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【Guide】Top-level design released, comprehensive green transformation breeds great investment opportunities

China Fund News reporter Li Shuchao Fang Li Zhang Ling

Recently, the Central Committee of the Communist Party of China and the State Council issued the "Opinions on Accelerating the Comprehensive Green Transformation of Economic and Social Development" (hereinafter referred to as the "Opinions"). This is the first time that a systematic deployment has been made at the central level to accelerate the comprehensive green transformation of economic and social development.

The "Opinions" focus on five major areas, namely, building a spatial pattern of green, low-carbon and high-quality development, accelerating the green and low-carbon transformation of industrial structure, steadily advancing the green and low-carbon transformation of energy, advancing the green transformation of transportation, and advancing the green transformation of urban and rural construction and development, as well as three major links, namely, implementing a comprehensive conservation strategy, promoting the green transformation of consumption patterns, and playing the supporting role of scientific and technological innovation. It deploys to accelerate the formation of a spatial pattern, industrial structure, production mode and lifestyle that conserves resources and protects the environment, and points out the path for green and low-carbon development in the whole society.

The "Opinions" also put forward a series of goals: by 2030, the scale of the energy-saving and environmental protection industry will reach about 1.5 trillion yuan; the proportion of non-fossil energy consumption will increase to about 25%; the carbon emission intensity of unit turnover of operating vehicles will be reduced by about 9.5% compared with 2020; the annual utilization of bulk solid waste will reach about 4.5 billion tons, etc.

What positive signals does the Opinion release? Which industries will have investment opportunities in the future as the economy and society undergo a comprehensive green transformation?

To this end, China Fund News interviewed Yan Dong, fund manager of the quantitative and derivative investment department of Penghua Fund, Xing Junliang, fund manager of ABC-Huarong Fund, Zeng Yingjie, fund manager of Invesco Great Wall Fund, Ji Yu, fund manager of Hongde Fund, and ICBC-Risheng Fund, to jointly interpret the "Opinions" and identify investment opportunities on the road to green transformation.

Yan Dong:From the perspective of market growth space, the new energy vehicle industry still has great development potential.

Xing Junliang:The "Opinions" will strongly promote the supply-side reform of green finance, efficiently match the needs of various industries, stages, and types of green transformation, and effectively improve the accuracy and effectiveness of supporting the comprehensive green transformation.

Ji Yu:Currently, the prices of lithium and silicon have reached or are close to the bottom, and the industry's investment opportunities come from grasping the reversal cycle of distress.

Zeng Yingjie:Under the background of the trend of intelligent automobile industry, China's new energy automobile industry chain with global competitiveness will surely generate huge investment opportunities. The most promising part is the whole vehicle, followed by intelligent related parts.

one,

Sending positive signals

Green transformation sector welcomes development opportunities

China Fund News: What positive signals does the Opinion release? What highlights do you focus on?

Xing Junliang:This "Opinion" is a top-level design document for accelerating the comprehensive green transformation of economic and social development. It puts forward clear green transformation goals and detailed action plans for the two time nodes of 2030 and 2035, and the environmental protection industry will clearly benefit. The "Opinion" proposes that "the scale of the energy-saving and environmental protection industry will reach about 15 trillion yuan by 2030". The white paper "China's Green Development in the New Era" shows that the output value of my country's energy-saving and environmental protection industry will exceed 8 trillion yuan in 2021. The energy-saving and environmental protection industry has great room for future growth. There are potential opportunities in energy-saving technology and equipment, high-efficiency energy-saving products, energy-saving service industry, advanced environmental protection technology and equipment, environmental protection products and environmental protection services.

Ji Yu:The "Opinions" is a systematic deployment and top-level design at the central level for accelerating economic and social development and comprehensive green transformation. It clarifies the overall requirements, goals, and implementation paths of comprehensive green transformation at the national level, covering various fields such as urban and rural construction, industrial structure upgrading, and low-carbon transformation of energy and transportation.

We focus on three aspects: First, accelerate the construction of a new power system and deepen the reform of power prices. The policy is expected to bring extensive benefits to the entire industrial chain of the new power system, and multiple links such as source, grid, load and storage will benefit fully. At the same time, power price reform is expected to promote the environmental value of green electricity, the capacity of thermal power and the value of ancillary services through market-oriented mechanisms.

