Core Viewpoint - Hong Kong Exchanges and Clearing (HKEX) is establishing a sustainable finance ecosystem to support market participants in their transition towards sustainability [1] Group 1: Sustainable Finance Initiatives - HKEX is providing products and platforms, including ESG exchange-traded funds and sustainable bonds, to facilitate the transition of enterprises [1] - The carbon trading platform "Core Climate" connects global carbon investors with climate projects, aiding companies in offsetting carbon emissions [1] Group 2: ESG Framework and Standards - HKEX has launched an ESG framework and standards to assist companies in sustainable development [1] - The exchange is ensuring that climate-related disclosures meet international standards through guidance and education [1]

Group 1 - The Asian capital markets have become a significant engine for global economic growth, contributing nearly one-third of global GDP, with listed companies accounting for 55% of the global total and market capitalization at 27% [1][2] - The number of listed companies in Asia has more than doubled from approximately 14,000 in 2000 to nearly 29,000 in 2024, while the market capitalization has increased by $25 trillion, with China, Japan, and South Korea as key players [2][3] - Despite growth, many Asian economies still heavily rely on bank loans, with only 14% of corporate debt financed through bonds, highlighting a need for diversified financing options [2][3] Group 2 - The Asian stock market is the largest globally, with 8,586 companies listed in growth markets, representing a market value of $3.3 trillion, which is 80% of the global total for similar markets [3][4] - Market fragmentation exists, with China, Japan, and South Korea holding 86% of the stock market value, while countries like Bangladesh and Pakistan have markets that are less than 40% of their GDP [3][4] - Corporate governance remains a challenge, with 46% of listed companies having their top three shareholders controlling over 50% of the shares, and institutional investor participation is low at 18% [3][4] Group 3 - The corporate bond market in Asia has reached $13.9 trillion, accounting for 23% of the global market, with China contributing 75% of the issuance [4][5] - Sustainable bonds are emerging as a growth area, with $145 billion issued in 2024, of which over 60% are green bonds, although transparency issues regarding fund usage persist [4][5] Group 4 - Artificial intelligence (AI) is transforming the financial landscape in Asia, with a projected tenfold increase in data center demand in Southeast Asia from 2023 to 2030 [5][6] - Regulatory frameworks are evolving, with initiatives like regulatory sandboxes in Hong Kong and Singapore to facilitate safe AI applications in finance [5][6] Group 5 - The report emphasizes the need for balanced development in Asian capital markets, addressing regional disparities, optimizing financing structures, and enhancing corporate governance to strengthen the overall market [6][7]

Core Insights - The sustainable bond market has seen significant growth over the past decade, raising over $5.5 trillion for projects aimed at addressing environmental challenges and social inequalities [1][2] - LSEG has played a pivotal role in this market, launching the first dedicated green bond segment in 2015 and evolving it into the Sustainable Bond Market (SBM) [1][8] Market Growth and Impact - Over 170 issuers have launched 720 bonds in the LSEG sustainable bond market, raising nearly $422 billion, which supports various environmental and social projects [2] - Funding from these bonds has primarily supported energy efficiency, natural resources, and sustainable land use projects, accounting for about 25% of total funds raised [2] Market Development - The SBM has expanded from a single segment to a comprehensive market, introducing categories for sustainable development, social bonds, and issuer-level bonds [8] - The market has also introduced transition bonds to support issuers in climate-related activities [8] Value Creation for Issuers and Investors - The SBM provides issuers access to a global investor base, often resulting in oversubscription for bond offerings, enhancing visibility and credibility [9] - Investors benefit from a diverse range of debt asset classes and strict sustainability standards, which enhance confidence in their investments [9] Emerging Trends - The market is evolving to support various financing needs, including climate adaptation projects and blue bonds aimed at ocean protection [18] - New financial instruments like debt-for-nature swaps are gaining traction, allowing emerging market sovereigns to refinance debt at lower rates to fund conservation efforts [18] Future Outlook - LSEG is committed to driving innovation in the sustainable bond market, anticipating continued growth and the emergence of new financing opportunities [14][15]

