The Asia-Pacific (APAC) green bond market has boomed in recent years, becoming the second-largest market after Europe and ahead of North America.1Rising green bond issuance in the APAC region reflects the global trend toward ESG investing, but the momentum is especially strong in Asia. This boom is the result of the sense of urgency in the global political context on climate change mitigation, as well as the willingness in Asia to take a leadership role in the field of sustainable investing. While the strong growth in the market is positive, harmonization of green bond standards in the region will be critical in maintaining this momentum.
The APAC economy is well suited to an expansion in green bonds. Its global leadership in electric vehicle, battery and renewable energy manufacturing makes it a positive environment for green bond issuance.
The growing support for the global climate agenda has also contributed to the burgeoning of the APAC green bond market. Since COP21 in 2016, most Asian countries have rolled out climate measures to help put them on a path towards a +1.5 °C world. Even though China was relatively late in announcing its 2060 carbon neutrality target, its robust top-down policy had in the meantime functioned as a massive leverage for the green bond market in the region.
Climate-related developments and regulation in other markets have also contributed to the expansion of the APAC green bond market. A key example can be found in EU regulation such as the Sustainable Finance Disclosure Regulation (SFDR), the EU’s proposal for a directive on corporate sustainability due diligence and the emissions trading scheme (ETS), which have indirectly put a new ‘green’ burden on Asian financials and corporates, who would need to comply with EU standards in order to maintain business ties with its member states. One way for Asia to align with the global transition trend is by enhancing its ESG disclosure and greening its capex through green bonds.
The green bond market aims at making a clear distinction between green and non-green projects. Today, taxonomies are widely recognized as the best instruments to distinguish genuine green projects from those that do not comply with science-based targets. While the EU has taken a big step forward with its EU Green Taxonomy, many Asian states like China, Japan, Singapore, South Korea, Malaysia and Thailand, have developed great initiatives to establish their own green taxonomies.
The increasing number of taxonomies does, however, create difficulties for green bond issuers and investors that now have to deal with conflicting standards. As European issuers are struggle to align with the EU Taxonomy, Asian issuers are in the meantime inclining towards the Chinese Catalogue or their own national classification. It may become a substantial concern for Asian as well as European issuers in future, as the definition of a green project may differ across regions.
In the context of mushrooming taxonomies that challenge the unification of the green bond market, the Common Ground Taxonomy (CGT) represents a glimmer of hope. The CGT was published during COP26 and resulted from the merger of the EU and Chinese taxonomies. While it is still at an early stage, it may become the standard in Asia. Hong Kong, for example, aims to align its own green taxonomy – which is under development – with the CGT, and may become a central hub for Chinese as well as European green bond investors as a result.
The development of taxonomies has raised the interest of investors in the Asian green bond market, and may have boosted its expansion. But the market can only consolidate properly if ESG disclosure is standardized. Disclosure by corporates and financials of reliable and comparable ESG data will determine the quality of green bonds, which is where Asia still lacks maturity. The vast majority of APAC countries have not yet set mandatory ESG disclosure requirements, making it difficult to compare issuers, and preventing bond investors from making well-informed decisions. But some countries are catching up with international standards.
China’s first Guidance for Enterprise ESG Disclosure was enacted in June 2022. These voluntary guidelines offer a glimpse of what to expect from future mandatory Chinese disclosure. China has emphasized its desire to synchronize its standards with the forthcoming global ESG standards from the International Sustainability Standards Board (ISSB). These steps mark the beginning of Chinese dominance within APAC on ESG-related matters.
At the same time, this reinforces the quality of its green bond issuers and highlights its growing appetite for the green bond market. ASEAN states are doing their homework and are also on the right path to implementing strict ESG disclosure requirements. Singapore, Hong Kong and Malaysia have recently turned the TCFD disclosure recommendations into a mandatory requirement. And Japan and Taiwan have implemented mandatory sustainability reporting. This momentum for ESG disclosure puts Asia in a very good position in the global race towards ESG and green bonds best practices.
In 2021, APAC became the second most prolific green bonds market, reaching USD 390.44 billion in outstanding value by year end.2 With an additional USD 151.76 billion of green debt in 2021, the market expanded by 3.5 times compared to its 2020 volume. China leads the field, followed in joint second place by Japan and South Korea; see Figure 1. The top three largest issuing countries originated 81.6% of the total green bond market volume.
Representing only 8% of the volume, sovereigns remain quite shy in green bond issuance compared to corporates. Figure 2 shows that energy, green buildings and clean transportation are the three largest sectors benefiting from green bond proceeds, and represent the vast majority of the total volume of outstanding green bonds in 2021.
With China in the lead and other countries in the region keen to participate in the powerful drive towards sustainability, the APAC green bond market is thriving. APAC’s position on the global green bond market may even be a means for the region to show its leadership in a new financial system in which ESG is fully integrated.
