Case Study On "YiTeng 22-1" Green Asset Securitization

With the determination of China’s "peak carbon" by 2030 and "carbon neutrality" by 2060,green sustainability has become an important topic for global development.Green asset-backed securities,with the added benefits of lowering financing thresholds,reducing issuance difficulty,and lowering leverage,can effectively promote the achievement of China’s carbon neutrality goal while achieving the financing objectives of issuers.Meanwhile,as an important part of the energy sector,automobiles are also accelerating the reduction of carbon emissions and electrification.The issuance of green asset-backed securities for new energy vehicles has sparked a new wave of investment.The "Yiteng 2022 First Phase Personal Automobile Loan Green Asset-Backed Securities," successfully issued by FAW Car Finance Co.,Ltd.in the interbank bond market,is the first green credit asset securitization project in Northeast China.It sets an example for central enterprises to implement the national dual carbon strategy and fully demonstrates its exemplary leading role.This article takes "Yiteng 22-1" green asset-backed securities as a case study to illustrate the elements involved in the issuance design of green asset securitization products,including the background of the issuance,transaction structure,overview of the underlying asset pool,and green certification.The article then provides an in-depth analysis of the unique aspects and potential risks of this product,including the underlying assets,credit enhancement measures,cash flow distribution mechanism,and pricing process.Finally,the article explores the potential benefits for the issuing institution from economic and market perspectives.Based on the above work,this article found that: firstly,the overall performance of the "Yiteng 22-1" issuance and operation process was stable,but there were flaws in the selection of underlying assets and credit enhancement arrangements,and the advantages and disadvantages of this product could provide reference for the issuance of similar products;secondly,as the market currently lacks the conditions to use complex pricing models,the nominal spread pricing method is more suitable for pricing green asset-backed securities at this stage;finally,green certification can indeed reduce the financing cost of asset securitization to a certain extent,but it requires scale effects.Therefore,exploring the balance between the cost,risk,and return of security issuance is still a key issue that needs to be addressed in the current and future development of green asset-backed securities products.In response to the shortcomings of "Yiteng 22-1",this paper argues that in order to reduce the default risk of green asset securitization risk,it is necessary to strengthen the screening of its pooled assets,reasonably arrange the interest rate and age of the pooled loans,and balance the scale of the asset pool and financing costs.Rational use of credit enhancement measures to "hedge risks" and improve investors’ trust.For some unfavorable factors affecting the development of green asset securitization in the market,relevant departments should also improve the information disclosure system and explore supportive policies for the issuance of green asset-backed securities to enhance the participation and enthusiasm of the issuers.