APAC's growing investor demand provides fertile ground for sustainable bonds — Moody’s

KUALA LUMPUR, Feb 14  — Asia-Pacific’s (APAC) large financing needs post-pandemic, and  the region's focus on carbon transition and other environmental, social and governance (ESG) risks will propel issuance of sustainable bonds, according to Moody’s Investors Service. 

The credit rating agency said there is also rising investor demand for instruments that cater to the sustainable market. 

Moody’s assistant vice-president and analyst Nishad Majmudar said conditions are ripe for a rise in the issuance of sovereign sustainable bonds, which is expected to come initially from established issuers.

“Although the development of regulatory standards and taxonomies across the region is still at an early stage, it will gradually facilitate markets,” he said in a statement today. 

The credit rating agency said APAC governments with track records of conventional issuance or have strong market access, such as Hong Kong (Aa3 stable), Indonesia (Baa2 stable), South Korea (Aa2 stable) and Malaysia (A3 stable), are driving sustainable bonds.

“The issuer base is likely to expand through multilateral support and as investors’ appetite for sustainable bonds catches up with vanilla bonds,” it said.  

The credit rating agency also said that the post-pandemic focus on investment to meet UN Sustainable Development Goals will drive issuance, particularly as major governments including China (A1 stable), Japan (A1 stable) and South Korea pursue net-zero emissions by 2050.

“Although the regulatory landscape in Asia remains uneven, efforts to harmonise national standards in major issuing markets will help address concerns relating to transparency and greenwashing, and will provide clarity around the use of proceeds and project availability, which remain global issues.

“Hong Kong and Singapore (Aaa stable) have intensified the development of such standards as both aim to become green financial hubs,” it added. 

— BERNAMA