Malaysia and Singapore have intensified longer-term positioning as regional hubs for green and sustainable finance, making the issuing of sustainability bonds in ASEAN more vibrant.
ASEAN Sustainable Finance State of the Market 2020 has been launched by the Climate Bonds Initiative with the support from HSBC. The report revealed that the region’s sustainable finance market has maintained rapid growth despite the negative impact of Covid-19. This then has called for the need of a sustainable economic recovery.
It was noted in the report that the Malaysian sustainability bond and sukuk market currently stood at US$2.6 billion. This shows that a total of 15 green bond, sukuk and loan deals have been issued by Malaysian entities, with six occurring in 2019 and three in 2020.
One of the green deals, which came into the market in 2020 was the first ASEAN Green Sustainable and Responsible Investment Sukuk. It is worth RM260 million (US$61m) and issued by Leader Energy, with HSBC Amanah Malaysia as the lead arranger.
“The proceeds are to finance two solar photovoltaic power projects in Kedah, which also marks Leader Energy’s debut project financing issuance in the ringgit denominated bond market,” the report revealed.
It was also highlighted in the report some key policy developments that are anticipated to drive ASEAN’s sustainable finance market, such as Malaysia’s Joint Committee on Climate Change, led by Bank Negara Malaysia and Securities Commission Malaysia.
It will identify the development of guidance documents on climate risk management and scenario analysis as one of its priorities in 2021, according to the report. Meanwhile, the ASEAN Green, Social, and Sustainability (GSS) issuance reached a record high of US$12.1 billion in 2020, from US$11.5 billion issued in 2019.
Cumulative GSS issuance in ASEAN since 2016 now stood at US$29.1 billion. According to the report, Singapore remained the leader of GSS issuance in 2020, representing 53 per cent of the region’s issuance.
On the sector’s outlook, the report suggested that sustainable finance is set to further underpin national recovery and stimulus plans to “build back better.”
“Public sector issuance remains a driver to encourage private sector issuers to participate in the market, and ASEAN’s sovereign issuers’ club is set to expand with planned sovereign green bond issuance already announced by Singapore and Vietnam.
“Malaysia, on the other hand, sees a future role as an international centre for sustainable Islamic finance and green sukuk,” it added.
In addition, ASEAN markets are collectively developing a system to bring greater clarity to market participants and deepening efforts to improve definitions for sustainable investments.
The development of other instruments, such as three sustainability-linked bonds and loans or transition bonds, are also needed to meet the larger financing needs of ASEAN’s low carbon transition.