Green bonds pushed for lenders, companies as fundraising alternative

Corporate March 29, 2018 01:00


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THAI BANKS and companies have been urged to issue green bonds as demand for the securities rises in line with a growing awareness among investors of the need to combat climate change.

“Thailand is a potential market for green bonds due to an increased awareness of environmental and corporate governance issues, “ said Vincent Milton, managing director of Fitch Ratings Thailand.

The global market for green bonds was estimated at US$280 billion on January 31, Milton said.

While this market segment remains small, accounting for less than 1 per cent of the global bond market, there is more room for growth, he said.

China is the global leader in green bonds, with outstanding issuance of almost US$80 billion that is used to support pro-environment policies. Other issuers include supranational agencies such as the World Bank.

China has a top-down policy in this area as the government wants to clean up pollution, said Natalia Bogomolova, regional industry manager of East Asia Pacific International Finance Corporation. She said that the International Finance Corporation (IFC), the financial arm of the World Bank, was discussing with Thai financial institutions a plan for how they can move into green bonds.

 “There is a high chance for it and the amount is expected to be sizeable,” Bogomolova said in response to a question on whether a Thai bank would break ground with the first issuance of a green bond this year.

She said that Thai banks want to add green bonds to their asset portfolios. Thailand and many other emerging markets are in process of establishing green bond framework, Bogomolova said.

She said there are many reasons why green bonds should be issued.

For the issuer, its credibility is enhanced for future opportunities in green investment initiatives and the institution itself can build up its green credentials.

On the investor side, there is demand from high-net-worth individuals seeking to merge their philanthropic and investment interests, according to Bogomolova.

 “Millennials are a growing investor demographic and are more likely to consider environmental, social and governance factors,” she said.

The IFC is ready to support Thai financial institutions to issue green bonds, Bogomolova said.

The IFC recently subscribed to a green bond issued by BDO Unibank in the Philippines. It was the first such issuance in the country. The bond was issued on February 20 under a private placement between the IFC and BDO.

The IFC subscribed to the entire US$150 million issuance using its own accounts. The bond will be used to finance renewable energy, industrial energy efficiency and green building transactions in the Philippines.

Obboon Thirachit, director corporates at Fitch Ratings Thailand, said that renewable energy - such as that from solar and wind power - has the potential to grow as the Thai government wants the proportion of renewable energy consumption to rise to 15 per cent of the total over the next 20 years. Energy from renewable sources accounts for just 3 per cent of the country’s total consumption now.