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The way to induce asset‐backed securities participation in eco‐compensation

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  • Gong Zhang
  • Shulei Bi

Abstract

By establishing an ecology compensation asset securitization project, market mechanisms can be used to regulate the interests of stakeholders in ecological conservation. Previous studies have shown that combining asset securitization with environmental protection can effectively promote the sustainable development of both economy and environment. However, there is still a lack of research on the stable mechanisms and impact of integrating ecology compensation and asset securitization. In this study, we propose a comprehensive operating model for ecology compensation asset securitization and a specific valuation framework supported by a multi‐period, multi‐state Markov model for ecology compensation asset securitization. If the project's net present value is positive, it can effectively reduce the risks of ecology compensation projects and increase the return rate of ecology compensation asset securitization projects. By employing the case study of ZhongHang ShouGang Green Energy (SZ:180801) and implementing the asset pool valuation using the multi‐state Markov model, the deviation error is 0.89%, validating the effectiveness of the model. Additionally, sensitivity analysis from simulation results indicates that changes in interest rates and default probabilities are the main factors influencing the valuation of the asset pool. After summarizing the research conclusions, relevant policy recommendations and future prospects are presented. This research aims to provide reference for the development and application of ecology compensation asset securitization.

Suggested Citation

  • Gong Zhang & Shulei Bi, 2024. "The way to induce asset‐backed securities participation in eco‐compensation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(2), pages 843-859, March.
    • Handle: RePEc:wly:mgtdec:v:45:y:2024:i:2:p:843-859
    DOI: 10.1002/mde.4036
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    References listed on IDEAS

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