What is green finance used for?
Economic hotspot 18 What is green finance used for?
Green finance refers to guiding social funds to support through financial services such as loans , private equity funds, bond issuance, stock issuance and insurance. Behaviors in green industries such as environmental protection, energy saving and clean energy. This is just one of the meanings. Generally speaking, it is finance that supports green development.
Why should we formulate green finance policies?
If there are externalities, the market often fails! In a market economy, positive externalities and pollution of green investment
p> Negative externalities of p>
cannot be endogenized, because sometimes property rights cannot be clearly defined and the merger of companiesises is often not that simple. But carbon neutrality is the way forward, so we need to tackle this problem. We need to make production efficient through certain interventions! There are also carbon tariffs and carbon neutrality which will cause transformation or operational difficulties for some businesses, and will require support from green finance.
How to implement it specifically?
1. Increase the price of green products, such as subsidies, thereby increasing the return on investment of green products. Reduce price subsidies for pollutants, thereby reducing their return on investment.
2. The return of a socially responsible company must equal profit plus social responsibility, and tax incentives will be given to companies with high social responsibility.
3. Look for the ecological character of industries, productss and financial assets in a more complete chain. The green we see often refers to the final product. For example, solar power production is green, but silicon panel production can use a lot of energy. Although new energy vehicles use electricity, their electricity can be thermal power generation.
4. Solving externalities is actually similar to the first one! It is recommended to reduce the risk burden of green financing As mentioned earlier, the interest rate of commercial bank loans is composed of risk-free rates. interest rate plus risk premium and profit. Because green investment has positive external effects, its profitability should be relatively low. If indicators such as ROE are used to measure a company's operating conditions, green investment will certainly be low. However, there is no wayto confirm that green projects are risk-free in the short term, but worth it in the long term, so commercial banks can reduce risk weighting.
We should also recommend that green bonds be prioritized for repayment. Since green development benefits everyone, it is reasonable for ordinary creditors to bear the possible risks of their own non-green financing. Specific financial measures include the issuance of green bonds, the creation of green funds, the creation of green banks, green insurance, etc. !
This article only briefly presents some views on green finance, for reference only. Some points of view come from the People! Ma Jun, chief economist of the Research Bureau, Bank of China, and Political Commissar Lu, chief economist of the Industrial Bank.