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Tencent News "First Line"

Author: Feng Biao Editor: Liu Peng

"The Trust Industry Association is promoting the newly revised "Green Trust Guidelines" and supporting documents this year, aiming to guide and promote the entire industry to deeply practice green finance, implement ESG management concepts, and promote high-quality transformation and development of the industry." Recently, at the ESG Trust Industry Forum held by Minmetals Trust, Chen Jiaoxia, full-time vice president of the China Trust Industry Association, conveyed the new trend of green development in the trust industry.

Currently, the trust industry is under pressure. According to statistics, in the first half of this year, the total operating income of 53 domestic trust companies was 32.228 billion yuan, down 20.97% from 40.779 billion yuan in the same period last year, and the net profit was 16.862 billion yuan, down 27.09% from 23.127 billion yuan in the same period last year.

Since 2018, financial industry supervision has become stricter. Under the requirements of deleveraging and de-nesting, the asset scale of the trust industry has declined for three consecutive years. The domestic trust industry is facing the task of transformation and development.

In particular, on March 20, 2023, the former China Banking and Insurance Regulatory Commission issued the "Notice on Standardizing the Classification of Trust Business of Trust Companies" (referred to as the "Three New Regulations" in the industry), which was implemented on June 1 last year. The new regulations require the trust industry to return to its original purpose of trust, and to gradually reduce the proportion of non-standardized financing businesses such as loans, and not to use management contract-basedPrivate EquityIt is not allowed to carry out asset management trust business in the form of trust business, private investment banking business serving the financing party in the form of trust business, channel business and fund pool business in any form, and it is not allowed to promise in any form that the trust property will not suffer losses or promise minimum returns.Shadow BankingFinancing trust business with prominent risks.

In Chen Jiaoxia's view, the trust industry is currently in a critical period of transformation from old to new driving forces. The industry needs to make up its mind to break away from traditional path dependence, find its role positioning accurately, give full play to the trust's asset allocation function, wealth management function and social service function, return to the origin of trust, reconstruct business logic, and find its strategic positioning in the new development stage.

In terms of transformation and development, the emerging ESG concept not only provides guidance for the business direction of the trust industry, but also provides a reference for the corporate governance of the trust industry.

Specifically, ESG helps trust companies reshape the concept of standardized governance and comprehensive risk management, such as expanding the traditional risk management framework to non-financial areas to ensure that trust companies maintain sound operations in a complex and changing market environment; second, ESG helps trust companies strengthen their service to social welfare and the concept of common prosperity; third, ESG helps trust companies deepen the concept of green, low-carbon and sustainable development, especially guiding the trust industry to deepen the innovation of green financial products and explore new business forms including carbon trust products.

Moreover, the current regulatory authorities are constantly improving the ESG system of financial institutions from the top-level design level. In particular, in 2024, the three major exchanges in Shanghai, Shenzhen and Beijing officially released the "Guidelines for Sustainable Development Reporting of Listed Companies", and the company's disclosure of ESG reports has gradually changed from a "multiple-choice question" to a "mandatory question."

At the industry level, Liu Kai, a professor at the School of Economics of Renmin University of China, pointed out that the main challenges in the current development of ESG lie in incomplete information disclosure and information asymmetry, inconsistent ESG evaluation standards and frameworks, and the balance between ESG investment and short-term and long-term returns.

In this regard, Liu Kai suggested that financial institutions and enterprises should grasp major risk points in the absence of complete information, conduct targeted analysis and management, and gradually come up with better solutions in the dynamic evolution and development.