Research On The Investment Value Of China’s Carbon Neutral Corporate Bonds

To implement the "30-60" double carbon emissions target proposed by General Secretary Xi Jinping in June 2020,China has actively launched a new financial financing instrument,carbon-neutral bonds,and published several government documents to provide guidance and policy support to enable its rapid development.However,due to the relatively short development time of carbon neutral bonds in China,there are still problems such as the lack of uniform standards for carbon neutral bonds,the level of investors’ awareness of green investment concepts and the insufficient scale of investment resulting in the value of carbon neutral bonds not being fully reflected.Therefore,a study on the investment value of carbon neutral corporate bonds will not only help investors seize investment opportunities and reduce investment risks in the process of achieving green development,but also help promote the development of China’s carbon neutral bond market.Firstly,this paper will firstly review and summarize the current literature on the development of green bonds,bond pricing models and green bond risks.Secondly,we will discuss the development status of China’s carbon neutral bond market from a macro perspective and analyze the problems and challenges faced by the market in depth.Taking the first batch of carbon neutral corporate bonds issued by Three Gorges Group "GC Three Gorges 01" as an example,we will build an investment framework for carbon neutral corporate bonds from the perspective of investors,and discuss it from three perspectives:enterprise operation,risk analysis and valuation analysis.In terms of corporate operating conditions,the analysis focuses on corporate profitability,solvency and cash flow;in terms of risk analysis,three perspectives of interest rate risk,liquidity risk,and credit risk are used.For the assessment of credit risk,this study adopts the Z-Score model to warn credit risk and the Credit Metrics model to quantify credit risk to determine the investment value of "GC Three Gorges 01";in terms of valuation analysis,the paper uses the B-S model as the basis to evaluate the value of carbon neutral bonds.In this paper,the carbon neutral bonds are divided into two parts:the value of the bonds themselves and the value of carbon neutral attributes.The value of the bond itself is evaluated by the general bond pricing theory,while the value of the carbon neutral attributes is priced by the B-S model in the real option method.The results of the study show that Three Gorges Group’s business is sound and its carbon neutral corporate bond "GC Three Gorges 01" has a high intrinsic value and relatively low overall risk.This finding is highly consistent with the green investment concept and further validates the investment value of the bond.In particular,when valuing carbon neutral bonds,green projects are an important factor affecting the value of bonds,and investors should focus on them in their analysis.Based on the above analysis,we give policy advice from three levels:investors,issuers,government and financial regulators,in order to promote the development of carbon neutral bonds in China.