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Sustainable Financing and Investing survey – China Report

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China has set a goal of reaching carbon neutrality by 2060 and the combination of more robust regulatory and policy support, a buoyant green and sustainable finance market, and pragmatic approach by issuers and investors point the way to a sustainable future.

The move comes as sustainable finance – and attitudes to sustainability more generally – undergo a transformation in China.

China still faces challenges. But the combination of more robust regulatory and policy support, a buoyant green and sustainable market, and a flexible and pragmatic approach by issuers and investors point the way to a bright future.

This sense of change is evident in the responses of 200 China companies – that are active in the capital markets – and institutional investors, who we surveyed on the topic of sustainable financing and investing. This is the second year we have run this China survey.

Together with the green bond market being seen as the most developed area of sustainable finance in China, the commitment to sustainable finance among companies and investors has notably improved on last year.

Some of the key findings from the survey are:

  • Sustainability as a key priority – Issuers’ and investors’ focus on sustainability in their organisations, in industries, and across supply chains, has strengthened in the past 12 months, provoked by the experience of the pandemic, supportive government policy, and regulatory efforts to deepen and develop the sustainable finance market. For about a fifth of issuers, sustainability has become their most important strategic priority.

  • Issuers and investors seek to develop and fund net zero transition plans – Responding to the government’s net zero 2060 commitment, issuers and investors are increasing their focus and attention on what they need to do, including developing their own net zero plans, and seeking extra investment to enable their low carbon transition.

  • Sustainable finance evolves and matures but challenges remain – Across products and markets, development continues apace, and most issuers (63%) see no obstacles to using sustainable debt financing. However, while 55% of investors say the same, 45% do see serious difficulties, including on pricing, the work involved in investing in such products, and in trading such securities on the secondary market.

  • Broad support for policy initiatives to grow sustainable finance – Issuers and investors are showing broad-based support for various People’s Bank of China’s green finance and climate change mitigation initiatives, with most (30%) showing complete alignment on incorporating climate change into policy and seeing this as the most important initiative to develop green finance in China over the next two years. About a fifth of respondents say strengthening information disclosure, including developing a mandatory disclosure system, would be most important.

  • Issuers and investors see benefits in greater disclosure – Should the government require companies to disclose more information on environmental and social issues, issuers say two of the main benefits would be helping them internally to be more sustainable, and helping their investors better understand their sustainability activities. For investors, most believe it would help them choose between more and less sustainable companies, and that it would make it easier for them to invest sustainably.

  • Barriers to investment fall but skills gap emerges – While 59% of respondents this year say they see no obstacles to investing in the green and sustainable economy – a significant shift from last year when 55% said the opposite – some 41% do see issues, and top among them is a lack of the necessary ESG skills and understanding within respondents’ organisations. Other prominent issues include the long term nature of projects, too much risk (especially for issuers), and internal investment policies preventing investment in these areas (particularly for investors).

  • Green and sustainable investment opportunities evolve – Over the next five years, issuers and investors believe clean coal, improved electricity grids, energy efficiency in industry and in buildings, sustainable waste management, as well as recycling and the circular economy, are among the most attractive investment opportunities, replacing areas such as carbon capture and solar power generation that were in focus last year.

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COVID shifts, social agendas & more

Global perspectives from issuers and investors in our latest HSBC’s 2021 Sustainable Financing and Investing Survey.

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