IFR Asia and LSEG LPC: ESG Bond and Loan Financing Roundtables 2025: Bond Panel
IFR Asia: Javier, maybe you can start by giving a picture of what the ESG bond issuance trends are like in Asia at the moment.
Javier Carballo, Credit Agricole CIB: Absolutely. The broad theme here is that the market continues to grow. For ESG-related bonds, the market grew by about 4% last year, 10% the year before. And we are about halfway to where volumes were last year.
Of that, some 70% are use of proceeds bonds, whether it’s green or sustainability. That’s something that has been consistent throughout the years, even when markets have peaked.
In terms of ESG-related bonds as a percentage of total volumes, that runs somewhere between 18% and 23%.
The use of proceeds green bonds are here to stay. They’re measurable, transparent, and easy. We’ve seen the emergence of sustainability bonds, particularly the last two years, which is effectively the mix of green and social use of proceed bonds.
Right now, what we need to consider is how we improve the depth and substance. We’ve got topics like sustainability-linked bonds, which were big about four years ago but have really tailed off.
Everyone in Asia continues to talk about transition finance, which is a very tricky topic. But it’s a topic that should be at the forefront of every regulator’s, every issuer’s and every investor’s mind.
Asia Pacific markets have generally been active in ESG bonds. South Korea has been a very consistent issuer within public markets – we’ve seen issuances from Industrial Bank of Korea (IBK), Hanwha Energy, Export-Import Bank of Korea, Shinhan Bank, and Posco and Korea Housing Finance Corp in the Kangaroo market. In Hong Kong, we’ve got the Hong Kong Special Administrative Region and Hong Kong Monetary Authority. From mainland China, we had the State Power Investment Corporation’s green hybrid deal and Bright Food’s roadshow for sustainability bonds.
Also the National Broadband Network Australia did a sustainability 7.5-year euro bond, which was extremely well received.
India definitely has a lot of potential. We did the US$1bn green senior secured bonds for Greenko in March – so the quality and range of issuers is there. The Securities and Exchange Board of India just established a new ESG finance framework on June 5. It’s a good use of a framework that is locally relevant and hopefully that becomes a catalyst for a broader reach out into international markets.
What’s interesting about Asia Pacific is that governments have been very proactive in terms of ramping up taxonomies and frameworks, and that’s what’s driving the issuance in local currencies.
Finally, because I know questions about greeniums will come up, I’ll touch on that a little bit. Credit Agricole CIB tracks greeniums in developed markets, and in Europe, it’s probably one to five, but here in Asia, I think the dynamics are really market-driven. Let’s take the IBK deal, for example, that priced at a negative concession of three or four basis points through the secondary curve. At the end of the day, whether that was labelled or not, I think you’d have the same uptake.
There are a lot of funds here looking primarily at yield and obviously at the label. If you get both, fantastic, but at the end of the day, I think the market focuses on looking at the primary supply.
In the past, issuers would be asked, “Are greeniums the reason why you would access the ESG market?” That discussion has moved, and it’s a little more holistic now. It’s because more issuers have a framework, a decarbonisation strategy and social goals. And what better way to communicate it to the market than by putting something out there that’s credible, that’s measurable, and that the market can assess on its own merits.
IFR Asia: Hafiz, what are you seeing in terms of issuance trends, and maybe touching on local currency as well?
Hafiz Hussin, DBS: To supplement Javier’s points, a key driver is sustainable finance regulations in various markets. Sebi recently issued guidelines for sustainable bonds and sustainability-linked bonds adding to the green bond guidelines that were previously issued. This was also marked by the issuance of India’s first SLB by L&T in June 2025. In late 2023, the Indonesian regulator, Otoritas Jasa Keuangan (OJK) also issued guidelines for sustainable debt capital markets locally driving new issuances.
These regulations are key because it gives execution certainty to support the local sustainable debt capital markets, which had generally been untapped. Since the release of such regulations, domestic issuers have been tapping local currency markets to raise capital to support their sustainability objectives.
Another key driver is the development of investors’ internal ESG policies and sustainable finance guidelines. Asset managers and asset owners, even those without ESG-focused mandates, are starting to look at sustainability considerations and how to integrate them as part of their due diligence and credit assessment process. To ensure continued access to capital markets, sustainability increasingly needs to be integrated into an issuer’s overall strategy when they go to market. Issuers need to better communicate their strategy to manage key climate risks and material ESG issues.
