KUALA LUMPUR, Nov 10 (IFR) – The ASEAN Capital Markets Forum has launched a framework of Green bond standards designed to act as a catalyst for the funding of climate-aligned projects in the region.
The ASEAN Green Bond Standards, unveiled at the Malaysian Securities Commission’s inaugural ASEAN capital markets conference in Kuala Lumpur, recognises the explosive growth of the Green bond market, with global issuance projected to grow to US$1trn by 2020, according to the World Bank and ACMF.
“The ASEAN green framework is not only important in creating standards in the region, they are also important in creating awareness in the region,” ICMA Asia-Pacific chief representative Mushtaq Kapasi told IFR.
“ASEAN must grow in a responsible and sustainable manner,” said SC chairman Ranjit Ajit Singh, who is also chair of the ACMF, made up of regulators from the member countries. “The ASEAN Green bond standards will help in the allocation of resources towards climate-friendly investments.”
Malaysian real-estate developer PNB Merdeka Ventures, which has set up a M$3.65bn (US$875.6m) sukuk programme to construct an environmentally friendly building, is expected to be the first to adopt the ASEAN standards. MIDF Investment Bank is principal adviser and lead arranger on the murabahah programme.
A handful of issuers in Malaysia and Singapore have sold Green bonds this year, but the format remains relatively new in the region. Malaysian solar producer Tadau Energy sold the country’s first Green project bonds, with a M$250m 15-tranche sukuk in July. Quantum Solar Park Semenanjung was next, with a M$1bn offering of Islamic Green project bonds in September.
In Singapore, property developer City Developments sold the city state’s first Green bonds with a S$100m (US$73m) two-year print in April. An offering of US$500m five-year floating-rate notes from DBS Bank in July is Singapore’s first and only offshore Green bond.
To encourage more issuance, individual ASEAN countries, such as Malaysia and Singapore, have introduced schemes to help offset the costs of issuing green debt.
In late October, Malaysian Prime Minister Najib Razak announced income-tax exemptions for recipients of the special Green SRI sukuk grants. Singapore is also introducing tax incentives for issuers to offset expenses related to obtaining external reviews for Green bonds.
NO FOSSIL FUELS
Although Asian funds lack the depth and breadth of their leading peers in Europe and the US, where environmental, social and governance concerns are part of many investment mandates, interest among investors in the region has been growing in recent years, notably among private wealth clients.
The ASEAN Green bond standards are among the first established frameworks in Asia for this asset class and adhere very closely to the ICMA principles. They specifically exclude the funding of fossil fuels to prevent so-called greenwashing.
The Green bond status will be available only to issuers located in ASEAN or if the Green bonds have geographical or economic connections to the ASEAN region.
The framework recommends compliance with a rigorous monitoring process, which includes continuous disclosures of information on the use of proceeds and frequent reporting, in addition to a required annual report on the projects’ progress, as well as the appointment of external reviewers with relevant credentials.
The 10 ASEAN members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.