2025-09-29 12:02

Key takeaways We expect USD inertia in the weeks ahead, barring marked hawkish US data surprises… …but Japanese factors may gain more traction in USD-JPY and other JPY crosses. Focus will include LDP leadership election and the BoJ’s October decision. In the coming weeks, the USD looks set to be trapped, in our view. Factors, such as the still buoyant risk appetite (Chart 1) and continued concerns over the Federal Reserve’s (Fed) independence amid the US administration’s legal cases (Reuters, 23 September 2025) point to further USD downside, but this could be offset by cyclical upside risks, given that markets are priced more dovishly than what the recent Fed rhetoric would seem to justify. It is worth noting that the September “dot plot” shows that the Fed is basically evenly divided between the need for one or two cuts during 4Q25. With a c90% chance of a Fed rate cut at the 28-29 October meeting in the price (Bloomberg, 25 September 2025), it may be hard for US data (like non-farm payroll on 3 October and CPI on 15 October) to out-dove markets and the risks are skewed to a bigger USD bullish reaction if the numbers land hawkishly. Source: Bloomberg, HSBC Source: Bloomberg, HSBC While USD sentiment remains the key driver to USD-JPY, Japanese factors may gain more traction in the coming weeks. Concerns about possible JPY weakness related to Japan’s ruling Liberal Democratic Party (LDP) leadership election (4 October) seem overblown, as the winner will be aware that cost-of-living concerns are what drove their predecessor out. Our economists also expect the Bank of Japan (BoJ) to hike its rates at its 30 October meeting, and markets only see a c55% chance of this happening. As such, a BoJ hike will probably provide further support to the JPY over the near term. For GBP-JPY (Chart 2), we see the pair going lower in the week ahead, as the GBP is likely to be dragged down by elevated UK fiscal concerns (see FX Viewpoint – GBP: Fiscal risks for details). Other than GBP-JPY, EUR-JPY is also likely to go lower in the weeks ahead, as the EUR may lack catalysts for near-term gains. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/jpy-cross-rates-in-focus/

