Bank analysts estimate $600bn of green bonds from Asia by 2023

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Some $600bn (€512bn) of green bonds from Asian issuers could be coming investors’ way over the next five years, according to Bank of America Merrill Lynch.

Analysts at the investment bank estimated that, by 2020, China will have issued $55bn of green bonds per year, Japan and India $15bn each, and Australia and South Korea $10bn each.

China was expected to provide nearly half of the forecasted $600bn of supply over five years.

The analysts considered there to be good grounds to expect the Asian green bond market to grow at this rate, although they said their forecast could be conservative.

“We estimate Asian green bonds penetration is below 10% of current potential,” they said.

The region had made strong commitments to reduce greenhouse gas emissions as part of the Paris Agreement, and in the analysts’ view capital expenditure directed at mitigating climate change would need to increase from $275bn in 2018 to $500bn by 2030.

Last year renewable energy investments from Asia comprised 59% of global spending, with China accounting for the bulk of the expenditure.

In addition to strong demand for financing, there was also increasing investor appetite for “climate aware” investments and increasing acceptance of green bonds methodology, the analysts said.

Dutch asset manager Robeco and its sustainable investing arm yesterday announced the launch of a credit strategy investing in green bonds and traditional corporate bonds in a bid to help achieve the UN Sustainable Development Goals.

The strategy is one of many new products and services that asset managers have been launching to meet demand for investments that make a positive contribution to meeting global environmental and social challenges. This can be separate, or in addition to, integrating environmental, social and corporate governance considerations in the analysis of issuers from a financial risk perspective. 

Major European pension funds were among the backers of a $1.42bn emerging market green bond fund recently launched by Amundi and the International Finance Corporation. Luxembourg’s reserve fund is one of the asset owners to have recently created a mandate dedicated to green bonds.

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