New research by the Climate Bonds Initiative shows green bonds are more heavily oversubscribed than vanilla equivalents, tighten more during the bookbuilding process and continue to attract investors that are not green mandated.
The not-for-profit organisation, which oversees the Climate Bonds Standard, sampled green bonds over a two-year period and found new issue premiums are not a given for buyers of green bonds. In fact, 55% of transactions in the sample either priced on the curve or inside it.
The research – published at the end of May – flags the potential for green bonds to bifurcate from their vanilla counterparts in coming years, and raises the spectre that issuers who cannot show sustainability credentials may one day pay a credit premium.
Growing global interest in sustainable capital markets has prompted FinanceAsia and ANZ to join forces to survey the views of investors and issuers on green financing trends in Australia and the Asia-Pacific.
As a FinanceAsia reader you are invited to express your opinion in the survey. Taking part is easy: it only takes about five minutes to complete the survey.
The poll aims to capture the rising level of interest from governments and companies to issue in green or sustainable format, and from investors who are now making meaningful allocations to the asset class.
Overall issuance in the sustainable capital markets was $34 billion in the first three months of 2018, an increase of $2.3 billion on the same quarter last year, according to figures compiled by BNP Paribas in May.
Volumes are still concentrated in Europe – accounting for 60% of all flow in the first quarter – but the Asia-Pacific market is growing significantly as regulators introduce legislation and schemes to support transactions. Already this year, Hong Kong’s quality assurance agency launched a green finance certification scheme and the Tokyo Stock Exchange established a platform for green and social bond issuers to post reports and reviews on their securities.
This follows China’s move in December 2017 to publish guidelines for green bond verifiers and introduce a licencing scheme to authenticate the credentials and monitor the methods used by verifiers.
Such financial systems infrastructure has encouraged more borrowers in the region to issue in green and sustainable format, with Asia accounting for 14% of global supply in the first quarter of 2018 according to the BNP Paribas report. Most deals originate in Australia where all four of the big domestic banks have issued green bonds, as have several corporates and semi-government entities.
In Southeast Asia, the Republic of Indonesia broke new ground in February when it raised $1.25 billion from the first Asian sovereign green bond. The five-year green sukuk was issued soon after new regulations around environmental-based securities were tabled by the country’s financial services authority, the OJK.
The poll being conducted by FinanceAsia and ANZ asks investors and issuers to share their views on trends in the market, gauging appetite levels and asking for opinions on topics such as sector diversification, preferred currencies and access to analysis.
For the results of the survey to be representative, it is important that as many executives as possible participate, so we would be very grateful for your valuable time. Responses will be completely confidential and will only be presented in an aggregate format.
Results will be published in the July issue of FinanceAsia magazine. Click below to take the survey.