2025-09-29 07:04

Key takeaways There were no major surprises in the recent volley of interest rate decisions from major. Frontier market stocks have outperformed both emerging and developed markets this year – with the MSCI Frontier index up 33%. That’s been driven by the tailwind of a weaker US dollar and the relatively insulated nature of Frontiers from global market volatility. Recent data from an NBER and OpenAI project show that ChatGPT adoption has risen threefold (from 10% to 30% of the internet-using population) in the richest economies over the past year. Yet, the real surge is in middle-income countries, where usage has jumped 5-6 times. Chart of the week – 1990s redux? As AI enthusiasm continues to dominate investor sentiment, US stock indices are pushing to fresh all-time highs. And with the Federal Reserve resuming its easing cycle amid ongoing evidence that the US economy has achieved a “soft landing” following its aggressive hiking cycle of 2022-23, parallels are being drawn to the mid-90s bull run in markets. Indeed, the similarities are striking. The US economy experienced a soft landing in 1995, just as the personal computer revolution and rise of the internet was transforming society and boosting productivity – similar to the potential impact of AI today. But is that where the similarities end? Starting points matter. 1995 began with the 12-month forward PE of the S&P 500 at just above 12x, versus around 22x now. We also know that the latest 1990s was characterised by a potentially favourable macro backdrop of falling inflation and unemployment, and hyper-globalisation. A structural decline in bond yields contributed to a rerating of equity multiples. By contrast, today’s global backdrop of economic fragmentation is keeping inflation sticky and means the supply side is prone to shocks. With government finances increasingly stretched, bond yields are likely to remain high, and macroeconomic volatility is expected to continue. Investors should take the potential impact of AI seriously. The current bull run could continue for a while. But with many of the tailwinds of the 1990s now acting as headwinds, could Alan Greenspan’s (premature) bathtub musings of “irrational exuberance” in 1996 be more relevant to today’s market environment? Market Spotlight Spread thin Credit spreads – the gap between the cost of borrowing for governments and corporates – have narrowed to near-record lows this year. The spread on US investment grade (IG) credit, for example, tightened to 0.72% the week before, its lowest since 1996. High yield spreads are also close to long-run tights. And it’s a similar story in European credit too. The credit rally has been a highlight of global investment returns this year. In part, it’s been driven by easy financial conditions, better-than-expected earnings, resilient balance sheets, and stable leverage. The limited impact of tariffs on company profit margins, so far, has also spurred confidence, and the recent decision by the Fed to cut rates despite elevated inflation could further fuel the positive backdrop. For investors, narrow credit spreads can mean slimmer returns, but with US rates still relatively elevated, ‘all in’ yields remain attractive. Given that firms with stronger balance sheets can be more resilient to economic cracks, some fixed income specialists prefer high-quality investment grade (IG) to high yield. The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Source: HSBC Asset Management, Bloomberg, Macrobond. Data as at 7.30am UK time 26 September 2025. Lens on… The rate escape There were no major surprises in the recent volley of interest rate decisions from major central banks. The US Federal Reserve restarted its easing cycle, while the Bank of England (BoE) and the Bank of Japan (BoJ) – like the European Central Bank (ECB) a few weeks earlier – kept policy on hold. But the decisions – and accompanying commentary – revealed diverging views on the outlook, and the near-term path for rates. In the US, new FOMC member Stephen Miran was the lone dissenter (favouring a 0.5% cut) in an otherwise unanimous vote for a 0.25% cut (to 4.00-4.25%) on labour market weakness. Despite elevated inflation, the market is pricing two more 0.25% US cuts by year-end, and two in 2026. Elsewhere, the BoE has been divided since the summer on the risks of elevated inflation and weak growth, with further UK cuts not now expected until 2026. A bigger surprise was at the BoJ, where the prior assumption of there being no rush to tighten policy was dashed by two dissenting votes, which put a rate hike this year back into play. One central bank closer to resolving these policy dilemmas is the ECB. After eight rate cuts, eurozone inflation is close to target and policy is in neutral territory – mission accomplished. The efficient frontier Frontier market stocks have outperformed both emerging and developed markets this year – with the MSCI Frontier index up 33%. That’s been driven by the tailwind of a weaker US dollar and the relatively insulated nature of Frontiers from global market volatility. Discounted valuations, steady profits growth, and strong structural stories have all attracted investors – and new policy easing by the Fed could be another catalyst. According to some equity experts, there continue to be broad opportunities across the asset class. One example is in Gulf Cooperation Council (GCC) countries, which have taken a mediating role in regional geopolitical issues, whilst prioritising domestic reforms. Saudi Arabia, for instance, continues to press ahead with investments in major national initiatives. Meanwhile, a better-than-expected outcome on US tariffs should mean that Frontiers continue to benefit from a re-routing of global supply chains, including growing demand for ‘nearshoring’ from Europe. In sum, relatively low volatility, low intra-country correlations, and the continued tailwind of a weaker US dollar all support the positive outlook for Frontier equities. AI as an equaliser An interesting trend in generative artificial intelligence (AI) isn't just how popular the technology is becoming, but where uptake is happening more quickly. Recent data from an NBER and OpenAI project show that ChatGPT adoption has risen threefold (from 10% to 30% of the internet-using population) in the richest economies over the past year. Yet, the real surge is in middle-income countries, where usage has jumped 5-6 times. There isn’t much difference now in ChatGPT usage between countries at the 50th vs 90th percentile of GDP per capita. For example, Brazil, South Korea, and the United States all now show similar usage levels and near-universal internet access, despite having GDP per capita of USD10k, USD34k, and USD86k, respectively. This convergence could have meaningful market implications. Generative AI is expected to deliver around 25% of productivity gains over the medium-long run, according to academic research. If middle-income economies embed these AI tools faster than their developed peers, they may capture efficiency dividends sooner. This could support equity upside in emerging and frontier markets. Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. You cannot invest directly in an index. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Source: HSBC Asset Management. Macrobond, Bloomberg. Data as at 7.30am UK time 26 September 2025. Key Events and Data Releases Last week The week ahead Source: HSBC Asset Management. Data as at 7.30am UK time 26 September 2025. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector or security. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Market review Risk markets struggled to make headway. Fed Chair Powell emphasised two-sided risks on inflation and the labour market, dampening optimism for significant US rate cuts. The US dollar strengthened against a basket of major currencies, while gold prices reached new highs. 10-year US Treasury yields rose modestly, with the front-end losing ground with four 0.25% rate cuts now priced in by end-2026. US and euro area IG credit spreads widened slightly but remained close to record tights. In equity markets, US stocks broadly retreated, with weakness in tech stocks weighing on the Nasdaq. The Euro Stoxx 50 edged down, while Japan’s Nikkei 225 rose to another all-time high amid a weaker yen. EM Asia equities were mixed: South Korea’s Kospi declined, whereas China’s Shanghai Composite and India’s Sensex rose. In commodities, oil prices rallied amid lingering concerns over geopolitical risks. https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-weekly/1990-s-redux/

