Video content has been blocked in accordance with your cookie settings. You can access this feature by accepting all cookies or adjusting your cookie settings below.
Speaker : Altaf Kassam
We spent many happy years as a family in Hong Kong. But one thing we don't miss at all is the air pollution. It used to lift for only one week, a year around Chinese new year when the government told the factories to shut down. But once the festival was over and the factories came back online, again, the smog returned.
It was clear then that China's growth, although incredible, came at a considerable external cost. And fast forward to today, China is now the world's largest emitter of global greenhouse gases with over 20% of the total. So it's clear now to me, that China's energy transition is going to be the key to limiting global warming. There are some encouraging signs. China has committed to carbon neutrality by 2060 in its latest and 14th five-year plan. And also said that it's going to peak its coven dioxide emissions by 2030 at the latest given the way the government is also withdrawing from funding internal projects and tapering the fiscal stimulus. I think the gap is going to have to be filled by the private market. And so green bonds should step up.
There are some encouraging signs again, in the first quarter of this year, China was the global leader in terms of green bond issuance, but its market has only a sixth of the size of the U S despite its bond market in total being about 90%, the size of the US it means there's a lot more room to grow. And I think the market's not just going to grow in size, but it's going to broaden in terms of diversification and it's going to improve in terms of liquidity. So all plus points for international investors. However, what we're still hearing from international investors about the Chinese green bond market in particular, as they have told us about the Chinese bond market as a whole, is that they're worried about state interference and the lack of transparency, which makes me worry myself that the Chinese green bond market won't really get the investor intention it deserves, and won't get off the ground and help finance this climate transition, which is effectively going to save the world. So what can China do? Well, I thought of four things, firstly, it needs to add transparency to its climate reporting through mandatory reporting and enforcing those standards. Secondly, it needs to fall in line with global green bond standards. At the moment, a third of its green bonds don't adhere to the global norms and this needs to be fixed.
Um, it's working with the EU on a global green taxonomy, hopefully that will help. And it's trying to implement these standards in its Belt and Road initiative as well, but there's still a lot more to be done. Thirdly, it needs to develop its offshore US dollar bond market and especially the green bond market. This will give issuers access to the longer term stable funding from better sources that they desperately need again to finance this green transition. And finally, China needs to be proud and step up as a global climate leader, hopefully shoulder to shoulder with the Biden administration. Now time will tell whether China competes - some have called this a climate war - cooperates, or even coordinates with the US which would be the Goldilocks scenario on climate transition. And in a sense, only time will tell if China is a fair weather climate advocate or it's really in it for the long term.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
This video is provided for informational purposes only and should not be considered investment advice or an offer for a particular security or securities.
The views and opinions expressed by the speaker are those of his or her own as of the date of the recording, and do not necessarily represent the views of State Street or its affiliates. Any such views are subject to change at any time based upon market or other conditions and State Street disclaims any responsibility to update such views. These views should not be relied on as investment advice, and because investment decisions are based on numerous factors, may not be relied on as an indication of trading intent on behalf of State Street. Neither State Street nor the speaker can be held responsible for any direct or incidental loss incurred by applying any of the information offered. Please consult your tax or financial advisor for additional information concerning your specific situation. This video cannot be used for commercial purposes and not all products and services in this video are available for investments in your region.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street Global Advisors’ express written consent.
Investing involves risk including the risk of loss of principal.
This information is for informational purposes only, not to be construed as investment advice or a recommendation or offer to buy or sell any security. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. There are no guarantees regarding the achievement of investment objectives, target returns, portfolio construction, allocations or measurements such as alpha, tracking error, stock weightings and other information ratios. The views and strategies described may not be suitable for all investors. SSGA does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. Investing entails risks and there can be no assurance that SSGA will achieve profits or avoid incurring losses.
Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted.
Images of NYSE Group, Inc. are used with permission of NYSE Group, Inc. Neither NYSE Group, Inc. nor its affiliated companies sponsor, approve of or endorse the contents of this program. Neither NYSE Group, Inc. nor its affiliated companies recommend or make any representation as to possible benefits from any securities or investments.