JPMorgan expects ESG bond issuance in Asia to nearly double in 2022 amid investor demand and climate change efforts
- The US dollar-denominated ESG bond supply in Asia, excluding Japan, has already reached a record high of US$58.6 billion year-to-date
- Investor demand, greater adoption of ESG strategies by issuers, government policy and regulatory requirements are all expected to boost ESG bonds
The US dollar-denominated ESG bond supply in Asia, excluding Japan, has already reached a record high of US$58.6 billion year-to-date, and could continue to rise, according to the investment bank.
“There are a number of factors that will drive growth of ESG bonds from increasing investor demand, greater adoption of ESG strategies by issuers and the need to finance them, to government policy and regulatory requirements,” said Jessica Chen, co-head of ESG financing for Asia ex-Japan at JPMorgan, in an emailed interview last week.
“We expect to see more harmonisation of local and global standards, greater alignment of ESG financing with issuers’ decarbonisation targets, and more focus on disclosure and transparency from both issuers and investors.”
In the revised guidelines, the task force asks that companies disclose their carbon emissions independently of a “materiality assessment”.
In Hong Kong, a cross-regulatory agency steering group led by the Hong Kong Monetary Authority and the Securities and Futures Commission announced in December that it aims to align listed firms’ climate-related disclosures with TCFD recommendations by 2025.
The issuance of green bonds, fixed-income products designed to fund projects that are environmentally friendly, amounted to US$354 billion for the first three quarters of 2021, already surpassing the record high of US$297 billion issued last year, according to the non-profit Climate Bonds Initiative (CBI).
Green bond investments could reach the US$1 trillion milestone by the end of 2022, according to a survey by the CBI released on Thursday of 353 respondents in the finance industry.
About a quarter of respondents selected the fourth quarter of 2022 as the period when green bond investments are expected to pass US$1 trillion for the first time in a single year.
“Capital allocation towards clean energy, resilient infrastructure, green transport, buildings and sustainable agriculture needs to accelerate into the multiple trillions, every year, rippling through both developed and emerging economies,” said Sean Kidney, chief executive of the Climate Bonds Initiative, in the report last Thursday.
“US$5 trillion in annual green investment by 2025 is a real economy investment benchmark to judge progress in greening the financial system,” said Kidney.
The acceleration of the green bond market has led the CBI to lift their forecast for green bond investments for full year 2021 to US$500 billion in August, from a forecast of US$400-450 billion in early January.