CHINA (PRC FIRMS): An Introduction to Projects & Infrastructure

Investment Opportunities for China's Infrastructure Industry Under the Goals of Peaking Carbon Emissions and Carbon Neutrality

“双碳”目标背景下我国基础设施行业的投资机遇 

I. Impact of the goals of peaking carbon emissions and carbon neutrality on China's infrastructure industry “双碳”目标对我国基础设施行业的影响

On September 22, 2020, China proposed the goals of peaking carbon emissions and subsequent carbon neutrality (hereinafter referred to as the "goals of carbon peak and neutrality") at the 75th session of the United Nations General Assembly. Making concrete efforts to achieve the peaking of carbon emissions before 2030 and carbon neutrality before 2060 is China's major strategic decision and is related to the sustainable development of the nation itself and the building of a global community of shared future. The Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and the Long-Range Objectives Through the Year 2035 (hereinafter referred to as the "14th Five-Year Plan") has made a systematic and strategic planning to achieve eco-environmental progress and eco-environment protection during the period of the 14th Five-Year Plan, listing green development, carbon emission and improvement of eco-environment quality as key words for the development of China.
2020年9月22日，中国在第75届联合国大会上提出“双碳”目标。力争2030年前实现碳达峰、2060年前实现碳中和是中国的重大战略决策，也事关中华民族永续发展和人类命运共同体的构建。而《中华人民共和国国民经济和社会发展第十四个五年规划和2035年远景目标纲要》（以下简称“‘十四五’规划”）对我国“十四五”期间生态文明建设和生态环境保护工作做出了系统谋划和战略部署，将绿色发展、碳排放、生态环境质量改善等列为国家发展的关键词。

The 14th Five-Year Plan period is considered a key period of China's low-carbon energy transition, and driven by the goals of carbon peak and neutrality, the green development is an inevitable choice under China's eco-environment strategy and the only way to achieve sustainable development as soon as possible. Accordingly, the investment direction and strategy in the infrastructure industry need to follow the trend of green, low-carbon and high-quality development. It is foreseeable that government investment will focus on major projects of ecological and environmental protection, inclining to the improvement of the environment quality and advancement of the governance capacity and ecological economy. Besides, corporate investment will focus on green technology research and development, digital transformation and cultivation of new energy. These new areas offer a broad market and a lot of investment opportunities.
可见，“十四五”时期作为我国能源低碳转型的关键期，在“双碳”目标的驱动下，绿色发展是我国生态文明战略下的必然选择，也是早日实现可持续发展的必由之路。相应的，未来我国基础设施行业的投资理念和方向也将紧扣绿色低碳和高质量发展两大主题。可以预见，政府投资将围绕生态环保类重大项目，重点向改善人居环境品质、提升治理能力和生态经济协同倾斜；企业投资也将围绕绿色科技研发、数字化转型以及新动能的培育。这些新兴领域带来广阔市场和大量的投资机会。

II. Development and exploration of domestic green infrastructure projects 国内绿色基础设施项目的发展与探索实践

China started theoretical study and project development of green/sustainable infrastructure projects at a very early stage. Since 2013, the State Council and various ministries and commissions of it have issued regulations to vigorously introduce the public-private partnership (PPP) model into urban infrastructure, environmental protection and public services. "Green projects", such as ecological environmental protection and improvement, urban waste treatment and sewage treatment, have become focal fields of PPP investment and a major direction that social capital pays attention to. By the end of 2021, there were 5,919 pollution prevention and green and low-carbon projects with an investment of CNY5.7 trillion, accounting for 35.2% of all projects, according to the statistics of the National Public-Private Partnership Integrated Information Platform Management Database.
中国在很早也就开始了将绿色投资原则和可持续发展理念注入基础设施项目的理论探索和项目实践。自2013年起，国务院及各部委就陆续发文，大力将政府和社会资本合作（PPP）模式引入城市基础设施、环境保护及公共服务领域，生态环境保护治理、城市垃圾处理及污水处理等“绿色项目”也成为了PPP投资的重点领域和社会资本重点关注的方向。根据全国PPP综合信息平台管理库统计信息，截止2021年末，我国累计污染防治与绿色低碳项目5,919个、投资额5.7 万亿元人民币，占全部项目的35.2%。

