Sustainable and Responsible Capital Markets 2017
Sustainability is a term used liberally and vaguely in the financial world. But it has a precise meaning: living so that we do not make it harder for future generations to live. That principle is violated by today’s economy, including its financial markets. But little by little, the heart of markets — the decisions investors make — is facing up to what it has long repressed. Jon Hay reports.
Several developments in the past year have the potential to move green finance up a gear, in its ability to actually bring about change in the real world. Jon Hay highlights four of them.
The much sought after trend for green bonds to outperform conventional paper in secondary trading is now a reality, according to public sector borrowers — but perhaps only for those with enough dots on their green curves to provide a comparison.
With France’s green OAT and record issuance this year, the green and social bond market has emerged from obscurity into the bright lights of mainstream capital markets. Treasurers and CFOs are, by now, aware of what the market has to offer. But to channel capital on the scale required to limit global warming to 2C, the market must adapt and innovate to meet investors’ need for clarity, and to incentivise issuers. Lewis McLellan reports.
Corporate and bank issuers are taking up the SRI bond gauntlet, providing the market with the kind of names that have long been the goal of its biggest cheerleaders.
The enthusiasm in China for a greener economy — and green financing techniques — now embraces the far-reaching Belt and Road Initiative. Meanwhile, foreign investors are being invited into China’s bond market. But as Noah Sin reports, to unite Chinese and international green finance markets, China will have to close the gap between two views of what is green.
Asia’s green finance story is not just about China and India. Although the US has threatened to pull out of the Paris Agreement, southeast Asia has reiterated its commitment to sustainability. As Morgan Davis reports, that is beginning to be felt in its financial markets, where countries such as Malaysia, Singapore and Indonesia are exploring ways to foster green financing.
Responsible investing — and green and social bonds in particular — are still not a mass market among US investors. But the fund managers leading the charge are optimistic: consciousness has moved a long way in a few years.
Latin America is one of the most promising fields, both for green economic investment, and for green financing. Powerful players in the region’s capital markets, such as national development banks, are supportive, and the range of issuers is spreading, from renewable energy into sectors such as paper, airports and banks. As Oliver West reports, there is good demand from international investors, but what could help even more is to build up the local market.
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