Caixin
Mar 23, 2021 06:32 AM
FINANCE

CCI Partners with GCL to Form $1.5 Billion Carbon Neutrality Fund

According to Goldman Sachs, China will need to invest $16 trillion in new energy and pollution control-related projects over the next 20 years to reach its carbon neutrality goal.
According to Goldman Sachs, China will need to invest $16 trillion in new energy and pollution control-related projects over the next 20 years to reach its carbon neutrality goal.

Shanghai-based private equity firm China Capital Investment Group (CCI) and renewable energy developer GCL Energy Technology Co. Ltd. plan to pump up to 10 billion yuan ($1.5 billion) into a carbon-neutrality fund to invest in green projects, joining a flurry of institutions to tap green finance amid Beijing’s push to cut emissions.

The fund is set to raise the first phase of 4 billion yuan, according to GCL, in a filing to the Shenzhen stock exchange. The company will invest 51% of the fund while CCI will put in 20%.

The companies are the latest to jump on the bandwagon of green finance as the central government’s push toward carbon neutrality creates new investment opportunities.

The new fund will focus on projects including electric car charging, ride sharing, smart vehicle management, and battery development.

President Xi Jinping pledged in September that the world’s biggest producer of carbon dioxide — the chief greenhouse gas contributing to global warming — aims to reach an emissions peak before 2030 and achieve carbon neutrality by 2060. The target will require the transformation of the world’s second-largest economy.

Liu Zhenya, a former chairman of State Grid Corp. who currently runs an energy industry think tank, said recently that China’s carbon emissions could peak in 2028, ahead of the government’s schedule, amid a rapid transition away from fossil fuels.

According to Goldman Sachs, China will need to invest $16 trillion in new energy and pollution control-related projects over the next 20 years to reach its carbon neutrality goal. At least 75% of the investments should come from private sectors, the investment bank said.

China is already the world's largest green financial market. By the end of 2020, the country had outstanding green loans of nearly 12 trillion yuan ($1.85 trillion), ranking first in the world. The outstanding value of green bonds was 813.2 billion yuan, the second-most in the world. Meanwhile, financial products marketed in the name of greener growth, such as insurance, trust and investment funds, have thrived.

Zhang Lei, CEO and founder of leading private equity fund Hillhouse Capital, said over the weekend that his company, too, is planning to launch a fund for green projects. China’s transformation into a green economy provides the most promising opportunity for investors and will attract massive capital into sectors related to carbon reduction, he said.

CCI has invested in three investment funds linked to renewable energy; the latest is the first branded as carbon neutrality fund. By the end of 2020, environment and energy-related investment accounted to 14.4% of the company’s total portfolio.

GCL is counting on the partnership with CCI to support its business restructuring, expanding from renewable energy development to car-sharing and charging businesses, the company said in the filing.

GCL’s Shenzhen-traded shares surged to the exchange’s 10% daily price limit Tuesday following the news.

GCL predicted that electricity’s share in energy consumption by the transportation sector will surge to 34% by 2050 from current 1% amid China’s push for clean energy, offering huge business potential for electric car charging and battery development.

Contact reporter Han Wei (weihan@caixin.com)

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