CICC ESG Financing｜Responsible Investment Empowers Innovation
In recent years, the world has been in agreement that protecting the environment and investing in sustainable development are of the utmost importance. China participated in developing, in addition to promising to adhere to, the goal of carbon neutrality, and investing in ESG (Environmental, Social, and Governance) factors, has become the norm. For a long time, CICC, as a financial service institution, has committed to serving our country as it works toward this overarching goal. In this process, CICC has committed itself to living the ESG lifestyle and empowering others to do the same.
Using its respective talents, CICC works to perform its function as a financial institution and optimizes the allocation of resources and empowers social and economic development. CICC strives to develop a wide swath of products and services around green and sustainable finance, while also promoting the growth of sustainable finance.
I. Supporting Sustainable Financing
Underwriting green bonds
CICC’s work in this area includes the underwriting of a wide range of green and carbon-neutral bonds. In the first half of 2022, CICC helped issue 33 green bonds, with a scale of over RMB140 billion in total, putting itself at the forefront of sustainable development in the finance sector. The value of ESG bonds issued by Chinese enterprises in overseas markets in 2022 1H reached over USD18 billion, among which 11.5 billion was due in part to CICC’s contribution.
In 2022, CICC worked to support the following major projects:
January 19th: China Development Bank issued its “Low-Carbon Transport Construction” Bond Connect green bonds with a size of RMB15 billion. This was the first time in 2022 that a policy bank issued green financial bonds. CICC, at this time, was helping China Development Bank while it encouraged the transport industry to make the low-carbon transition.
February 23rd: The CECEP Solar Energy Technology Company issued RMB1 billion worth of public offering corporate bonds under the double-label “Carbon Neutral” and “Rural Revitalization”.
March 30th: China Development Bank issued RMB12 billion worth of “Clean Energy Equipment Manufacturing” Bond Connect green financial bonds.
May 19th: China Huaneng issued RMB2 billion worth of extendable corporate bonds, which is the first bond on the exchange linked with the transition to low carbon.
May 23rd: China Construction Bank successfully issued its first tranche of 2022 green financial bonds totaling RMB10 billion in value. It’s the first financial bond linked to sustainable development in the domestic market.
May 26th: The Agricultural Development Bank of China issued its first green financial bonds of 2022 with a scale of RMB3 billion. Funds raised from these bonds are mainly used to support loans for projects like national reserve forests, high-standard farmland, clean energy, and pollution prevention and control.
June 16th: The Industrial and Commercial Bank of China issued the first tranche of its green financial bonds of 2022 with a total value of RMB10 billion. This is the first green financial bond issued in line with the China-EU “Common Ground Taxonomy”, and the first carbon-neutral and green financial bond issued by a commercial bank.
July 27th: China Development Bank issued RMB12 billion worth of its “Yangtze River Basin Ecosystem Protection and Restoration” Bond Connect green financial bond. This bond is mainly used to support projects run by green industries such as water pollution control, comprehensive management of agricultural and rural environments, and water resource conservation, among other related projects.
August 24th: The Export-Import Bank of China issued the first green financial bonds of a policy bank under the framework of the “China Green Bond Principles,” the funds of which are mainly used for the clean energy industry.
October 13th: China Development Bank issued the third tranche of its 2022 Bond Connect green financial bonds, used to fund green infrastructure projects such as urban infrastructure, public transportation (construction and operation) in urban and rural environments, and others as part of the “Green Infrastructure Upgrade.”
Helping finance national and local construction projects
From the very beginning, CICC has been committed to supporting construction projects for the national government and for local governments as well. In its capacity as a financial service institution, CICC has been able to help in financial empowerment and promoting steady economic growth, as part of its work in service of national strategies.
In 2022, CICC played a role in the following projects:
October 26th: CICC worked as a joint global coordinator and joint sustainability structuring advisor and helped the Hainan provincial government to issue RMB5 billion worth of offshore local government bonds. Funds raised from these bonds were used to invest in protecting marine environments, security projects for green or key areas of people’s livelihoods, and information campaigns to promote Hainan Province’s sustainable development philosophy to overseas markets.
October 28th: CICC worked in the capacity of joint bookrunner and joint lead underwriter to assist the Guangdong provincial government in issuing 3-year offshore RMB local government bond in Macau with a total value of RMB2 billion. All funds raised from these bonds were used for the construction of major infrastructure projects in the Nansha district of Guangzhou, which operates as a major hub of financial activity between Guangdong province and Macau.
October 31st: The Shenzhen municipal government issued RMB5 billion worth of offshore local government bonds. CICC acted the lead underwriter and joint bookrunner in the issuance and certification of the green and blue bonds.
Providing financial relief for small, medium, micro, and private businesses
These businesses are important forces that promote the steady development of the national economy. Whenever needed, CICC does its best to be active in helping solve their financing difficulties with the various services and tools at disposal.
In the first three quarters of 2022, CICC assisted companies specializing in science and technology innovation in raising approximately RMB213.5 billion through equity financing and helped small, medium, and micro enterprises raise over RMB170 billion funds. In the first half of the year, CICC assisted in the fundraising of over RMB36 billion through ABS projects for small and micro enterprises, with a total underwriting scale amounting to nearly RMB10 billion.