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - In May, the issuance scale of urban investment bonds was halved, and the net financing continued to be negative. The issuance of innovative varieties such as science - and - technology bonds increased. The reform of economic development zones encourages park urban investment companies to list for financing [6][9][17]. - The yield of urban investment bonds may be more likely to decline. The safety cushion of urban investment bonds is still sufficient, and the credit spread still has room to compress. Investment strategies include allocating high - quality enterprises in strong regions, paying attention to urban investment companies in key provinces with debt resolution benefits, and weak - qualified urban investment companies in strong regions. Also, focus on new bond - issuing entities in the industrial transformation and integration of urban investment [6][7][45]. 3. Summary by Directory 3.1 5 - month Urban Investment Bond Market Operation Characteristics - **Financing and issuance scale**: Affected by tightened financing policies and seasonal factors, the issuance scale of urban investment bonds decreased by 52.44% month - on - month to 26.3616 billion yuan, and the net financing was - 7.127 billion yuan, remaining negative for three consecutive months. The issuance scale from January to May was 2.3 trillion yuan, a year - on - year decrease of 13.22%. 21 provinces had net outflows, and the net outflow scale of key provinces and large economic provinces decreased month - on - month [9][11]. - **Review and approval**: The review and approval pass rate of urban investment bonds on the exchange decreased by 7.45 percentage points to 88.01% month - on - month, with 7 bonds terminated for review, mainly issued by AA - level and below entities. The registration pass rate of the National Association of Financial Market Institutional Investors increased by 5.97 percentage points to 11% month - on - month [10][11]. - **Innovative varieties**: The issuance of science - and - technology bonds accelerated. In May, 14 labeled urban investment bonds were issued, with a total scale of 1.2 billion yuan. Among them, 9 science - and - technology bonds had a scale of 870 million yuan. Labeled urban investment bonds had a certain cost advantage [17]. - **Issuance term and borrowing - to - repay ratio**: The weighted average issuance term was 4.18 years, an increase of 0.18 years month - on - month. The borrowing - to - repay ratio was 93.24%, and 14 provinces reached 100%. Only Chongqing among the 8 key provinces issued new - type urban investment bonds [20]. - **Issuance interest rate and spread**: The weighted average issuance interest rate was 2.30%, a decrease of 0.13 percentage points month - on - month, and the spread was 77.49BP, a narrowing of 14.44BP month - on - month. The issuance cost in key provinces was higher and the decline was smaller [23]. - **Overseas bonds**: The issuance scale of overseas urban investment bonds decreased by 70.33% month - on - month to 1.2218 billion yuan, and the weighted average issuance interest rate increased by 0.31BP to 5.88% [29]. - **Yield and credit spread**: The spot trading scale of urban investment bonds decreased year - on - year and month - on - month. The yield of urban investment bonds decreased overall, and the credit spreads of most key provinces narrowed [32]. 3.2 Credit Analysis - **Rating adjustment**: On May 19, 2025, Shanghai Brilliance Credit Rating & Investors Service Co., Ltd. upgraded the bond ratings of "G23 Nanhu 1" and "23 Nanhu Green Bond 01" of Jiaxing Nanhu Urban Construction Investment Group Co., Ltd. from AA+ to AAA, with a stable outlook [7]. - **Abnormal transactions**: 46 bonds of 39 urban investment entities had 70 abnormal transactions, with a scale of 252 million yuan. The scale and number of abnormal transactions decreased month - on - month [7]. 3.3 Early Redemption and Maturity Putback - In May, 62 urban investment companies early - redeemed the principal and interest of 73 bonds, with a scale of 1.3396 billion yuan, a month - on - month decrease of 46.34%. The maturity and putback scale of urban investment bonds in the second half of the year is 2.8 trillion yuan [7]. 3.4 Investment Strategy - Allocate high - quality enterprises in strong regions based on fundamentals and moderately extend the duration. For medium - and short - term duration allocation, focus on strong urban investment companies in key provinces with debt resolution benefits and weak - qualified urban investment companies in strong regions. Also, pay attention to new bond - issuing entities in the industrial transformation and integration of urban investment, especially those with labeled bonds such as science - and - technology and green bonds [6][45]. 3.5 Recent Policies and Hot Events - **Central policies**: In May, the central government introduced policies beneficial to the transformation and development of urban investment enterprises, including supporting the issuance of science - and - technology bonds, promoting urban renewal, reforming national economic development zones, and improving the modern enterprise system with Chinese characteristics [6][48]. - **Local policies**: Jilin proposed to accelerate the "withdrawal from the province", Xinjiang set a goal to clear financing platforms in 2025, Jiangsu supervised the replacement of implicit debts with special bonds, and Zhejiang issued special bonds for purchasing existing commercial housing [6].