The second is to improve the green transformation pricing policy. Compared with overseas utilities, the current marketization level and price transmission mechanism of my country's power sector have room for further optimization; the cash flow of environmental protection sectors such as waste incineration and water services also relies heavily on government subsidies. The "Opinions" clarifies the future policy direction and is expected to promote the improvement of profitability stability and cash flow of my country's utilities.

The third is to promote low-carbon transportation. The Opinions propose that by 2035, new energy vehicles will become the mainstream of new sales vehicles. Driven by the global low-carbon transformation and green development goals, the new energy industry has developed rapidly, and my country's new energy vehicles have also achieved rapid rise. With the improvement of independent brands' technological innovation, manufacturing level, product supply and other aspects, the global competitiveness of my country's new energy vehicle industry is expected to continue to strengthen, and related companies are expected to benefit.

ICBC Credit Suisse Fund:The Opinions is the first time that the central government has made systematic arrangements for accelerating the comprehensive green transformation of economic and social development. It is a top-level design document for ecological civilization construction from the perspective of economics and society. At a time when green and low-carbon development is facing certain difficulties, the CPC Central Committee and the State Council have once again emphasized the importance of green development as a task for comprehensively deepening reform, indicating that while firmly developing, more flexible measures that are more in line with the characteristics of the stage of economic development will be taken to promote green transformation, and point out the medium- and long-term development direction for my country's green economic transformation.

There are several hot spots worth noting in the Opinions: First, the spatial pattern section adds "building a green development highland"; second, the word "reasonable" is added to "reasonable control of coal consumption growth"; third, the implementation of a comprehensive conservation strategy to accelerate the pace of green transformation of enterprises in the whole society. In addition, the Opinions mentions "new pollutant control", which may be one of the important directions for subsequent scientific and technological innovation in the field of environmental protection.

two,

Environmental protection sector is expected to continue to benefit

China Fund News: One week after the release of the Opinion, the environmental protection sector has the highest growth rate among the Shenwan first-level industries, and many stocks have risen rapidly. How is the sustainability of the environmental protection sector's trend? What is its long-term investment value?

Yan Dong:The Opinion proposed for the first time that the scale of the energy-saving and environmental protection industry will reach about 15 trillion yuan by 2030. According to China's Green Development in the New Era, the output value of my country's energy-saving and environmental protection industry exceeded 8 trillion yuan in 2021, and it is expected that the average annual compound growth rate of the energy-saving and environmental protection industry will reach about 7.2% by 2030 (the energy-saving and environmental protection industry includes energy-saving technology and equipment, high-efficiency energy-saving products, energy-saving service industry, advanced environmental protection technology and equipment, environmental protection products and environmental protection services, etc.). The fundamentals of related industries are expected to benefit in the long term, and the continuity of the trend needs to be combined with the market rhythm.

The Opinion also proposes that by 2030, the proportion of non-fossil energy consumption will increase to about 25%, the installed capacity of pumped storage will exceed 120 million kilowatts; the carbon emission intensity of the unit turnover of operating vehicles will decrease by about 9.5% compared with 2020; the annual utilization of bulk solid waste will reach about 4.5 billion tons, etc. In terms of institutional guarantees, the green transformation price reform will be improved, and the time limit of carbon emission reduction support tools will be extended to the end of 2027. Focus on the market-oriented reform of hydropower. Unlike the stage of regulation and subsidies, marketization can reflect the excess returns brought by competitive advantages in performance and development, and bring about an increase in valuation.

Ji Yu:The Opinion is expected to boost the performance growth of companies related to the environmental protection sector in the long term. We are relatively optimistic about the long-term investment value of the sector: first, the fundamentals, volume and price are stable; second, the industry is gradually entering a mature stage, capital expenditure is reduced, and dividend capacity is improved; third, as the price and charging mechanism are rationalized, the cash flow of water and waste incineration assets is expected to improve significantly in the long run.

