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Sunday, 19 November 2017

IFR Asia Green Bonds Roundtable 2017: Sustainable growth

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Asia’s Green bond market is beginning to bloom. Even in a quiet year for China’s domestic market, the arrival of first-time issuers from the likes of India, Australia and Singapore is adding new depth to the region’s green finance push.

Interest is broadening across a range of sectors, too. Since the Export-Import Bank of Korea launched Asia’s first Green bond in 2013, progress has depended largely on public policy institutions or state-owned banks, with just a handful of corporate issuers embracing the format. In the last 12 months, however, that universe has expanded significantly.

Asia’s green issuers now include a host of private-sector companies, from traditional and renewable power generators to property developers. The overseas rupee market has come on line; Singapore and Hong Kong have welcomed their first deals; Chinese issuers have printed in euros.

There is, of course, much more to be done. Financing the transition to a low-carbon economy will require far greater engagement from all levels of the capital markets, and many investors are still reluctant to realign their portfolios.

IFR Asia convened a panel of specialists in Hong Kong on July 11 to discuss the progress made so far and debate the challenges ahead. Standardisation, in particular, remains a thorny issue, despite the efforts of global market participants to draw up a set of voluntary guidelines – known as the Green Bond Principles.

There were calls for stronger market infrastructure to ensure that issuers live up to their commitments and investors’ portfolios are truly aligned with their mandates. The panel discussed the potential for punitive measures for errant issuers, perhaps through ratings actions or regulatory penalties, as well as the additional costs involved with green certifications.

Speakers also discussed the idea of regulatory incentives, perhaps through tax breaks or lower capital requirements, which could stimulate the development of a green bond market across Asia. A consensus emerged that the market was not yet ready for premium pricing for green securities, although investors are looking to climate-aligned investments to outperform in the long-term.

The audience tested the panel on a number of topics, including whether a green investment today would still qualify as green in 20 or 30 years’ time, given the pace of technological change and regulatory developments.

Delegates left with plenty to think about, including one point where the panel presented a unanimous view: that the US withdrawal from the landmark Paris climate agreement would not affect the growth of the green market.

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To purchase printed copies or a PDF of this report, please email gloria.balbastro@thomsonreuters.com.

 

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