IFR Asia’s 6th annual Green and Sustainable Financing Roundtable took place on August 20, 2020, amid a period of unprecedented change in the capital markets.

The Covid-19 pandemic has forced businesses everywhere to change the way they operate, and IFR is no different. Originally scheduled as a face-to-face discussion, this year’s Outlook for Asian Credit Roundtable brought together a cross-section of market participants for a live webcast – a first for this publication.

IFR’s ESG webinar took place on June 23, days after the European Parliament had passed the EU Taxonomy Regulation, and soon after the Green and Social Bond Principles Annual General Meeting had unveiled Sustainability-Linked Bond Principles for ESG targets-based general purpose bonds. (Not to be confused with use-of-proceeds sustainability bonds, ICMA was careful to point out).

IFR has conducted its German Corporate Funding Roundtable for around a dozen years now. The conversation that took place in early June as a closed video conference call was clearly and easily the most extraordinary, given what had happened in the previous quarter.The impacts and effects of Covid-19 as a public health issue first and a second-order economic issue need no repeating here. Yet despite the dire macroeconomic data and forecasts, the capital markets have experienced one of the best periods in their recent history. Since the severe collapse in equity and bond prices towards the end of March, markets have staged a remarkable comeback. Bond issuance volumes have hit records and while credit pricing may not have recovered its – arguably overbought – pre-Covid levels, the market is offering issuers tremendous opportunities to lock in keen costs of funds at a highly uncertain time. Both of the issuers on the session – BMW and E.ON – have taken full advantage of the opportunities the market has afforded them. While deals are being executed at a rapid clip, the market isn’t exactly euphoric although it has to be said the central bank and government support packages are acting as a robust backstop and creating a broadly comfortable if nervy tone. Discussion on the IFR call did question whether the government and monetary support generally was perhaps going too far and whether governments had over-reacted, creating into the bargain a strange juxtaposition of rampant inflation in financial asset prices set against a backdrop of dire economic impacts. What came up in discussion was an interesting notion that public authorities have created a series of temporary fixes to an economic problem using financial tools that are not necessarily appropriate. And, in the haste to get something out, not all of the monetary tools and programmes may necessarily have been well thought out. The bigger issue, of course, is how governments and monetary authorities exit their bazooka programmes.Panellists questioned the extent to which fundamentals justify current spreads, but by the same token investors do not have the luxury of putting liquidity aside and waiting for better levels. Neither of the investors on the call have really altered their approach to the bond market. Nor have DCM originators. While the impacts of Covid-19 have been grave and called for caution, the bond market has been through crises before. All of that said, the there was a sense on the call that capital markets participants have been acting at the same time as wondering if it made sense in the long run.In light of developments from March, IFR’s panellists – two issuers, two investors (Union Investment and Ampega Asset Management), and two bankers (HSBC and Commerzbank) – followed similar paths of operationalising risk-mitigation processes, conducting internal stress tests and scenario analyses to try and make sense of emerging developments with a view to keeping the capital markets functioning.