In comparison, typical overseas public utility companies have seen a long bull market in their stock prices with their solid performance and continuously increasing dividends in the low-interest era. However, domestic water and waste incineration companies are currently facing certain cash flow pressures due to the failure to straighten out the payment mechanism. However, from a policy perspective, with the improvement of the charging model and the gradual realization of "user pays", the cash flow of such assets is expected to gradually improve, and the long-term investment value will gradually emerge in the future low-interest environment.

ICBC Credit Suisse Fund:In the medium and long term, on the one hand, the reduction of polluting waste and the changes in environmental protection management models are both opportunities and challenges for traditional environmental protection companies; on the other hand, the "Opinions" are supported by relevant policy systems, which will help the environmental protection industry and companies to improve profitability and business models, enhance the intrinsic attractiveness of environmental protection investments, and bring mid- to long-term potential investment value to the environmental protection industry.

From the perspective of specific areas, there are relevant investment opportunities in the fields of water, gas and soil consolidation in environmental protection, including sewage pipelines, soil remediation, non-electric flue gas treatment, electrification of sanitation, and resource utilization of hazardous solid waste.

However, judging from the profit model and business characteristics of each business, government investment and policy support are still important driving forces. In comparison, the price reform of the more mature water and waste incineration industries is continuing to advance. The improvement of water price policies and the reform of the charging method for domestic waste treatment have brought improvements to the industry's business model, which is worthy of attention.

three,

Green electricity and other fields are expected to benefit

China Fund News: The "Opinions" proposes to accelerate the green and low-carbon transformation of industrial structure and steadily promote the green and low-carbon transformation of energy. In these two aspects, which investment areas are expected to benefit in the future?

Xing Junliang:The green and low-carbon transformation of industries will benefit industries with carbon reduction attributes, such as renewable resources and electric sanitation equipment; the Opinions proposes "continuously updating binding standards such as land, environment, energy efficiency, water efficiency and carbon emissions, and leading the optimization and upgrading of traditional industries with the improvement of national standards", which will be constrained from the supply side, and will have certain benefits for environmental governance, energy-saving transformation, ultra-low emission transformation, water treatment and utilization, carbon capture, storage and utilization, etc.; steadily promote the green and low-carbon transformation of energy, "vigorously develop non-fossil energy", and hydrogen energy, biomass energy and other industries will benefit. In addition, carbon measurement companies are also expected to benefit.

Ji Yu:The "Opinions" clearly propose to vigorously promote the green and low-carbon transformation of industries such as steel, nonferrous metals, petrochemicals, chemicals, building materials, papermaking, and printing and dyeing. At the same time, it proposes to promote the deep integration of industrial digitalization and intelligence. Relevant energy-saving equipment manufacturers, energy-saving transformation engineering companies, and digital technology companies are expected to benefit.

However, it should also be noted that in the past two years, companies such as steel and building materials have faced an unfavorable situation of declining market demand and intensified competition, and the operating pressure on companies is relatively high. To promote the active transformation of such high-energy-consuming companies and realize "supply-side reform", the continuous promotion of supporting policies is needed.

ICBC Credit Suisse Fund:As a clean, flexible and low-cost high-quality power source, hydropower will play a more important role in the new power system; the growth potential of nuclear power has been confirmed again. Due to the strong license attributes and stable electricity prices of nuclear power, the yield of nuclear power projects is likely to be maintained. It is recommended to pay attention to investment opportunities in nuclear power operators and related industrial chains. In addition, clean green electricity such as wind power, photovoltaics and waste power generation can realize green benefits through green certificates, thereby improving project profitability.

Four,

New energy vehicle market has broad development space

China Fund News: The Opinions proposes to promote low-carbon transportation and vigorously promote new energy vehicles. According to data released by the China Passenger Car Association, the domestic new energy vehicle retail penetration rate reached 51.1% in July. What is the growth space for the new energy vehicle market in the future? After the adjustments in recent years, what is the current investment timing?

Yan Dong:From the perspective of market growth, the new energy vehicle industry still has great development potential. At the same time, with the rapid growth of new energy vehicles, the after-sales market will also usher in changes, including an increase in demand for non-original accessories and an increase in the importance of insurance business, which will bring new investment opportunities to related fields. Considering that the new energy vehicle industry is still in a period of rapid development, coupled with the continuous support of policies and the continuous advancement of technology, some areas of the industry chain can now be regarded as a relatively positive investment point. However, investors should also pay attention to the risk factors that may be caused by intensified industry competition, technological progress, supply changes, and policy changes, and make rational investment decisions.