2025-09-26 07:03

Key takeaways Table of tactical views where a currency pair is referenced (e.g. USD/JPY):An up (⬆) / down (⬇) / sideways (➡) arrow indicates that the first currency quotedin the pair is expected by HSBC Global Research to appreciate/depreciate/track sideways against the second currency quoted over the coming weeks. For example, an up arrow against EUR/USD means that the EUR is expected to appreciate against the USD over the coming weeks. The arrows under the “current” represent our current views, while those under “previous” represent our views in the last month’s report. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-trends/usd-sentiment-dominating-fx-markets/

2025-09-22 12:02

Key takeaways As widely expected, the BoE kept rates on hold and slowed QT in September… …and the Fed’s 25bp cut came in line with market expectations, albeit with marginally hawkish details. We expect GBP-USD to go higher in the months ahead, while fiscal risks could weigh on the GBP against the EUR. On 18 September, the Bank of England’s (BoE) Monetary Policy Committee (MPC) voted by 7-2 to keep its key policy rate on hold at 4.0%. The decision came in line with market expectations. On quantitative tightening (QT), the BoE announced that the stock of the UK government bonds (known as “gilts”) held in the Asset Purchase Facility (APF) will be reduced by GBP70bn over the next 12 months, compared to the previous GBP100bn-a-year reduction pace. The central bank will also aim to sell fewer long maturity gilts than gilts at other maturities. Slowing QT and reducing the proportion of long maturity gilt sales should generally help stabilise financial market conditions and the GBP, but the impact may prove marginal. We think that the Autumn Budget (26 November) is likely to remain the key driver for the GBP in 4Q25, with the fragility of the UK government finances being a key risk for the GBP. Higher long-term gilt yields (Chart 1) would likely weigh on the GBP if it comes to growing market concern on the UK government’s capacity to meet its fiscal target. Higher taxes or lower government spending may also add to GBP woes for an already stalled economy. But the GBP weakness is likely to reflect against the EUR. Source: Bloomberg, HSBC Source: Bloomberg, HSBC As for GBP-USD, US factors would probably have a more dominant impact. The Federal Reserve (Fed) resumed its policy easing, with a widely expected 25bp cut in September; however, the details of the decision were bordered on the hawkish side of expectations (for more details, please refer to USD: The Fed cuts rates for the first time this year). While these factors supported the USD, the outlook remains weak, as the Fed’s easing path is likely to be in contrast to much of other G10 central banks (Chart 2). We still expect the USD to weaken gradually in the months ahead, and that also means GBP-USD could go higher. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/gbp-usd-central-bank-decisions-in-focus/