Core Viewpoint - The article highlights the challenges and inconsistencies in ESG (Environmental, Social, and Governance) information disclosure among banks, emphasizing the need for improved data quality, standardization, and a shift from formal reporting to substantive management practices [1][2][9]. Group 1: ESG Disclosure Challenges - Different ESG disclosure frameworks lead to fragmented and less comparable information among banks, with data quality issues, particularly in carbon emissions, relying heavily on self-reported data from corporate clients [1][2]. - The lack of unified standards and comparability in disclosure metrics remains a significant issue, with many banks showing improvement in their 2024 ESG reports but still needing enhancements [3][4]. - The absence of consistent reporting on Scope 3 emissions, which includes indirect emissions from the value chain, is prevalent, with several banks not disclosing this data at all [4][5]. Group 2: Data Collection and Management Issues - The collection of ESG data is complicated by the involvement of multiple business systems, and smaller banks face challenges due to insufficient technology investments [2][7]. - There is a high cost of cross-departmental coordination for ESG management, and the traditional risk management systems of banks do not effectively integrate with ESG practices [2][8]. - The scarcity of professional talent with expertise in both finance and ESG is a barrier to effective data collection and analysis, as understanding ESG requires knowledge across various disciplines [8][10]. Group 3: Recommendations for Improvement - Banks are encouraged to enhance their ESG information disclosure by establishing standardized data collection and processing systems, aligning with both international and domestic ESG standards [10][11]. - It is essential for banks to integrate ESG goals into their business strategies and performance evaluation systems, fostering a culture of participation and collaboration across all levels [10][11]. - Utilizing advanced technologies such as big data and AI can improve the collection, monitoring, and risk assessment of ESG information, while also focusing on building a skilled workforce in this area [11].

Group 1: Overview of Sustainable Finance - Sustainable finance integrates environmental, social, and governance (ESG) goals into financial activities to support the transition to a sustainable economic growth model [7][8][10] - The global sustainable bond and loan market has experienced three phases: initial development, rapid expansion, and adjustment, with green bonds being the primary driver [13][14] - Europe dominates the global sustainable bond market, while the Asia-Pacific region, particularly China, is emerging as a significant growth area [14][15] Group 2: China's Sustainable Finance Market - China plays a crucial role in promoting sustainable finance, especially after the announcement of its "dual carbon" goals, accelerating the green transformation of its economy [8][10] - The annual growth rate of green loans in China from 2018 to 2023 reached 26.62%, with new green bond issuances in 2022 and 2023 totaling 0.98 trillion and 1.08 trillion RMB, respectively [15][16] - The development of ESG asset management products in China is rapidly advancing, particularly in public funds and bank wealth management products [21][22] Group 3: Challenges and Opportunities in Low-Carbon Development - Achieving climate goals requires a significant increase in climate investment, but current capital markets lack sufficient incentive mechanisms [10][16] - Financial institutions and companies face challenges in the decarbonization process, including rising costs, policy risks, and technological risks [9][10] - Many global companies have set net-zero emissions targets, with 68% of carbon-intensive industry firms committing to such goals [17][18] Group 4: ESG Reporting and Regulation in China - As of May 2024, 2,124 listed companies in China have published ESG sustainability reports, accounting for approximately 39.8% of A-share companies [21][22] - The ESG report publication rate is highest among financial, public utility, and energy sectors, while sectors like ICT and consumer goods lag behind [21][22] - The regulatory environment for ESG in China is becoming more standardized, with increasing requirements for corporate ESG disclosures [21][22]