Zeng Yingjie:Under the background of the trend of intelligent automobile industry, China's new energy automobile industry chain with global competitiveness will surely generate huge investment opportunities. The most promising part is the whole vehicle, followed by intelligent related parts. The whole vehicle is the track that should be focused on under the wave of intelligence. Intelligent related parts will fully benefit from the beta of intelligence and enjoy the dividends of the times brought by the rapid increase in industry penetration. The new parts that benefit the most are new components, such as wire control brake, wire control steering, domain controller, laser radar, etc.

Xing Junliang:At present, the independent vehicle brands are in the cycle of new smart electric vehicles, and the trend of independent rise is clear. At the same time, domestic car companies are accelerating their overseas layout, and exports are expected to continue to contribute to growth. At the current point in time, the increase in the old-for-new policy has begun to stimulate demand, the industry's prosperity is marginally upward, and the approaching peak season and the intensive launch of new cars drive sector opportunities. At present, the automotive industry is in a critical period of additional configuration. The whole vehicle benefits from the greater flexibility of new car launches, focusing on vehicle companies with upward sales and financials.

Ji Yu:The penetration rate of new energy vehicles in China is expected to continue to increase, and with the growth of exports, the industry has considerable room for growth. From an investment perspective, the penetration rate of new energy vehicles at the retail end exceeded 50% in July. Although there is still room for further improvement, the growth rate has slowed down. In addition, the intensified competition in the industry has increased the difficulty of investment and the trend of the target is obviously differentiated.

In the future, we will seize the corresponding opportunities around the trends of electrification, intelligence, and overseas expansion. For the vehicle side, we will focus on automakers that have dominant price segments, leading intelligence layout, gradually fulfilling overseas expansion logic, and upward product cycles. For the parts side, we will focus on companies with strong category expansion capabilities, continuously expanding customer base, and significant room for improvement in product market share or penetration.

ICBC Credit Suisse Fund:New energy vehicles currently have good advantages in terms of economy and environmental protection, which has won the favor of consumers and brought about a continuous increase in penetration rate. In the future, as the scale continues to grow, the production cost and the cost of intelligent hardware will continue to decline, and the competitiveness of new energy vehicles will continue to increase. Based on this logic, new energy vehicles are expected to achieve a higher penetration rate.

The new energy vehicle sector has been adjusting continuously in recent years, which shows that in an industry that continues to grow rapidly, there is still great uncertainty, and professional research and judgment are needed to avoid risks and seize opportunities. In the medium and long term, new energy vehicles still have a lot of room for growth in the global market, and excellent companies can not only obtain continuous growth from the Chinese market, but also from overseas markets.

five,

The medium- and long-term demand for nonferrous metals is expected

China Fund News: With the increase in investment in environmental protection, low-carbon technologies and related industries in the future, what changes will occur in the medium- and long-term demand for non-ferrous metals such as copper, aluminum, lithium, and silicon? How do you view the investment opportunities therein?

Yan Dong:The Opinion proposes that the proportion of non-fossil energy consumption will increase to about 25% by 2030, which will inevitably further increase the layout of photovoltaic, wind power, hydropower, energy storage, new energy vehicles and other industries, accompanied by an increase in investment in the above-mentioned related industries, thereby driving the growth of demand for upstream raw materials. From the perspective of upstream raw materials, copper, aluminum, lithium and silicon are key materials for electrification and new energy transformation, among which copper's conductivity plays an indispensable role in power grid construction.

In addition, from the perspective of environmental protection and low carbon in the production of upstream raw materials, the country issued the "2024-2025 Energy Conservation and Carbon Reduction Action Plan" in May this year, proposing energy conservation and carbon reduction actions for petrochemicals, non-ferrous metals, steel, construction and other industries, especially emphasizing the reduction of consumption in the electrolytic aluminum industry. The strict control of the increase in the supply side of the electrolytic aluminum industry and the pull of the demand for electrification and new energy transformation are expected to bring about a continued high prosperity in the aluminum industry.