I expect the market to continue to remain stable this year despite the setbacks we have in the West and geopolitical tensions, mainly because sustainable finance is the most effective way to communicate your sustainability strategy to investors.
IFR Asia: Melissa, what kind of developments have we seen in this region in terms of regulations or standards?
Melissa Cheok, Sustainable Fitch: This year we’ve really seen a focus on taxonomies, focused on transition specifically. That’s building on the momentum that we’ve seen all across APAC with the Singapore-Asia taxonomy and the ASEAN taxonomy. India just came out with their own guidelines and they’re going to be publishing a taxonomy soon.
Just last week [on June 17], we saw Australia release their taxonomy as well, very clearly highlighting critical sectors to the Australian economy, which I think really underscores that there is a balance being struck between sustainable performance and economic growth, security and continuity.
Increasingly, we’ve been getting a lot more issuers in the region wanting that extra analysis. Not just in relation to the EU taxonomy, but according to localised taxonomies. There is growing demand and an acknowledgement that there is a need for localised decarbonisation pathways across APAC.
Every economy in this region is different and not all of them can decarbonise at the same rate. It’s good to see that understanding emerge, especially from the regulators who are very much pushing this forward.
Another area we’ll probably see develop even further is corporate disclosures. Last year, we saw several countries commit to the International Sustainability Standards Board, which sets a baseline reporting standard. Hopefully, that will improve not just the quantity but the quality of data being collected and reported.
That is not just happening in APAC, but globally as well. We saw US states like California pushing ahead with climate disclosures; the same with Brazil and China.
Through the years, we have seen disclosures improving over time. There is less conflation of terms and more understanding of the nuances between different types of terminology and what exactly is being measured, which is obviously a good thing.
Something I wanted to maybe draw attention to is the EU Omnibus proposal. I know it seems very far away but obviously there are efforts now to consolidate and simplify reporting standards. There is also an element of expanding the room for transition where they’re going to allow partial alignment to the EU taxonomy. That opens up more eligibility for projects to be considered for financing, whereas before it was more of a binary classification that excluded a whole bunch of sectors from tapping sustainable finance. Hopefully this means less work for ESG compliance people and ESG reporting people in all the companies that we serve across the region.
IFR Asia: Hafiz, transition finance is something that comes up a lot. We see a lot of transition bonds in Japan, but is that going to come to the rest of Asia?
Hafiz Hussin, DBS: Transition finance is definitely a space to watch, especially in Asia. Many of the region’s taxonomies have now started to consider transition use of proceeds as eligible activities for sustainable finance. But there’s still a lot of hesitation from investors because there’s not just one definition on what constitutes a credible transition. For example, looking at the different and diverse economies in Asia, what is considered transition in Indonesia is just not the same versus Singapore.
While I don’t expect transition as a label for sustainable debt to pick up in the near term, there are industry efforts underway to seek clarity on the definition of transition finance. Additionally, investors are demonstrating a growing interest in understanding and evaluating the credibility of issuers’ transition plans which will drive some of the efforts to harmonise transition finance.
For issuers, what is important is integrating transition considerations as part of the overall corporate strategy, especially for corporates in carbon-intensive sectors. It’s no longer a good-to-have but rather a must-have to disclose issuers’ decarbonisation plans.
This is not just in the international markets but also in the domestic markets as well. Many regulators are also pushing for alignment to ISSB standards to address transition and physical risks. How I see it is that transition is now a part of an overall corporate strategy – not just looking at specific labels that are assigned to a debt instrument.
IFR Asia: Is that what you’re seeing, Javier, that it’s not captured in the labels, but there is a transition element in a lot of the financings?
Javier Carballo, Credit Agricole CIB: I think the way I’d put it is, every discussion, whether it’s labelled or not, there’s an onus for the issuer to really outline their decarbonisation strategy to the markets – the depths of it and the specific steps they’re taking.
I think to grow the market, the best scenario is that transition finance has to be labelled. The problem with that is, when you put a label on it, it has to be credible, measurable, with clear disclosure, clear impact reporting, and also, from the investor standpoint, you cannot expose them to potential greenwashing.
