It’s becoming increasingly common for clients, particularly those from Europe, to demand that investment portfolios follow sustainability guidelines, according to Cecilia Chan, chief investment officer for Asia-Pacific fixed-income at HSBC Global Asset Management.
Speaking on a panel at FinanceAsia’s 2nd China Fixed Income Summit, Chan said that based on recent experiences, it was likely that clients would in the future require stronger requirements in terms of environmental, social and corporate governance (ESG) analysis, as well as request that portfolios should stick to certain ESG guidelines.
HSBC GAM was in discussions with some private banking clients as well as institutional clients about launching Green Bonds Fund, Chan said. She didn’t disclose specific details.
There was “tremendous business potential” in developments related to ESG investing, she added.
Participants on another panel discussion, meanwhile, blamed inadequate development of a “credit culture” for a peculiar characteristic of China’s onshore bond market, where issuers prefer to issue short-term bonds to long-dated securities because of the confidence in their ability to refinance at low rates when needed. China’s onshore bond market is the world’s largest after the U.S.
Short-term debt usually tends to be cheaper than longer-term borrowings, but carries refinancing risk if it needs to be rolled over.
“For corporates, there is very, very little incentive onshore to go longer than three years,” said Philippe L Ahoua, manager for treasury client solutions for the Asia-Pacific at IFC. He also noted the preference by Chinese companies for bank loans to bonds.
“It takes time for a market that big to change and to build a credit culture from zero,” said Jenny Zeng, co-head for Asia Pacific fixed income at AllianceBernstein, although she noted that the market development was on the “right track.”
Jason Pang, portfolio manager at J.P. Morgan Asset Management, Bank of Singapore’s Gareth Nicholson and Ping An of China Asset Management’s head of fixed income Sean Chang are among the participants on Friday, the final day of the summit. The full schedule can be found here.