The region’s developing taxonomies and growing interests in ESG disclosure send very positive signals. But to establish its leadership, the APAC market would need to standardize its sustainability standards to create coherence among its participants. Our view is that, with the prospect of further improvement and growth, the APAC green bond market now represents an attractive investment opportunity.
1 This article is based on a more detailed paper, entitled Time for the APAC green bond market to step up to the challenge”, July 2022 We wish to thank Bertille Cormery, Green Bonds Intern, for her valuable work and contributions to the paper.
This information is for informational purposes only and should not be construed as an offer to sell or an invitation to buy any securities or products, nor as investment advice or recommendation.
The contents of this document have not been reviewed by the Monetary Authority of Singapore (“MAS”). Robeco Singapore Private Limited holds a capital markets services license for fund management issued by the MAS and is subject to certain clientele restrictions under such license.
An investment will involve a high degree of risk, and you should consider carefully whether an investment is suitable for you.
Warning/Important note: This website contains information which is only available to qualified investors as defined below. If you are not a qualified investor, please click “I Disagree” to leave the website.
By clicking on "I agree", I declare that:
1 - This website may only be accessed directly or indirectly by the following persons in Singapore:
1) “institutional investor” under section 304 of the Securities and Futures Act (Cap.289)(“SFA”), which means:
(i) the Government; (ii) a statutory board as may be prescribed by regulations made under section 341 of the SFA; (iii) an entity that is wholly and beneficially owned, whether directly or indirectly, by a central government of a country and whose principal activity is (A) to manage its own funds; (B) to manage the funds of the central government of that country (which may include the reserves of that central government and any pension or provident fund of that country); or (C) to manage the funds (which may include the reserves of that central government and any pension or provident fund of that country) of another entity that is wholly and beneficially owned, whether directly or indirectly, by the central government of that country; (iv) any entity (A) that is wholly and beneficially owned, whether directly or indirectly, by the central government of a country; and (B) whose funds are managed by an entity mentioned in sub-paragraph (iii); (v) a central bank in a jurisdiction other than Singapore; (vi) a central government in a country other than Singapore; (vii) an agency (of a central government in a country other than Singapore) that is incorporated or established in a country other than Singapore; (viii) a multilateral agency, international organisation or supranational agency as may be prescribed by regulations made under section 341 of the SFA; (ix) a bank that is licensed under the Banking Act (Cap.19); (x) a merchant bank that is approved as a financial institution under section 28 of the Monetary Authority of Singapore Act (Cap.186); (xi) a finance company that is licensed under the Finance Companies Act (Cap.108); (xii) a company or co-operative society that is licensed under the Insurance Act (Cap.142) to carry on insurance business in Singapore; (xiii) a company licensed under the Trust Companies Act (Cap.336); (xiv) a holder of a capital markets services licence; (xv) an approved exchange; (xvi) a recognised market operator; (xvii) an approved clearing house; (xviii) a recognised clearing house; (xix) a licensed trade repository; (xx) a licensed foreign trade repository; (xxi) an approved holding company; (xxii) a Depository as defined in section 81SF of the SFA; (xxiii) an entity or a trust formed or incorporated in a jurisdiction other than Singapore, which is regulated for the carrying on of any financial activity in that jurisdiction by a public authority of that jurisdiction that exercises a function that corresponds to a regulatory function of the Authority under this Act, the Banking Act (Cap.19), the Finance Companies Act (Cap.108), the Monetary Authority of Singapore Act (Cap.186), the Insurance Act (Cap.142), the Trust Companies Act (Cap.336) or such other Act as may be prescribed by regulations made under section 341 of the SFA; (xxiv) a pension fund, or collective investment scheme, whether constituted in Singapore or elsewhere; (xxv) a person (other than an individual) who carries on the business of dealing in bonds with accredited investors or expert investors; (xxvi) the trustee of such trust as the Authority may prescribe, when acting in that capacity; or; (xxvii) such other person as the Authority may prescribe.
2) “relevant person” under section 305(1) of the SFA, which means:
(i) An accredited investor; (ii) a corporation the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; (iii) a trustee of a trust the sole purpose of which is to hold investments and each beneficiary of which is an individual who is an accredited investor; (iv) an officer or equivalent person of the person making the offer (such person being an entity) or a spouse, parent, brother, sister, son or daughter of that officer or equivalent person; or (v) a spouse, parent, brother, sister, son or daughter of the person making the offer (such person being an individual).
3) any person who acquires the units [in a collective investment scheme] as principal if the offer is on terms that the units may only be required at a consideration of not less than $200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of units in a collective investment scheme, securities, securities-based derivatives contracts or other assets, and if the following condition is satisfied: (i) the offer is not accompanied by an advertisement making an offer or calling attention to the offer or intended offer; (ii) no selling or promotional expenses are paid or incurred in connection with the offer other than those incurred for administrative or professional services, or by way of commission or fee for services rendered by any of the persons specified in section 302B(1)(d)(i) to (vi) of the SFA; and (iii) no prospectus in respect of the offer has been registered by the Authority or, where a prospectus has been registered (A) the prospectus has eAccxpired pursuant to section 299 of the SFA; or (B) the person making the offer has before making the offer 1. informed the Authority by notice in writing of its intent to make the offer in reliance on the exemption under this subsection; and 2. taken reasonable steps to inform in writing the person to whom the offer is made that the offer is made in reliance on the exemption under this subsection.
