Asia green bonds are booming

ESG investing has gained a strong footing in North America and Europe, but the Asia-Pacific region has turned out to be an underdog in recent years when it comes to green bond issuance. Asia green bonds are booming as the region is taking a leadership role in sustainable investing, writes Robeco analyst Gino Beteta Vejarano.

The investment management firm in an insight says that most Asian countries have rolled out climate measures after COP21 in 2016, which makes sense as the region leads in electric vehicles, batteries and renewable energy manufacturing. Asia’s green bonds market is proliferating due to climate-related developments and regulations in other markets such as Europe.

However, Robeco sees a range of ESG standards by Asian countries which could create difficulties. “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,” writes Vejarano. A potential solution that the asset manager sees is the standardization of taxonomies in the green bond market.

China is leading in green bond issuance in the region, and the country with Japan and South Korea makes up 81.6% of the total green bond market volume. However, sovereign green bonds are still lacking.

“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,” says Vejarano, adding that the APAC green bond market represents an “attractive investment opportunity”.

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This article was first published on capitalmarkets.net.