinions on Building a Green Financial System," which marked the establishment of a relatively complete policy framework for the development of a green financial system. In the same year, China incorporated green finance into the G20 issue and established the G20 Green Finance. The research team helps the financial system improve its ability to mobilize green investment in the private sector. As one of the important sub-sectors of the financial industry, the assets managed by the trust industry have surpassed the fund industry, the securities industry and the insurance industry in 2013, becoming the second largest sub-sector of the financial industry. Therefore, in the direction of business development, the trust naturally has to be green. The development of green trusts is in line with the country's medium and long-term development strategy, and is also a strategic task for China to improve its financial system, and is in line with the development direction of the trust industry to emphasize social responsibility.

    Secondly, from the perspective of the financial industry serving the real economy, the development of green trusts is the general trend. The report of the 19th National Congress of the Communist Party of China clearly pointed out that it is necessary to "deepen the reform of the financial system, enhance the economic ability of financial services, increase the proportion of direct financing, and promote the healthy development of multi-level capital markets." At the National Financial Work Conference held in July 2017, General Secretary Xi Jinping put forward four important principles on how to do a good job in financial work. The first one is that finance must “return to its source and obey the service of economic and social development”. It is the duty of the financial industry to effectively serve the real economy and meet the needs of economic and social development. It is also the initial heart and mission of the financial industry. Only by serving the real economy can finance achieve its sustainable and healthy development. In the process of transforming the real economy into green development, the development of green finance can provide new kinetic energy for the growth of the real economy, while the trust industry can contribute to the construction of the national ecological civilization by virtue of its unique institutional advantages and financial operation characteristics. On the asset side, it provides financial support for green industries through flexible use of equity, debts and even asset securitization, and creates rich green trust financial products. On the fund side, it actively guides customers to pay attention to the “material wealth” of financial investment income. "Management, extending to the "spiritual wealth" management of the national green environmentally responsible social investment, guiding and encouraging social capital to invest in the green industry, so that the capital end and the asset end customers share the interconnection.

    Finally, from the perspective of the transformation and upgrading of trust business, the development of green trust is one of the important ways for the trust industry to actively adapt to market changes, strengthen its own capacity building, and practice “deviation from reality”. In recent years, the trust industry has actively promoted business transformation, vigorously improved its active management capabilities, and gradually transformed from traditional financing trusts to investment trusts. With the continuous deepening of the green development concept and the further improvement of the green financial market system, the green trust has become an important entry point to promote the transformation of the trust industry. In the process of transformation and upgrading of the trust industry itself, through the allocation of funds, it can also achieve the green transformation of industrial institutions and energy institutions, support the green environmental protection industry to become a new economic growth point, and thus achieve sustainable development of the economic environment.

    (Study lead unit: AVIC Trust Co., Ltd.)

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