2025-09-22 07:03

Key takeaways Japanese stocks hit an all-time high last week, with the MSCI Japan index up 20% this year in USD terms. Private credit proved its resilience in Q2 this year despite a tricky technical backdrop. Loan demand outpaced supply amid slow mergers and acquisitions and corporate buyout activity, while April’s tariff shock from the Trump administration injected volatility across markets. Gold has risen by nearly 40% to USD 3,700 an ounce this year, making it one of the best performing asset classes globally. Chart of the week – Global central banks – can you cut it? Last week’s 0.25% rate cut by the US Federal Reserve was billed by Chair Jerome Powell as a “risk management cut”. While core inflation – up 3.1% year-on-year in August – remains well above the Fed’s 2% target, it was the signs of weakness in the labour market that ultimately proved decisive in the FOMC’s decision. Put together, the macro signals point to a “stagflation lite” environment of weaker growth and still warm inflation. Yet, for now, stock markets continue to look through it. Expectations of a new round of Fed easing – paired with the ongoing AI-driven rally and a dip in policy uncertainty – have contributed to a strong performance in US stocks over the summer. But this hasn’t just been a US markets story... With emerging market central banks already cutting rates ahead of the Fed in this cycle, US dollar weakness this year created even more space for bold EM policy easing. With the exception of India (see Market Spotlight), this backdrop is a big reason why EM stocks and bonds have been among the best performing assets in 2025. In Q3 alone, we’ve seen significant stock market gains in mainland China, Taiwan, South Korea, Frontiers, ASEAN, and LatAm. Additionally, the latest Fed cuts could support a further broadening out of market returns, and add further impetus to EMs. Yet there are risks to today’s perfect-looking markets. A new cycle of Fed easing was widely anticipated, so the good news may well have already been priced in. Meanwhile, tariff uncertainty persists, which could spur further volatility. And valuations in US stocks remain high in places – with profits concentrated in technology sectors. With expectations so high, markets could be vulnerable to disappointment. Market Spotlight India – three factors to watch Some of India’s major asset classes have endured a lacklustre performance this year, yet the country’s impressive growth trajectory remains undeniable. That bodes well for a pick-up in investment returns – especially if headwinds around US trade and domestic growth start to fade. There are three key factors investors should watch. #1. How fast can India sustainably grow? The IMF sees 6%+ growth out to 2030, but some think that could stretch to double-digits. That’s ambitious in today’s multipolar world, with slower global growth and climate constraints. But India’s structural story – demographics, rural-to-urban migration, infrastructure, and innovation – is powerful. #2. All eyes on the INR. Dollar weakness has boosted emerging markets in 2025, but the rupee has bucked that trend, depreciating against the USD. That’s partly down to geopolitics, tariffs, and capital rotation to other parts of Asia. But from here, high real yields, a competitive FX rate, and solid external balances should help stabilise the rupee. #3. Growth at a reasonable price. Indian equities have lagged this year: +2% in USD terms versus +37% in China. In a multipolar world, this kind of country divergence could become the norm. With a PE ratio below 22x, and expected mid-teens earnings growth, Indian stocks trade at a multiple similar to that of the US, but with a cheaper currency and powerful long-term growth drivers. The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Source: HSBC Asset Management, Bloomberg, Macrobond. Data as at 7.30am UK time 19 September 2025. Lens on… Japanese rally Japanese stocks hit an all-time high last week, with the MSCI Japan index up 20% this year in USD terms. Behind the rally has been a pick-up in profits growth, corporate governance reforms, a better-than-expected trade deal with the US, and improving foreign investment flows. But it comes at a sensitive time. After the resignation of PM Shigeru Ishiba, a general election is set for early October. All eyes are on how the outcome might influence Japan’s fiscal path. A recent pick-up in 30-year JGB yields – a phenomenon seen globally – reflects that uncertainty. In practice, the Bank of Japan’s direction of travel appears clear, even if the timing isn’t. Last year it reversed course on years of loose policy by hiking rates in response to rising inflation and growth. Further hikes are likely, even if current progress has been slowed by tariff uncertainty, weak domestic demand, and politics. Private credit resilience Private credit proved its resilience in Q2 this year despite a tricky technical backdrop. Loan demand outpaced supply amid slow mergers and acquisitions and corporate buyout activity, while April’s tariff shock from the Trump administration injected volatility across markets. Yet, private credit held its ground. Some private credit analysts note that direct lending activity was modest, with additional financing for existing loans and refinancing driving volumes. With fewer deals available, competition for quality assets intensified, compressing spreads at the larger end and pushing some borrowers toward the syndicated loan market. The real anchor of the quarter was credit quality. Default rates remain low and broadly unchanged from 2024, underscoring the asset class’s defensive appeal. Investors have continued to allocate, with wealth channel inflows into semi-liquid vehicles adding momentum. Looking forward, proactive sponsor support, lender flexibility, and the restart of policy easing in the US should support activity. For seasoned managers, this environment presents opportunities to secure attractive, risk-adjusted returns. Gold rush Gold has risen by nearly 40% to USD 3,700 an ounce this year, making it one of the best performing asset classes globally. As a safe-haven, the yellow metal tends to outperform in phases of high geopolitical risk and rising inflation. In the past, the price has correlated closely with real (inflation-adjusted) US yields – but that relationship has broken recently, implying that other drivers are at play. One is likely to be the intensive gold buying of global central banks. From here, near-term price moves are tricky to anticipate. Some multi-asset analysts think a major pause or reversal is unlikely given that USD gold reserves remain very high everywhere. But some caution could be warranted. The last time gold reached current levels in inflation-adjusted terms was the 1980s. An alternative play on the asset class could be through exposure to quoted gold miners. A higher gold price has driven a surge in profits. But a lag in analysts adjusting forecasts to the higher price means 12-month forward PE ratios haven’t re-rated meaningfully from previously low levels – so there could be space for valuations to rise. Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. You cannot invest directly in an index. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Source: HSBC Asset Management. Macrobond, Bloomberg, LCD Pitchbook. Data as at 7.30am UK time 19 September 2025. Key Events and Data Releases Last week The week ahead Source: HSBC Asset Management. Data as at 7.30am UK time 19 September 2025. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector or security. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Market review Positive risk sentiment prevailed last week, with the US Federal Reserve cutting rates by 0.25% as anticipated. Fed Chair Powell signalled the latest policy easing was a “risk management decision”, reflecting “rising downside risks to employment”. The US DXY dollar index recovered from early weakness and was on course to finish the week flat, while gold prices reached another historic high. The Treasury yield curve steepened modestly, with 10-year and 30-year yields rebounding. European government bonds were range-bound, and both US and euro credit spreads remained tight. In equity markets, US indices, including the S&P 500 and Nasdaq, reached all-time highs, driven by robust technology stock performance. The Euro Stoxx 50 and Japan’s Nikkei 225 also saw positive moves. Other Asian equity markets mostly rose, though China’s Shanghai Composite retreated. https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-weekly/global-central-banks-can-you-cut-it/