At present, China is actively promoting and carrying out the ecology-oriented development project model (EOD model). It is an innovative way of project organisation and implementation, adopting ecological priority and green development, and aiming at promoting high-quality regional economic development. At the same time, the model effectively solves common green infrastructure project problems, such as insufficient revenue sources and excessive reliance on public financial expenditure, by extending the industry chain, applying joint operation or development, integrating green projects of low profitability but high social benefit with the related industries of good profitability. In this regard, the first batch of EOD pilot projects in China was announced by the Ministry of Ecology and Environment, National Development and Reform Commission and China Development Bank in April 2021, offering a good reference and model alternative for social capital in green infrastructure projects.
目前，我国正积极推广和开展以生态环境为导向的项目开发模式，即EOD（Ecology-Oriented Development）模式。它是一种创新性的项目组织实施方式，坚持生态优先，践行绿色发展理念，促进区域经济高质量发展。同时，它以特色产业运营为支撑，采取产业链延伸、联合经营、组合开发等方式，推动公益性较强、收益性差的绿色项目与收益较好的关联产业有效融合，能够有效解决绿色基建项目自身收益来源不足、过度依赖财政支出等发展难题。对此，对此，生态环境部、国家发改委和国开行也已于2021年4月发布了我国第一批EOD试点项目，对于社会资本参与绿色基础设施项目提供了借鉴和运作模式选择。

III. Things to consider when investing in green infrastructure projects 参与绿色基础设施项目投资应当考虑的方面

With the advance of goals of carbon peak and neutrality, raising investment in green infrastructure projects has been considered necessary for China's economic transformation and getting around the bottleneck of industrial development. In this regard, there are a few aspects that investors should consider:
随着“双碳”目标的深入推进，加大绿色基础设施项目投资力度已成为当前适应中国经济发展转型需要，破解产业发展瓶颈的必要途径。对此，投资者需要考虑以下几个方面：

First, fulfil corporate environmental responsibility guided by green investment principle. In order to meet the needs of developing a green and low-carbon recycling economy, many foreign countries and international financial institutions have engaged with research and practice on Environment-Society-Management (ESG) evaluation system of investment projects at an earlier time. Therefore, Chinese companies are encouraged to set up their investment criteria of green infrastructure projects, and gradually incorporate evaluation indexes in the whole process of investment, project development and risk management, which enables companies to better fulfil their environmental responsibilities and prevent ecological and environmental risks in project construction.
第一，以绿色投资原则为指导，切实履行企业环保责任。为适应发展绿色低碳循环经济的需要，国外诸多国家和国际金融机构很早就开始了关于投资项目ESG（环境-社会-管理）评价体系的研究和实践。因此，企业可以尝试研究关于绿色基础设施项目的筛选标准，逐步将绿色投资原则和评价指标具体运用于企业投资决策、项目开发和风险管理的全过程业务流程中，以引导企业更好地履行环保责任，防范项目建设过程中的生态环境风险。

Second, extensively participate in innovative green infrastructure projects and pay close attention to the EOD model. The EOD model, an innovative model of integrating eco-environmental protection with related industries, offers a new way for social capital to invest in green infrastructure projects. At the implementation stage of such projects, it is a key to develop correlated and profitable industries based on the characteristics of local economy and the form of local environmental improvement. It’s also important to integrate the industry chain bearing the comprehensive regional development in mind. At the same time, the projects should aim to generate revenue by commercialising on customised projects that meet the market demand and related industrial resources, so that the projects can break even and be sustainable.
第二，广泛参与创新型绿色基础设施项目，重点关注EOD模式。EOD模式将生态环境保护与关联产业融合发展的创新思路，提供了社会资本投资绿色基础设施项目的新路径。在该类项目的实施过程中，应重点注意根据项目区域特点，结合生态环境修复的成果形式，发展收益佳的关联产业，并以区域综合开发的思维整合产业链上下游。同时，应当根据项目的自身条件，开发出具有市场需求的经营性项目，利用经营性现金流入或相关产业资源回收资金，实现项目自我造血和投资与收入自平衡。 

