For the bond market, the Bloomberg Barclays Global Aggregate Index started inclusion of RMB bonds in April, which will attract around $ billion of inflows over the 20-month inclusion process. But even upon completion, RMB bonds will only account for around 6% of the overall index, leaving a big gap to fill considering that Mainland China is the world’s 2/4  BIS central bankers' speeches  second largest bond market. In September, JPMorgan announced a 10-month phased inclusion of Chinese government bonds into its benchmark emerging-market indexes, starting in February 2020. Market estimates suggested that the inclusion could lead to around $ billion of inflows into the onshore bond market per month. Mainland China is also on the FTSE watchlist for future inclusion into its flagship World Government Bond Index, with the next review in March next year. 13. The takeaway here is that, we are just seeing the tip of an iceberg in the big wave of allocation to Chinese assets by investment managers. The pace would likely continue to pick up in the next couple of years. Hong Kong’s Unique Position and what lies ahead 14. The vast opportunities in the Mainland and the Connect schemes offer a great example to remind ourselves Hong Kong’s unique value proposition. Under the “One Country, Two Systems” principle, we maintain a regulatory regime closely aligned with international norms and practices. At the same time, our close rapport with the onshore regulators ensures that we are the best place to experiment capital liberalisation initiatives.

Recent regulatory and legislative initiatives reflect growing international awareness of the great value of transparent disclosures on C&E risks. In Europe, large banks will have to disclose climate-related information under the European Banking Authority’s comprehensive implementing technical standards. They will have to already do so by early 2023, referencing data from the end of 2022. The information requested from banks includes qualitative and quantitative information on environmental, social and governance risks, as well as indicators such as alignment metrics and the green asset ratio – thus significantly raising the bar in terms of C&E risk reporting. In the same vein, sustainability reporting obligations under the European Commission’s Corporate Sustainability Reporting Directive will shortly apply to large corporations, including banks under our direct supervision. Main findings of the ECB report on banks’ progress towards transparently disclosing their C&E risk profile The ECB is also well aware of the importance of transparent disclosures. We published our first stocktake of banks’ C&E disclosures back in November 2020. We did so precisely to give banks the time and the incentive to improve the quality of their own disclosures in this field. Back then, virtually none of the institutions in the scope of the assessment met our expectations as set out in the ECB Guide on climate-related and environmental risks, which we published at the same 2/4  BIS central bankers' speeches  time. The second stocktake, published today, shows that the quality of banks’ disclosures has improved since then, especially in the areas of risk management, governance and business models.