2025-09-19 12:01

Key takeaways Revenues from live music events are on the rise as festivals and concert attendance reaches record highs. But stakeholders should note major sustainability risks, such as travel emissions, and increasingly, biodiversity loss. Investors should also examine the impact of streamed music on industry emissions and advocate for enhanced practices. Revenue from live music events is increasing as festival and concert attendance reach record levels. However, as discussed in this report, stakeholders should be mindful of significant sustainability risks, such as travel emissions and biodiversity loss. Investors should also examine the impact of streamed music on industry emissions and advocate for enhanced practices. Did you know? Live music events generated revenue of USD34.84bn in 2024 versus music industry’s trade revenue of USD29.6bn Power use accounts for almost 2/3 of a live event’s operational carbon footprint Nearly 30 tonnes of waste was collected at Wembley Stadium event, which was attended by 77,000 fans Greenhouse gas emissions from the US music industry almost doubled from 200,000 tonnes of CO2 to 350,000 tonnes of CO2 between 1977 and 2016 Estimates suggest that between 36g CO2 and 77g of CO2 are emitted during every hour of video streaming High-intensity noise pollution can reduce the activity of bats by 47% Sources: Custom Market Insights, Global Live Music Market 2025-2034; The Powerful Thinking Guide: Smart Energy for Festivals and Events, 2017; Brent Council Planning Committee Report, April 7, 2021; 'Ever wondered how we clean up Wembley Stadium after a game?’, The FA, 28 August 2019; The Cost of Music, Kyle Devine, the University of Oslo, Dr Matt Brennan, the University of Glasgow, 2019; G Kamiya, The carbon footprint of streaming video: fact-checking the headlines, IEA, 11 December 2020; J Hoker et al., Assessing the impact of festival music on bat activity, Ecological Solutions and evidence, 30 June 2023. The greening of live music events Live music events, including concerts and festivals, are major revenue earners for the music industry. In 2024, these events generated USD34.84bn, surpassing the USD29.6bn from music industry trade revenues, which include streaming, physical products, performance rights, synchronisation, and downloads. Fan attendance continues to hit new highs, and live event revenues are projected to grow four times faster than overall consumer spending. While this boom benefits local economies, it also brings higher environmental costs, affecting the sustainability of these events in the following ways. Transportation – Fans and artists travelling to the venues, whether by road or air, are the biggest contributors to a venue’s carbon footprint (Figure 1). Venues – Food wrappers and plastic cups are a usual occurrence on the floors of music venues after events, producing tonnes of waste that requires sorting and disposal. Merchandise – Printed artist T-shirts are fan favourites; however, their production and disposal face the same issues as the fashion industry. These items are often cheaply made with low-quality materials that don’t last, adding to the fast fashion problem. Figure 1: Carbon footprint of a tour Source: BBC (2019) Energy – Lighting, sound systems, heating and cooling requirements, instruments and refrigeration are all major contributors to a venue’s energy consumption. Power usage accounts for almost two-thirds of a live event’s operational carbon footprint. Research shows that live events are often inefficient in their power usage. For example, Netherlands-based Watt-Now monitored 270,000 data points from outdoor events over a two-year period and found that 77% of generators being used had an average load of less than 20%. Generators using hybrid power are becoming best practice in the sector, although some alternative energy sources come with their own sustainability risks. Music venues, e.g., stadiums – Beginning with design, venues must be adaptive to a changing climate, including rising temperatures and extreme weather events. Additionally, they must be constructed in a sustainable manner, adhering to labour rights and conditions. Industry stakeholders and researchers have suggested several steps to improve the sustainability of the music industry, which we summarise in Figure 2. Figure 2. Steps to improve the