4) Or otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
If you are not any of the types of persons described above, you are not authorized to enter this website and you should leave this website immediately.
2 Terms and Conditions
You acknowledge that you have read these Terms and Conditions (“Terms”) prior to accessing the website located at www.robeco.com/sg (“Website”) and you agree to be bound by the Terms. If you do not agree to all of the Terms, you are not an authorised user and you should not use the Website. The Website is owned by Robeco Singapore Private Limited (company registration number: UEN. 201541306Z), which is licensed by the Monetary Authority of Singapore (“MAS”) pursuant to the Securities and Futures Act (Cap.289) (“SFA”) of Singapore, and is managed by Robeco Singapore Private Limited and/or its affiliates (collectively, as “Robeco”). The Website is intended for and should be accessed by institutional investors or accredited investors (as defined under Section 4A of the SFA) of Singapore. The Website is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject the Robeco to any registration or licensing requirement within such jurisdiction. It is your responsibility to observe all applicable laws, rules and regulations of any relevant jurisdiction. The content contained in the Website is owned by Robeco and/or its information providers and is protected by applicable copyrights, trademarks, service marks, and/or other intellectual property rights. You may not copy, distribute, modify, post, frame or link the Website, including any text, graphics, video, audio, software code, user interface, design or logos. You may not distribute, modify, transmit, reuse, repost, or use the content of the Website for public or commercial use, including all text, images, audio and/or video. Robeco may terminate your access to the Website for any reason, without prior notice. Neither Robeco, nor any of its associates, nor any director, officer or employee accepts any liability whatsoever for any loss arising directly or indirectly from the access of the Website. You agree to indemnity and hold Robeco, its associates, directors, officers or employees harmless against any and all claims, losses, liability, costs and expenses arising from your use of the Website due to violation of the Terms. Robeco reserves the right to change, modify, add or remove any parts of the Terms at any time and for any reason. The Terms shall deemed to be effective immediately upon posting. The Terms shall be governed by, and shall be construed in accordance with, the law of Singapore.
The Website has not been reviewed by the MAS. Accordingly, the Website may not be accessed directly or indirectly to persons in Singapore other than (i) to an institutional investor under Section 304 of the SFA, (ii) to a relevant person pursuant to Section 305(1), or any person pursuant to Section 305(2), and in accordance with the conditions specified in Section 305, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Nothing in the Website constitutes tax, accounting, regulatory, legal or investment advice. The Website is for informational purposes only and should not be construed as an offer to sell or an invitation to buy any securities or products, nor as investment advice or recommendation or for the purpose of soliciting any action in relation to Robeco’s businesses, or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it is unlawful to make such an offer and solicitation. Any reproduction or distribution of information from the Website, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accessing to the Website, you agree to the foregoing.
The funds referred to in the Website are for information only. It is not a recommendation or investment advice, nor does it mean the funds is suitable for all investors. The contents of the website is not reviewed by the MAS. Any decision to participate in the funds should be made only after reviewing the sections regarding investment considerations, conflicts of interest, risk factors and the relevant Singapore selling restrictions. You should consult your professional adviser if you are in doubt about the stringent restrictions applicable to the use of the Website, regulatory status of the funds, applicable regulatory protection, associated risks and suitability of the funds to your objectives.
Any decisions made based on the information contained in the Website are the sole responsibility of yours. Any investments made or to be made shall be with your independent analyses based on your financial situation and objectives. The investments and strategies contained in the Website may not be suitable for all investors and are not guaranteed by Robeco.
Investment involves risks and may lose value. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance. The Website may contain projections or other forward looking statements regarding future events or future financial performance of countries, markets or companies and such projection or forecast is not indicative of the future. The information contained in the Website, including any data, projections and underlying assumptions are based upon certain assumptions, management forecasts and analysis of information available on an “as is” basis and without warranties of any kind, whether express or implied, and reflects prevailing conditions and Robeco’s views as of the date published or indicated, and maybe superseded by subsequent events or for other reasons. The information contained in the Website are accordingly subject to change at any time without notice and Robeco are under no obligation to notify you of any of these changes. Robeco expressly disclaims all liability for errors and omissions in the information presented in the Website and for the use or interpretation by others of information contained in the Website.
Robeco Singapore Private Limited holds a capital markets services licence for fund management issued by the MAS and is subject to certain clientele restrictions under such licence. An investment will involve a high degree of risk, and you should consider carefully whether an investment is suitable for you.