So, it’s a chicken-and-egg situation. We need more of this sort of finance to come out so that we have a benchmark from which to structure future deals. And in the course of the issue, once you optimise the market, it becomes a better market.
If you look at Japan, which is the market everyone likes to point to, where the regulator and the Government of Japan have issued transition bonds, that’s basically been used as a benchmark for others to do so. I know Singapore issued a taxonomy in December 2023 that had a very specific transition element to it. Meanwhile, South Korea has a taxonomy with different transition categories.
For the market to grow, it needs a label, but for it to have that label, it has to be absolutely credible.
It’s a bit of a conundrum, right? Because we’re at a crossroads. You can issue one label that isn’t as convincing, but does that really help grow the market? It might do the opposite. It might turn issuers away and say, “Why do I need to deal with this when I can just talk about my transition strategy in the context of a regular bond deal?”
IFR Asia: Melissa, what are you seeing for the future of sustainability-linked bonds?
Melissa Cheok, Sustainable Fitch: I think most of us here in this room would understand that SLBs have been highly contentious for the last several years, for various different reasons, with regard to credibility, ambition of the bonds, as well as whether the reward and penalty system is really helping the market grow.
But this year is actually a very critical year. We have about 100 SLBs totalling US$70bn within our rated universe that will be coming to their observation dates, where they have to reveal how they’ve performed against their sustainability performance targets (SPTs). Whatever comes out of that will probably shape the narrative going forward.
In terms of whether transition has replaced SLBs or vice versa, I think that’s quite difficult to say, but I will say transition finance has evolved alongside SLBs. It’s not come in to fill a dearth, but it’s just another topic, and I think with any label in the market, it’s just a tool. It’s a tool for companies to raise financing to address what that they need to make more sustainable or green overall.
For the lack of an absolute definition, we are still seeing pockets of development happen. So the need for that is formalising a bit more, where you are seeing regulators come out and say, “We would like to see credible transition plans”.
If you harken back to two or three years ago where perhaps it was enough to make a bold claim that, “We’re going to be net zero by 2050 or 2060”, whatever that might be. Now, we’re seeing a lot more pressure being placed on issuers to really prove that they are on track to achieving those goals. It’s no longer a PR marketing campaign. We need to see credible and material progress being made.
That could ultimately end up, in a way, helping SLBs as well as sustainability-linked loans (SLLs), because being able to look at a transition plan and whether it’s credible or not, that is an element of transparency that has been lacking in the SLB and SLL market, which is already an opaque market.
We could see that help to bolster some issuance and address some of the problems, but that’s, again, a bold claim from myself. We need to see issuance come through and hopefully, a bit of a rebrand with regard to SLBs.
And then you really just need some companies to make use of this structure and show genuine improvement in their SPTs. Whether it’s a step-up or step-down coupon, these should be well calibrated, measured and can be delivered upon. Then, hopefully, we’ll see the market grow together. But I don’t think transition finance is going to replace SLBs, to address your earlier question.
IFR Asia: Should we expect a return to SLBs, perhaps in some of the local currency markets?
Javier Carballo, Credit Agricole CIB: Before I answer that, I’ll start off by saying I don’t necessarily want to separate SLBs from transition finance because SLBs can be a relevant approach to transition. I know that we categorise them as separate types of financing, but really, the SLB can be your link to achieve the transition. So maybe that’s the step that we’re all missing, and how this market finally takes off.
Now, SLBs have been proven to work in certain situations. In Italy, Enel missed their targets and there was a coupon step-up. Yet a lot of other Italian utilities have successfully issued SLBs, and those still exist.
In India, I think what they’re doing is something that other regulators should really do to give their high-profile issuers the confidence to structure these and to approach markets.
A very clear and defined framework from the regulators to issue that type of instrument is something that will drive markets. And as more domestic issuance comes through, hopefully that spurs a little bit more momentum into this space because it is a useful tool. I think it provides you with flexibility from a funding standpoint, because it’s not tied to specific use of proceeds, but again, what’s tricky is, the measurement, the levels, whether the step-up is really credible or punitive enough? These are all the issues that need to be addressed.
Hafiz Hussin, DBS: I absolutely agree that SLBs or sustainability-linked financing in general is a key tool. If you talk about a credible transition plan, what we’re essentially talking about is the plan to achieve future decarbonisation targets.