sustainability of the music industry Source: HSBC Let’s talk about streamed music Some commentators expect the rise of live streaming, hybrid events and on-demand concerts/videos to lower the music industry’s the carbon footprint. But, in practice, the environmental impact of digital music is hard to evaluate. A joint study by the Universities of Glasgow and Oslo found that the US music industry’s greenhouse gas (GHG) emissions almost doubled between 1977 and 2016, from 200,000 tonnes to 350,000 tonnes of CO2, which has been attributed to the rise in streaming services. However, carbon emissions from streaming have been declining in recent years, despite a rise in total streaming activity. Streaming of content involves data centres, content delivery networks, Internet transmission, and end-user devices like smartphones, TVs and tablets. Studies suggest that each hour of video streaming emits between 36g and 77g of CO2, but complexities in calculating the various elements involved, such as the energy efficiency of technology or energy/emissions allocation to shared elements, make it difficult to narrow the range to a more precise number. Assessing global streaming emissions is challenging due varying emissions across markets, influenced by each country’s electrical grid factors. For example, the Carbon Trust notes that video streaming emits 55g of CO2 per hour on average in Europe, 76g in Germany and 32g in Sweden. As countries decarbonise their electricity supply and modernise their grids, reducing data transmission intensity, we expect the climate impact of recorded music to fall globally. Greening of streaming Investors are increasingly scrutinising how digital service providers address environmental impacts, especially those related to streaming. Despite efforts, challenges in calculation remain. For example, Spotify aims for net zero emissions by 2030 and has reduced the size of its mobile app, optimised cloud usage and introduced dark mode for TV to cut emissions. However, in 2023, the company excluded Scope 3 Category 11, ‘Use of sold Products’, from reported emissions, highlighting the lack of standardised measurement methodologies for streaming emissions. Stakeholder pressure on firms for more transparency in this area will likely continue to rise. We think digital platform users should consider how they consume music as user devices make up the largest portion of the carbon footprint of music streaming (at just over 50%). To adopt more climate-friendly practices, music lovers can, for example, play music on smaller devices that emit less CO2, such as mobile phones rather than larger devices like TV, or download favourite songs for offline playback which also uses less battery capacity than streaming. The industry is responding Several live music industry participants, such as Live Nation Entertainment, have signed the “Festival Vision: 2025 Pledge”, committing to a 50% reduction in festival-related GHG emissions by 2050. On the music streaming front, major record labels, including Sony Music Group, Universal Music Group and Warner Music Group, joined forces in 2021 to sign a pact aimed at decarbonising the recorded music industry. This agreement requires signatories to either have verified science-based net zero targets or join the UN’s Race to Zero programme. In December 2023, these same record labels launched the Music Industry Climate Collective (“MICC”) to address challenges presented by global climate change. For publicly listed music companies, investors should carefully evaluate the credibility of their emissions targets and transition plans. We think music can serve as a catalyst to affect cultural and social change and the live music industry can do more to improve its sustainability record. Conclusion The live music industry can use its popularity and platform to raise awareness of climate change and sustainability. Investors should also be aware of factors that contribute to the industry’s carbon footprint, especially from concert tours and streaming. On a global scale, the lack of harmonisation standards makes it hard to measure the exact impact of streaming. However, working in concert, all stakeholders can drive the change necessary to help the industry reach its decarbonisation goals. https://www.hsbc.com.my/wealth/insights/esg/why-esg-matters/towards-a-green-day-for-music/