Asia’s ESG market needs balance
As more and more issuers jump on the environmental, social and governance bandwagon, it raises important questions.
What do the chicken-producer Japfa Comfeed, Delhi International Airport, Chinese mobile phone-maker Xiaomi, renewables company Greenko Group and property developer Gemdale Corp have in common?
Followers of Asia’s sustainable debt market will easily recognize the link: all these firms, and others in their respective sectors, have sold some form of sustainable bond – green, social, sustainability or sustainability-linked – this year.
The boom in bond issuance tied to socially responsible investment (SRI) has been remarkable. As of the end August 2021, borrowers from Asia ex-Japan had raised $85.6 billion from 295 green, social or sustainability bonds, according to Dealogic, whereas in the whole of 2020, there were 215 deals worth $58.2 billion. Volumes so far this year are an impressive 127% higher than five years ago.
But as more and more issuers jump on the environmental, social and governance (ESG) bandwagon, it raises important questions.
How much green-washing or social-washing has contributed to the spike in bond volumes, especially from firms that are not explicitly operating in the renewable sector? Where should banks and investors draw the line in supporting these transactions? And perhaps most important, what’s next for the market?
The answer really depends on who you ask.