Asian investors target sustainable debt and energy projects

Asian issuers have been increasingly attracted to the green and sustainable debt markets in the past few years, providing some propulsion to record year-on-year issuance growth globally.

Which of the following types of sustainable infrastructure projects would you be most interested in investing in?

Indeed, to the beginning of June, Asian issuers – led by Chinese and South Korean public and private sector borrowers – had issued a record $69 billion of green and sustainability-linked bonds. HSBC’s survey indicates that such strong interest in sustainable finance looks set to continue.

Asked if they expect their company to actively seek advice on green, social or sustainability issues in relation to capital markets transactions in the next 12 months, and a striking 78% of Asian issuers said they expected this to happen – the highest percentage of any region.

Appetite in Asia is clearly high, driven by government and regulatory support, and a desire among issuers to diversify their funding and demonstrate their commitment to sustainability.

On the investor side, this interest extends to sustainable energy projects, in which an emphatic 92% of Asian investors say they are interested in investing in, and of them some 18% are already doing so. Of multiple investment opportunities, investors say the most interesting projects for them to invest in are: Solar power (29%); wind power (23%); smart cities and grids (21%); and electric vehicles and transport (21%).

Asian investors were similarly keen on renewable power generation last year – wind, solar, tidal and hydroelectric power were the second most attractive opportunity after lower carbon forms of hydrocarbon energy – but this year smart cities and grids have risen notably, essentially replacing carbon capture and storage as one of the top opportunities.

Across the regions there is variation in the results, but solar power is also the leading opportunity in Americas and MENAT. Interestingly, European investors are most interested in carbon capture and storage, though solar power generation is in the top three.

Asian investors clearly see the opportunity to invest in clean energy and electric transportation, as well as the smart and more sustainable cities of the future.

More broadly, Asian investors are seeing and increasingly embracing the opportunity to invest sustainably and are catching up to their global peers. A shortage of experienced talent in the region may be hindering their progress, but it is not preventing it.

On the issuer side, they are leading the sustainable charge, increasingly positioning environmental and social issues at the core of their corporate growth and development strategies. In turn, this is providing investors with greater ESG-focused investment opportunities, which will likely continue to expand.