Green, ESG bonds the ‘biggest trend’ for Asia Law.asiaGreen, ESG bonds the ‘biggest trend’ for Asia Law.asiaGreen, ESG bonds the ‘biggest trend’ for Asia Law.asia
Impact Investing Forum 2023
London. Dec 05-06, 2023.
A Simmons & Simmons lawyer, who assisted guarantors in a recent issuance Of Asean green Bonds, said that finance sectors are becoming more interested in the instrument as environmental, governance and governance (ESG), concerns rise.
Jay Lee, based in Hong Kong, led the Simmons & Simmons team that assisted the Credit Guarantee and Investment Facility, a multilateral facility created by the governments of China and Japan, South Korea and Asean. It was used as the guarantor for the issuance MYR150m (USD36m) in Asean green bond due 2024 by Hanwha Q Cells Malaysia, a Malaysian subsidiary to the Seoul-based photovoltaic cells manufacturer of the identical name.
Lee stated to Asia Business Law Journal that there had been an increase in interest from securities houses, underwriting banks, and issuers in tapping into the green bond markets in the region. He said that some Asian governments, such as South Korea, Singapore, and Hong Kong, are planning to issue their own green bonds.
Lee predicted that the future trends in Asian debt capital markets will be driven by the positive growth of green and other ESG-related bonds.
He stated that “with growing concern about climate change and increased awareness and interest in ESG financings I anticipate that there will continue to be more issuances green sukuk [Islamic bonds] in Malaysia.”
Lee noticed that others involved in the deal weren’t familiar with the typical requirements for green bond documentation. Green bonds, if issued properly, should have more disclosure and contractual requirements than non-green straight bonds.
He said that Asia, which is well-known for being behind the US, UK, and EU in ESG and ESG financing, has some catch-up steps to take. “These are education steps that Asian green bonds market participants must go through in order to grow green bond markets in the region,” he said.
The guarantee obligations for green bonds in the MYR issuance will be shared by CGIF, the Export-Import Bank of Korea and CGIF. Sustainalytics provided the “green” certification and ESG component of the issuance. The green bonds were rated AAA(fg), Kuala Lumpur-based RAM Rating Services.