ASEAN economies register record issuance of GSS debt in 2021

Climate Bonds Initiative and HSBC have published the annual ASEAN Sustainable Finance State of the Market 2021 Report. Findings reveal that the sustainable debt market in the six largest ASEAN economies continued to grow rapidly in 2021 with record issuance of green, social, and sustainability (GSS) debt totaling USD24bn compared to USD13.6bn in 2020, up 76.5% YOY, and sustainability-linked debt totaling USD27.5bn compared to USD8.6bn in 2020, up 220% YOY.

This growth reflects the regions’ enthusiasm to allocate capital for the response to the COVID-19 pandemic along with facilitating long-term, low carbon, and climate-resilient economic growth.

Key highlights from the ASEAN sustainable debt market in 2021 include the following:

• Singapore remained the regional leader, with GSS debt issuance of USD13.6bn in 2021 compared to USD4.9bn in 2020. The growth is mainly driven by the green theme and reflects strong support for green finance from the Singaporean government.
• In ASEAN, Singapore was the largest source of green debt with volume of USD12bn. Together with Indonesia, Singapore has the most diverse mixture of deal sizes, ranging from below USD100m to above USD1bn.
• Singapore was the largest source of ASEAN sustainability-linked loans and bonds at the end of 2021, with 94 out of a total of 129 deals with a cumulative volume of USD33.6bn, accounting for 84.5% of the market.
• Green-labelled debt, encompassing green bonds and green loans, remained the most popular in the GSS debt market in 2021. 63.9% of GSS deals originating from ASEAN in 2021 were green, followed by sustainability (35.5%), with the latter showing an increase compared to 2020 (26%). The region saw a small volume of social debt issuances (0.6%) in 2021.
• Buildings and Energy continued to represent the main use of proceeds for green-labelled debt in ASEAN. The two sectors received two-thirds of proceeds in 2019 growing to 79% in 2020. The cumulative regional picture remained the same in 2021. Buildings and Energy combined accounted for 79.5% of the cumulative use of proceeds of green debt issued from the ASEAN region between 2016-2021.
• Non-financial corporate issuers were responsible for most (79%) of the ASEAN green volumes in 2021, while sovereign issuance continued to dominate the social and sustainability market, responsible for 51% of issuances.
• Sustainability-linked debt saw an exponential growth, adding USD27.5bn of sustainability-linked bonds (SLB) and sustainability-linked loans (SLL) in 2021 and thereby exceeding the traditional GSS debt volumes. The cumulative figure for the SLL and SLB markets at the end of 2021 was similar to that of the green-labelled debt at around USD39bn.
• The transition bond market is still nascent. ASEAN saw its maiden transition bond in 2021 with the Chinese Construction Bank in Singapore issuing a USD2bn deal designed to support China’s carbon-intensive industries, such as gas and other power generators, manufacturing, and steel production.

Growth in the ASEAN sustainable debt market continued to be encouraged by supportive regulatory developments in 2021. Work has been underway to establish green taxonomies that will provide a clear and common definition of sustainable activities. At the regional level, the ASEAN Taxonomy Board released a draft ASEAN Taxonomy in November 2021, while an increasing number of countries are progressing in developing their own taxonomies, such as Malaysia, Singapore, Thailand and Vietnam. Government grant schemes to subsidise the cost of GSS bond issuers has remained available, such as in Singapore and Malaysia. Requirements regarding sustainability reporting for corporates have been strengthened, as seen in Singapore, Indonesia and Thailand.

Investor demand is also growing from multiple sources. This includes greater understanding of climate risk from investors as well as enthusiasm to explicitly align sustainable investments with the UN Sustainable Development Goals and Paris agreement goals.

Kelvin Tan, Managing Director, Head of Sustainable Finance & Investments, ASEAN, HSBC said:

“Singapore’s central role as a debt issuance centre for the region has grown due to the leadership of the Singapore government. HSBC has been able to play a thought leadership role in helping to develop the country as a leading sustainable finance hub, through strong private-public partnership, and executing landmark sustainable finance transactions to support our clients in their transition. By chairing the Green Finance Industry Taskforce, we have worked on a number of key initiatives, including capability building and a green taxonomy. While the sustainable finance market is growing in Singapore and ASEAN, significantly more financing needs to be deployed to help clients adapt their businesses to mitigate the damages of climate change.”

Sean Kidney, CEO, Climate Bonds Initiative said:

“Several regional policies contributed to a rapid growth in sustainable finance in ASEAN and it’s clear there’s greater understanding of climate risk from both policy makers and investors. Despite the enthusiasm we see in the market, there’s still a huge gap that needs to be addressed - and quickly. High-emission and hard-to-abate sectors must transition from brown-to-green rapidly. That includes activities, assets and projects linked to energy, heavy manufacturing industries and agriculture. Local initiatives such as the Green Financial Industry Taskforce of Singapore (GFIT) are a good start, but we need to move quicker to make vulnerable regions like ASEAN less exposed to the consequences of climate change.”

Country-level updates focusing on notable deals, policies and initiatives are also unpacked in the report. The full report is available for download on Climate Bonds website and HSBC Centre of Sustainable Finance website.

Media enquiries to:

Denise Kok | +65 9646 7729 | denise.h.f.kok@hsbc.com.sg