December 20 Commentary on the Asia Pacific Climate Impact Outlook

January 14, 2021

BY Alexander Kalis

With China looking to be carbon neutral by 2060, the implications of the low carbon transition are slowly dawning on the market. President Xi has said that the total amount of wind and solar power that China generates will rise exponentially — from today’s 500 million kilowatts to 1.2 billion kilowatts in a decade. This has been reflected in the strong share price performances of renewable energy operators Suntien Green, Datang Renewables, Xinyi Solar, Xinyi Energy, Xinjiang Goldwind, and China Longyuan. China Longyuan’s strong month culminated in the announcement that Longyuan plans to issue A-shares to absorb mainland listed sister company Pingzhuang Energy. HK-listed Chinese renewable power operators have tended to trade below book value for many years. Amongst the cleantech companies, A-shares on average trade at a premium of 43% to their H-share counterparts. Therefore an A-share listing status should equip Longyuan with better financing abilities and potentially improve their returns going forward adding to the company’s already bright future.

With China, the EU, Japan, Korea and New Zealand all pledging carbon neutrality in the coming decades, the recent Democrat win of the two run-off seats, now gives the incoming Biden administration control of the US Senate, completing the “Blue Wave” and thereby facilitating future passage of the US$2 trillion green fiscal passage as part of the promised “Green New Deal”. These unfolding positive macro climate policies have provided strong macro tailwinds for the performance of equities in the low carbon environmental goods and services sector, and this trend has been recently reinforced by the rapid evolution of investment flows into passive green ETF/index-linked products that are presently providing heavy passive inflows into ESG investment strategies. In consequence, clean-tech equities have continued to outperform since the beginning of the year pointing to the advent of a secular growth trend for the green sector in 2021.

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