14th Asian Bond Market Summit - Financing strategies evolving to meet sustainability objectives
Experts agree that ESG is becoming a very strong asset class
SINGAPORE - Emerging markets bear more than their fair share of fickle funds flow that often leads to sharp market corrections. Issuers and investors need to be mindful of the risks while remaining nimble to take advantage of windows of opportunity. Under this backdrop, is the sustainable finance agenda at risk in the face of slowing growth?
At the Asset’s packed 14th Asia Bond Markets Summit in Singapore on November 13 delegates are eager to learn about the latest trends in debt capital markets. The first panel of the day examines how sustainable finance is possible during uncertain times where the trade war, global slowdown and increased volatility cloud the investment outlook.
Financing strategies are evolving to meet sustainability objectives, and with total issuance size of sustainable debt over US$1 trillion in 2019, and an expected 380 billion issuance in the Asian USD bond market, the ESG type of asset is a very strong asset class according to Jeff Zhang, global head of debt capital markets, CTBC Bank, and Siong Ooi, managing director, co-head of debt capital markets - loans & bonds, Asian investment banking division, MUFG.
However, in Australia, although there is not as much regulatory support as in other countries, the sustainable market remains active due to the participation of banks, explains David Jenkins, head of sustainable finance, corporate & institutional banking, National Australia Bank. “Major issuers for sustainable bonds are from SSA and banks. We are seeing diversified issuers. Corporate issuers are growing as well.”
Despite low yields for longer, risk-adjusted return pressures do not appear to be dampening the appetite for sustainable finance. “When there is market volatility, investors prefer ESG assets in countries such as India and Australia. We are seeing the market is moving from a traditional market to an ESG market,” says Ooi. Mervyn Tang, senior director, global head of ESG research, sustainable finance, Fitch Ratings, noted that, “There are more and more green bonds to be issued in the pipeline. Different investors will have different opinions on whether the asset is green or not.”
The formosa bond market in Taiwan is growing green, as foreign issuers are starting to tap the green market. However, only 20 to 25 billion USD sustainable bond issuance is expected from China issuers this year, and 80% to 90% of the issuers are SOEs and banks, meaning they are relying on mega issuers,” says Jeff Zhang, global head of debt capital markets, CTBC Bank. Tang thinks this is because China is facing the challenge of balancing environmental issues and economic growth. Zhang believes that government support is needed to push down the pricing of sustainable finance.
The current trends and opportunities in the renewables financing market in the Asia-Pacific are primarily energy related with wind and solar the mainstream asset classes in Taiwan and Malaysia, notes Ooi, and more hybrid structures and innovation in the renewable deals are being seen, but regulators should ensure the consistency of the regulatory framework to create momentum in the market.
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