Third, further explore financing alternatives for green infrastructure projects and follow any innovation in financing credit structure. To secure the financing in green infrastructure projects, differentiated and targeted green financing models should be employed for different types of projects. In addition to green bonds or green funds supporting specific green projects, recent government policies, such as the 14th Five-Year Plan, have made relevant deployments for the establishment of financial support tools for carbon emission reduction, which helps to guide commercial banks to step up support for investment and financing into green infrastructure projects in accordance with market principles, and provides more financial resources to green and low-carbon industries. As for the financing credit structure in green infrastructure projects, social capital can innovatively seek financing support from financial institutions by pledging their rights of pollution discharge, energy, water and carbon emission.
第三，进一步拓展绿色基础设施项目融资渠道，重点关注融资信用结构创新。从实现绿色基础设施项目融资落地的角度出发，应当根据不同类型的项目设计具有差异化和针对性的绿色融资模式，除了用于支持特定绿色项目的绿色债券或绿色基金，国家“十四五”规划等近期政策文件中对于设立碳减排支持工具也作出了相关部署，同样有利于引导商业银行按照市场化原则加大对绿色基础设施项目投融资活动的支持，撬动更多金融资源向绿色低碳产业倾斜。针对绿色基础设施项目的融资信用结构创新，企业也可以尝试通过排污权、用能权、用水权、碳排放权等权益质押方式寻求金融机构的融资支持。

Fourth, strengthen environmental supervision management in the entire lifecycle of the project. In recent years, with the reform of China's environmental policy system and the improvement of the environmental supervision system, new regulatory requirements have been raised the management standards of infrastructure projects. In addition to incorporating environmental impact assessment system as a key part at the project approving stage, and implementing classified management by the impact of construction projects on the environment, China has extended the environmental impact assessment to the subsequent stages of the project lifecycle. The relevant detailed supporting policies, such as the environmental follow-up evaluation and post-evaluation system, have been issued. These all raise the bar on investors' supervision and management capabilities covering environment, health, worksite safety, employment and other social issues.
第四，加强项目环境监督管理。随着近年来我国环境政策制度的改革和环境监管制度的不断完善，对于基础设施项目的管理标准也提出了新的要求。除在项目立项审查阶段将环境影响评价制度作为了项目决策的关键一环，并按照建设项目对环境的影响程度实行分类管理，我国开始将环境影响评价制度向项目后端进行全生命周期的覆盖和延伸，并出台了环境跟踪评价和后评价制度等相关配套政策。因此，投资人应当注重对于在环境、健康、安全、劳工和其他社会问题等各方面监督管理能力的提升。

Fifth, strengthen international cooperation in green infrastructure project under the "Belt and Road" initiative. Building an ecological civilization is vital to the future of mankind. The international community should join hands to forge a new type of partnership for mutual benefit and win-win results. Under the "Belt and Road" initiative, China has cooperated with many countries in the field of infrastructure construction, combining green concepts with project development as well as promoting a sustainable approach to development in other developing countries through project model and financial model innovation. China will continue to join its partners who share the concepts of green and low-carbon in the international market to contribute to the low-carbon economic transformation and global post-epidemic recovery. This is an area that investors/operators of green infrastructure projects should watch out for.  
第五��以“一带一路”倡议为引领，加强在绿色基础设施领域的国际合作。建设生态文明关乎人类未来，国际社会应携手打造互利共赢的新型伙伴关系。在“一带一路”倡议下��中国在基础设施建设领域与多国开展合作，并将绿色理念融入项目进程，结合项目模式和金融模式创新推动其他发展中国家的可持续发展。中国也将继续在国际市场联合具有绿色低碳理念的合作伙伴，助力全球低碳转型和疫后绿色复苏。这也是绿色基础设施项目投资者/运营者应当关注的领域。