There is a difference between green bonds and perpetual securities, sustainability bonds and sustinability-linked bonds (SLB). Green bonds and perpetuals are likely to fund only green projects; sustainability bonds fund green and/or social projects; and the use of proceeds for sustainability bonds are broader versus green bonds and perpetuals, notes OCBC Credit Research in an update on dated July 16.
Blue bonds are a subset of green bonds, where proceeds are generally, likely to be used for marine and ocean related projects.
See also: Sembcorp Industries prices inaugural $400 mil green bond offering
SLBs are to be linked to the issuer’s achievement in meeting a goal or target, of which the result will be either a stick and/or a carrot, notes OCBC Credit Research. “For example, an SLB linked to a reduction in carbon emissions by 25%. If the target is unfulfilled, the issuer would need to incur a higher interest cost. Use of proceeds for SLBs tend to be flexible and not linked to specified projects,” the report indicates.
OCBC Credit Research says green bonds and perpetuals amounting to $1.9 billion have been issed by Ascendas REIT, Manulife Financial Corp, National University of Singapore and Sembcorp Industries. The first sustainability bond was priced in July 2021 by Frasers Logistics and Commercial Trust, raising $150 million, while Surbana Jurong raised $250 million with an SLB.
Meanwhile, the Monetary Authority of Singapore plans to deploy US$1.8 billion ($2.4 billion) to five asset managers for climate-related investments, as part of its official foreign reserve’s portfolio. “This is likely to help spearhead developments in the public markets for sustainability investing,” OCBC Credit Research says. Although US$1.9 billion is a relatively modest amount, it should be sufficient for asset managers to establish their sustainability hub for the Asia-Pacific region in Singapore, OCBC Credit Research suggests.
In addition, the Singapore government is looking to fund infrastructure projects through green bonds, with up to $19 billion of identifiable public sector green projects such as Tuas Nexus, an integrated waste and water treatment facility.
Photo: Chestnut Nature Park by the author
