AXA IM Talk on Asia & China Market: China Green Bond: How to benefit from the awakening green giant?

In this month’s video, our Senior Emerging Asia Economist Aidan Yao gives a quick introduction of the status quo and potential opportunities in China’s green bonds market.

Please find the full script below:

Hello, welcome to our monthly video series, my name is Aidan Yao. I’m the senior Emerging Asia economist here at AXA Investment Managers.

After a year of tepid primary issuance – held back by the global pandemic, primary market activity in the Chinese green bond market came roaring back in 2021. China is therefore on path to become, once again, the world’s largest green bond issuer this year.

However, despite the rapid expansion of the market, and strong demand for green assets, global investors have so far been side-lined in this market due to concerns over the “greenness” of Chinese green bonds.

Our analysis actually suggests that there has been a significant quality convergence between Chinese green bonds and global green peers in recent years. While there are still some gaps and differences in regulations and standards, these gaps have narrowed significantly over time.

In addition to their ESG appeal, Chinese green bonds also offer a yield premium relative to conventional Chinese bonds. This is contrary to the experience in Europe, where green bonds are often issued and traded at lower yields. Therefore, buyers of Chinese green bonds are effectively getting “paid” to hold ‘green’ in their portfolio.

As one of the early global investors in this market, AXA IM has developed a strict set of rules to analyse Chinese green bonds. These rules are consistent with those we apply to our global green bond investments, designed to help our investors to mitigate the risk of ‘green washing’.

You can find more details on our framework as well as related topics in our latest research on AXA IM’s Hong Kong and Singapore websites.

Thank you and stay safe