Ji Yu:The development of environmentally friendly and low-carbon technologies represented by "wind, light and lithium" has become an important driving force for the growth of demand for upstream related resource varieties, but the investment logic of different resource varieties such as copper, aluminum, lithium and silicon is different. Copper and aluminum are industrial metals. Due to factors such as early capital expenditures, reductions in incremental mines, declines in the grade of existing mines, and the impact of geopolitical events, the global copper mine supply has shrunk, which will drive the copper price center upward for a long period of time in the future. The investment logic of aluminum on the supply side comes from the strong constraints of the domestic electrolytic aluminum production capacity ceiling. As the effective production capacity approaches the ceiling, the emergence of a supply gap will drive the aluminum price center upward.

As the subsequent industry's new capacity slows down and the industry enters a capacity clearance period, the competitive landscape will be optimized. At the same time, the medium- and long-term demand growth logic of the lithium battery and photovoltaic industries has not changed, and the improvement of supply and demand fundamentals will drive the repair of the industry's profit center. At present, the prices of lithium and silicon have reached or are close to the bottom, and the industry's investment opportunities come from grasping the reversal cycle of distress.

six,

Green financial instruments will provide multi-faceted support for green transformation

China Fund News: The Opinion proposes to enrich green transformation financial instruments, actively develop green financial instruments, and orderly promote the innovation of carbon financial products and derivatives. What positive effects will this have on the development of the green transformation industry?

Yan Dong:Enriching green transformation financial instruments mainly provides financial support for the low-carbon transformation of high-carbon industries. Its positive effects mainly include: providing financial support for green transformation industries, reducing the financing costs of green finance, improving risk management and innovation capabilities, promoting the sustainable development of green technologies and industries, and enhancing market transparency and standards.

With the standardization and regularization of green financial instruments, market transparency will be improved, which will help establish unified green financial standards and promote the interconnection and interoperability of global green financial markets.

Xing Junliang:The "Opinion" points out that "we must actively develop financial instruments such as green insurance, green equity financing, green financial leasing, green trusts, and orderly promote the innovation of carbon financial products and derivatives." It will strongly promote the supply-side reform of green finance, strengthen the coordination and linkage of different types of financial institutions in green finance, and build a complete multi-dimensional system of green financial tools. It efficiently matches the needs of various industries, stages, and types of green transformation, and effectively improves the accuracy and effectiveness of helping the comprehensive green transformation.

ICBC Credit Suisse Fund:The Opinions provide guidance for the financial industry to comply with the national green transformation strategy and promote the financial industry to better serve the green transformation. It mainly plays three positive roles:

First, optimize capital allocation and guide funds to flow into green transformation industries; second, broaden financing channels and provide long-term and stable financial support for green transformation industries; third, formulate transformation finance standards and promote industrial transformation.

In addition, through relevant measures of green finance, enterprises are encouraged to adopt more environmentally friendly production methods, while promoting industrial transformation and moving towards green, environmentally friendly and sustainable goals. By studying and formulating transitional financial standards, industrial transformation has been strongly promoted, which is a profound change for traditional industries.

seven,

REITs are expected to become a new growth point for public funds

China Fund News: The Opinion proposes to optimize the green transformation investment mechanism. Support eligible green transformation related projects such as new energy, ecological environment protection, etc. to issue infrastructure real estate investment trusts (REITs). What is the market space for such public REITs? What role will public funds play?

Xing Junliang:After years of development, the output value of my country's new energy and ecological environment protection industries has reached the trillion-yuan level, forming a large number of high-quality assets. Since related projects usually have attributes such as long cycles, heavy assets, and slow payment, we believe that the release of such REITs products can help companies recover cash flow and profits in advance, achieve circular investment, expand new projects, and improve the efficiency of capital use. Public funds will contribute positively to the virtuous cycle of industrial capital and finance, and REITs business is expected to become a new growth point for public funds.

ICBC Credit Suisse Fund:This has important guiding significance for the high-quality development of infrastructure REITs in the fields of clean energy and ecological and environmental protection, and is conducive to further promoting the ecological construction and healthy development of the primary and secondary markets of infrastructure REITs in related fields. At present, the secondary market of clean energy infrastructure REITs has performed relatively well, and the market space may have great potential.

Editor: Xiaomo

Review: Xu Wen

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