So sustainability-linked financing or having a framework that talks about how credible these targets are would be key to explain the narrative on your transition plan.
To be honest I think there’s a bit of unfair scrutiny on the sustainability-linked financing market. I think this could also be due to different standards of approach when it comes to structuring some of the sustainability-linked financing across both loans and bond markets.
I think what is needed to actually align the market is increased standardisation in the approach to structuring sustainability-linked financing so that there aren’t any differences in how these instruments are being structured across different markets and instruments.
At the end of the day, it’s all about having the courage to say, “This is my strategy, these are the targets I’ve set, and I have set it ambitious enough that even during the observation date, if I don’t meet that target, that means it’s a well-structured sustainability-linked financing instrument because that target was structured in a very credible manner”.
And if you don’t meet your target, then it’s all about communicating the narrative to investors. “Why haven’t I been able to meet those targets? These are the factors and this is my strategy going forward.”
Sustainability-linked financing, in my view, is about the ongoing conversation an issuer can have about their strategy. Sustainability-linked financing is a useful tool to enable an ongoing issuer-investor communication.
Melissa Cheok, Sustainable Fitch: Last December, Thailand issued their first sovereign SLB, which was over-subscribed. If we look at what exactly they were trying to achieve, it would be greenhouse gas emissions reduction and then an increase in electric vehicles with a step-up and step-down of 2.5bp. Whether or not that’s punitive enough or enough of a reward, I’m not too sure.
But the good thing about a sovereign SLB is that we’re seeing interest from other emerging markets across the world. I believe Slovenia is one of them and Mongolia. Also at the sovereign level because it is a public commitment, there is that transparency. You have to report on how you’re performing against your SPTs as well as the correct KPIs.
Further, sovereigns have the ability to make systemic change, so that trickles down through the real economy. I think that is perhaps maybe one way that SLBs make a comeback.
IFR Asia: Hafiz, we’ve talked a lot about the environmental side of finance, but what about social-labelled bonds? Are you seeing continued traction from issuance there?
Hafiz Hussin, DBS: Yeah, I think we are seeing quite a good volume of social bonds, especially in developing markets where there’s really a strong domestic social agenda. Just yesterday [June 23], state-owned Bank Rakyat Indonesia announced its Rp5trn social bond where DBS acted as the ESG adviser.
The deal is linked to some of the bank’s domestic programmes to do with empowering women, supporting micro entrepreneurs and other marginalised populations.
This is not the first social bond issuance that is coming out of the Indonesian market. We saw multiple entities: Pegadaian, Sarana Multigriya Finansial and Sarana Multi Infrastruktur that are also tapping the social bond markets this year.
Within the financial institution space, there is a strong social agenda that could be tied to potential social bonds, and that’s something that we are seeing quite actively in the local bond markets because the funding needs are mainly in local currency.
I think there are other pockets of businesses in developing markets that could also tap on social bonds as well. If the business itself is closely related to supporting social development then these instruments are a good avenue to raise capital.
IFR Asia: JAVIER, when an issuer does a social bond, does that get the same influx of money as a green-labelled bond does? Are they the same investors?
Javier Carballo, Credit Agricole CIB: Typically, the more predominant issuers of social bonds will be financial institutions and the supranationals, sovereigns and agencies (SSAs). The label is important being obviously, consistent with what they do and how they function as entities. I would say that, absolutely, we continue to believe that ESG in any form is a key differentiator. I think social bonds have come on by leaps and bounds. There are some social frameworks that are still in development, but for the most part, that’s really taken a leg up.
How does it manifest itself in the order book? Social bond funds are still in their infancy stage, ramping up. But, again, at the end of the day, because of the fact that it is labelled, easy to compartmentalise and assess objectively, you’re going to get a higher-quality order book. There are going to be more lines in the order book, and that’s going to create that pricing momentum.
So, at the end of the day, I think it just leads to more support for your potential bond. South Korea’s IBK was a social bond, which was extremely well received, and we’ve seen that in other cases as well.
IFR Asia: Melissa, are you seeing that social bond issuance is still resilient? Are there any particular new varieties coming through?
Melissa Cheok, Sustainable Fitch: Very much so. We did an analysis of the first quarter of this year compared to all the previous quarters. And this year, it is resilient against other labelled instruments, but I think it’s down 20% versus the same quarter last year. But the fact that it is resilient shows that investors are still committed to the theme, and that there is a need for it.
