Environmental, social and governance concerns are competing with geopolitical and macroeconomic issues as major problems to be tackled by governments, corporates and individuals in Asia and around the world. The threat to the environment and public health of global warming ensures that the topic of rebuilding sustainable economies and businesses in a just and inclusive way is a constant theme at the top table of governments, regulators, corporates, banks and investors.
The speed at which a country, an industry, or a corporate has committed to hit net-zero targets may vary according to the sector in which a company sits or the level of a country’s reliance on fossil fuels, but there is no ambiguity to the size of investment needed to mitigate the effects of global warming. It is huge.
The flow of investment into ESG-themed funds is increasing, but into which areas of the market should those funds be directed and what do companies need to do to attract the finance they require to re-engineer businesses models and remain relevant in the new paradigm?
Against this backdrop, IFR Asia held its green and sustainable finance roundtable in June, bringing together a panel of experts to share their experiences of issuing – and facilitating the launch of – green, social and sustainability-linked debt and to discuss the development of ESG finance across the region.
Labelled bonds represent just 5% of the overall global bond market, but that ratio is changing fast: as it stands, ESG-themed bonds currently account for 15%–20% of new international bond issues from Asia Pacific. Countries and companies are vying with peers in efforts to attract the growing pools of green-tinted funds and investments under management to finance green and sustainable projects through ‘use of proceeds’ bonds, or the transition away from dirty, brown energy at the corporate level with sustainability-linked structures.
For those borrowers willing to establish frameworks and pathways to a sustainable existence there are benefits. It may take additional time and effort to establish the internal infrastructure to set, achieve and report progress against sustainable targets but doing so currently sees borrowers realise tighter pricing over conventional debt. Over and above today’s financial advantage from going green, however, communicating an ESG commitment is important in explaining a company’s long-term strategy and future viability to all stakeholders.
As ever, the path to net-zero and sustainability is not without obstacles and there are questions to overcome around the structures of ESG transactions, data and reporting, and the ever-present concern around company commitment and greenwashing.
To see any benefits, though, issuers must first be able to navigate the primary market.
The webcast is free to view, on-demand. Access it here.
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