CICC Capital helped small, medium, and micro enterprises with their financing through direct investment. In the first half of 2022, CICC Capital invested altogether RMB1.6 billion in 30 individual projects.
As of digitalization, “CICC Cloud Investment Bank” WeChat account was launched to provide free help to small and medium enterprises with equity financing needs, which improves the inclusiveness and convenience of financial services for all. CICC also launched the first data-based comprehensive financial service platform CICC SRDI Torch app aimed to provide services for the small and medium-sized enterprises at the “specialized, refined, differential and innovational” sectors. It provides financial support and services for their different stages of growth.
II. Practicing Sustainable Investment
Growing green funds
CICC is currently working on establishing multiple green funds and helping coordinate with green industries, such as new energy, new materials, and new technologies, and in this way, CICC is able to help accelerate the construction of a low-carbon economy and society.
In 2021, CICC Capital jointly established the Shandong Green Development Equity Investment Fund with an initial scale of RMB1.5 billion alongside the Shandong Development & Investment Holding Group. This fund uses money from the Asian Development Bank and other international organizations to mobilize support from China’s government and private sector. This project is renowned for setting an example for future green financial innovative projects in China.
In March 2022, the CICC-GCL Carbon Neutral Industrial Investment Fund was established with a scale of RMB2.5 billion. Money from the fund will be invested in many different parts of the carbon neutral sector and will also improve the scale and commercialization of promising green enterprises and technologies.
In May 2022, CICC, together with the Xiamen branch of Zijin Mining Asset Management, launched an ESG-themed investment strategy product, which provides ideas for centrally managed and state-owned enterprises to take concrete action in line with the national strategy to provide “high-quality development.” This project set an example in the effort to transition to a green economy.
Launching ESG-themed public funds
CICC took advantage of opportunities presented in the ESG market and actively established ESG public offering funds, provided more choices for investors in the secondary market, and helped lead long-term sustainable growth in finance.
In July 2022, CICC Hong Kong Asset Management jointly established the China Sustainable USD Bond UCITS Fund with Eastspring Investments. This fund mainly invests in USD-denominated Chinese bonds that comply with ESG principles, which include bonds with the “green,” “social,” and “sustainable” labels. As for the investment system that CICC Hong Kong Asset Management uses in the Chinese USD bond market, it includes multi-dimensional credit screening, diversified investment strategies, and multi-level risk control.
In September 2022, CICC China Securities 500 ESG Enhanced Index Fund was launched. This fund is a way in which CICC can actively participate in the nation’s green strategy by using a commercialized approach to practice sustainable investment, and it’s also an important part of the ESG business development of CICC Fund.
III. Enhancing the System for Sustainable Finance and Building an Influence Ecology
While investing in the growth of sustainable investment and financing, CICC is also actively involved in developing diversified and sustainable financial products and services to meet the ESG investment needs of different investors.
CICC jointly compiled and released the ChinaBond CICC Rural Vitalization Credit Bond Select Index together with the ChinaBond Pricing Center. The Index was listed on the Chongwa (Macao) Financial Asset Exchange and selects high-quality rural revitalization bond issuers to provide investors with useful information on price trends in the rural revitalization bond market and related investment performance benchmarks in an effort to focus financial resources on key areas and weak links in the rural revitalization effort.
CICC’s Equities Department worked with Minsheng Bank to develop the Minsheng Bank-CICC Low-Carbon Leading Index and release it on the Wind platform. The index focuses on companies with large market capitalization and low-carbon emissions. With the express intention of reducing carbon emissions to the minimum, it has a clear target and has the potential to be popular among investors. CICC’s overarching goal with this index is to focus domestic funds into high-quality companies who emphasize reducing carbon emissions.
CICC jointly released the CICC Fixed Income ESG Metrics together with the ChinaBond Pricing Center. With a uniquely Chinese perspective, it can help certain national policies, such as the green initiatives, carbon neutrality, rural revitalization, and the common prosperity goals, among others. The system has recorded comprehensive information on the quality of ESG projects from, and especially on the medium to long-term impact of carbon neutrality policies on, over 4,000 bond issuers.
CICC established the first credit risk mitigation warrant (CRMW) linked to green asset-backed notes (ABN) in China. This is closely linked to Far Eastern Leasing’s green ABN CRMW and is an important exploration into green ABN derivatives.
CICC reached an agreement with Rio Tinto Group and Nanjing Iron and Steel to cooperate on the first carbon offset iron ore transaction in China’s steel industry. This is an innovative breakthrough in the field of carbon compensation for raw materials in the industry. The high-quality carbon credits used to offset the carbon footprint of the goods were purchased by CICC’s overseas subsidiary from the Hongshan forestry project in China’s Hubei Province, which meets certified emission reduction standards. Rio Tinto will write off the credits when they deliver the ore to Nanjing Iron and Steel, compensating for the emissions from the process of getting the raw materials.
Financial empowerment and innovative transformation – that’s what CICC brings to the table as it fulfills its role as a financial institution to facilitate the real economy’s transition towards a green future. Practicing the ESG concept and guiding the flow of capital resources to sustainable development is how CICC does just that.