FIs have been particularly active in this space. Themes that we are seeing with regard to alignment with the Social Bond Principles would be things like affordable housing, socio-economic advancement, particularly with a focus on financial inclusion, gender empowerment, particularly focused on women, as Hafiz mentioned.
We’ve also seen supranationals, I think led by the International Financing Corporation (IFC). Traditionally, they have been very good at reporting and transparency about use of proceeds. We see that continuing as a trend.
But I think with the increased politicisation of climate change, particularly in the West, I think social sustainability bonds present an opportunity, especially for impact-focused investors who still want a positive return and they might not want to go for maybe the flashier green or any sort of climate-related use of proceeds bond.
IFR Asia: One term that’s gained attention this year is greenhushing. Have you seen any signs that issuers are downplaying the ESG aspect of their issuance?
Melissa Cheok, Sustainable Fitch: Like everybody here, we’ve read the news of a lot of banks pulling out of those public alliances. But we have just released a report analysing corporate climate targets and how companies are executing against that. Based on a sample of 40 of the largest issuers, we found that, at a high level, they are still committed to their climate change goals. It might just be they’re pulling back to avoid scrutiny or being made an example of with the current administration in the US, for obvious reasons. But I think there has not been a massive shift away from delivering on those goals. Maybe just the communication around it has scaled back a little bit, and understandably so. This is particularly so for the hard-to-abate sectors.
So already in this part of the world, it’s quite difficult for them to access financing at scale, you can imagine in the West, where this is coming under scrutiny, it is even harder. So ultimately, we have not seen a huge shift away from being committed to their climate targets overall.
IFR Asia: Who do you think needs to drive the future adoption of ESG bond issuance? Is it the governments or the regulators? Is it the issuers or investors?
Javier Carballo, Credit Agricole CIB: You know, someone told me it takes two hands to clap, but it takes three to sing ‘Kumbaya’. So, I think it’s a combination of the three. The same way the green bond market develops, that was a good interplay between the regulators and the governments pushing the agenda, investors really wanting to understand and embrace the product, and issuers really challenging themselves to establish credible projects.
You can apply that formula to what we’re trying to build in terms of the other parts of ESG, like SLBs, transition bonds, or others. But it’s difficult because investors don’t want to be exposed to anything that can be construed as greenwashing. You have issuers that also don’t want their credibility to be questioned because their targets aren’t strong enough. And then regulators also don’t want to come up with regulations or taxonomies and find that no one’s issuing consistently with those taxonomies or those frameworks.
So, it has to be a concerted effort, and again, there is a model for it. The way the green bond market was cultivated and grew – that’s a good place to start.
Hafiz Hussin, DBS: Yeah, definitely all three have a key role to play. I would like to call out to the good work that the Singapore government agencies are doing with various local platforms set up that enable market participants across issuers, investors, and regulators to actually discuss the development of the sustainable finance market. This includes workstreams on taxonomies, product development, carbon markets – these discussions are key to drive the market and innovate beyond the traditional instruments that we see today.
I think there’s also a need for domestic investors to step up in terms of considering ESG as part of their overall credit assessment approach because ultimately their portfolio is going to be subjected to relevant ESG risks. We are hearing of local investors that are building capacity, hiring people and asking questions about building their capabilities on ESG. More investors developing capacity on sustainable investing would really open up the market to a whole suite of both international and regional investors driving growth of sustainable debt capital markets.
Melissa Cheok, Sustainable Fitch: I think kudos so far to the regulators. Something that has maybe been quite positive, especially in the region, is that we’ve seen every regulator that has issued a transition taxonomy build upon the previous work. This shows that their education, their capacity building and their feedback is being taken from the industry.
And I think it’s now on the investors and the issuers to drive that forward because there’s only so much that the regulators can do. They can give you the rules, the guidelines, short of making it mandatory, of course, and that would present a whole other host of problems.
Fortune favours the bold so if issuers issue structures that are a bit more ambitious, gain financing, and get good publicity around it, it’ll help the market grow. And then investors really have to exercise the powers that they wield, holding that much capital.
But overall, it’s really three-pronged. Everybody has to be involved at different phases. Regulators first, then the issuers, maybe then the investors – the whole ecosystem needs to come together.
