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Treasury & Capital Markets
Asean+3 sustainable bonds outpace growth in global, euro markets
Public sector participation drives issuance in local currencies, helps set pricing benchmark
Chito Santiago 22 Mar 2024

The sustainable bond markets in the Asean region, China, Japan and South Korea (known collectively as Asean+3) grew 29.3% in 2023, outpacing the 21% increase recorded in the global and euro area sustainable bond markets.

According to the latest issue of Asia Bond Monitor, published by the Asian Development Bank (ADB) on March 21, the outstanding sustainable bonds in the Asean+3 economies reached US$798.7 billion by the end of last year, expanding more than seven-fold from US$109.7 billion in 2017. The bonds were mostly issued in domestic currencies, and the 2023 tally accounted for about 20.1% of the global sustainable bonds. In comparison, the outstanding global and euro-area sustainable bond markets reached US$4 trillion and US$1.5 trillion, respectively, at the end of 2023.

ADB chief economist Albert Park notes that sustainable bond issuance in the Asean region made up a higher share of the local currency financing and long-term financing in 2023, driven by public sector participation. “The public sector participation not only adds to the supply of sustainable bonds, but also serves as a model case for the private sector and helps set a long-term pricing benchmark for these bonds in domestic markets,” he adds.

The total sustainable bond issuance in Asean markets in 2023 amounted to US$19.1 billion, according to ADB, accounting for 7.9% of the aggregated issuance in the Asean+3 sustainable bond markets. In Asean+3, sustainable bond issuance totalled US$242.2 billion. Meanwhile, global sustainable bond issuance declined from US$896.1 billion in 2022 to US$846.2 billion in 2023 on the back of higher interest rates.

Sustainable bonds are bond instruments that are used to finance projects and programmes with environmental and social benefits. Green bonds are the most common bond type in the Asean+3 sustainable bond market, accounting for 63.8%. China has the largest sustainable bond market in the region with a share of 43.4% of the bonds outstanding at the end of 2023.

Actually, issuance of all types of sustainable bonds in Asean+3 economies posted declines in 2023, except for social bonds, which surged 27.5% year-on-year, according to ADB, due to robust issuances from Japan and South Korea. Some of the large social bond issuances were those from Japan Expressway Holding and Debt Repayment Agency (US$9.4 billion), West-Nippon Expressway Company (US$3.3 billion), Korea Housing Finance Corporation (US$8 billion) and Korea SMEs and Startups Agency (US$3.4 billion).

The majority of the sustainable bond issuance in Asean+3 in 2023 carried a short tenor and came from the private sector. In 2023, 56.9% of sustainable bonds issued in the region had maturities of five years or less, including 38.6% with maturities of three years or less.

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