Sustainable funding held up in Asia during a rough patch globally last year thanks to strong local demand, and bankers say a pipeline of de-carbonisation projects is likely to keep deals flowing in 2023.
Issuance of bonds tied to environmental, social and governance (ESG) themes grossed $142 billion in Asia Pacific last year, barely below the record $144 billion of 2021, according to data from Refinitiv
That contrasted with declines of 30 per cent or more in total issuance in Europe and in the United States.
Participants say the 2022 issuance in Asia was fuelled on the supply side by the gargantuan task of greening Asia’s energy grid and by low yuan interest rates in top issuer China, where investment from domestic institutions supported prices
“Increased issuance in domestic currencies has compensated for the fall in the cross-border market, which was similar to the global picture,” said Atul Jhavar, head of sustainable capital markets for the Asia-Pacific at Barclays.
“We’ve seen a bunch of ESG-labelled issues, especially in currencies like the yuan.”
Chinese entities issued 59.3 per cent of the ESG bonds in the Asia-Pacific region in 2022, with total proceeds totaling $84 billion, up about 6 per cent from $80 billion in 2021. The number of issuers rose slightly, to 281 from 279.
The interest rate backdrop for issuers was favourable in China. Interest rates there remained lower and steadier than in the inflation-hit West. Three-year government bonds yield 2.5 per cent in China against 3.9 per cent in the U.S..
South Korea took the second spot, issuing $20 billion in ESG-linked bonds last year. Issuance in the Philippines more than doubled to nearly $8 billion.