Lack of unified standards is major challenge for green bonds in APAC

Proliferation of standards including international, regional, and domestic standards issued by regulators in China and the EU results in market segmentation

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Chengdu, China - The lack of unified standards for issuance is a major challenge for prospective green bond issuers in the Asia-Pacific even as this asset class is gaining traction in the secondary markets.

This is the consensus reached by experts during a panel discussion at the 13th Asia Bond Markets Summit held at the Grand Hyatt Hotel in Chengdu where it was recognized that green bond investors are expecting an alignment of standards to take place eventually. The summit was attended by about 250 asset managers, asset owners, and financial experts from around the region.

At present there is a proliferation of standards including international, regional, and domestic standards issued by regulators in China and the European Union. The proliferation of various standards has resulted in segmentation in the green bond market.

Ultimately, the formation of a set of unified standards for green bonds should depend on the understanding of the investors who are the key movers of green bond issues.

More broadly, asset managers and asset owners have begun to incorporate environmental, social, and governance (ESG) principles into their fundamental research but this is expected to be a long-term process.

In China, asset managers are taking the lead in pushing ESG investing by working with asset owners and pitching the need for ESG investing and global ESG practices, as well as how ESG can impact risk management and improve returns.

One issue with ESG investing in China is that there is not enough data to provide sufficient information and basis for using ESG investment strategies and practices. But asset managers are working with third-party data providers to address this problem.

The regional green bond market is seeing more diversified investors such as new green-focused funds and asset managers. More green bonds are also expected to be issued by corporates in various industries.

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Date

28 May 2019

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