Green bond sales in Asia have lagged the rest of the world in 2020 but that may change next year as some of the biggest economies accelerate their drive to cut carbon emissions, according to Fitch Ratings.
Issuance of notes in Asia whose proceeds are aimed at environmentally friendly projects has dropped about 30% this year, even as green bond sales globally have increased, according to data compiled by Bloomberg. With pledges from countries like China and Japan to become carbon neutral in the coming decades, the focus will be back on green debt in 2021 after a surge in sustainable and social bond sales in 2020 due to the pandemic, said Mervyn Tang, global head of ESG research at Fitch.
“We will see a pick up in green-labelled issuance in APAC as attention moves away from pandemic relief measures to financing the green projects needed to meet the major net-zero emission pledges across the region,” Hong Kong-based Tang said in an interview. “This is combined with policy pushes to support the green finance market.”
The decline in green bond sales from governments and corporates in Asia, to about $37 billion as of Dec. 7, stands in contrast with the rest of the world. In the Americas, sales increased 8% to almost $44 billion, while in Europe they surged more than 22% to over $140 billion, the data show.
Other regions may still overshadow Asia for green bonds in 2021. The European Union’s recovery plan includes a pledge to offer significant amounts of the debt, and Joe Biden’s presidency will bring additional funding into U.S. green infrastructure to align with the Paris Accord, Bloomberg Intelligence says.
With both China and Japan, the world’s second- and third-biggest economies, aiming for carbon neutrality as early as 2060 and 2050 respectively, the market to finance this shift needs to step up further, according to Fitch. That includes the development of transition bonds, with companies in industries such as oil or coal are looking at selling to help raise funds for a move to clean energy.
