ASEAN green bonds surge

Green bonds — debt sold to fund specific climate projects — have become a much bigger part of Southeast Asia’s capital markets since 2017. (asianbondsonline.adb.org) In the Association of Southeast Asian Nations, or ASEAN, sustainable bonds outstanding had expanded more than sevenfold by the end of 2023 from their 2017 level, according to Asian Development Bank data published in March 2024. Green bonds were the largest slice of that market. (asianbondsonline.adb.org) That growth followed a regional rulebook push. The ASEAN Capital Markets Forum introduced ASEAN Green Bond Standards in 2017 and revised them in 2018, giving issuers a common framework for how proceeds are labeled, tracked and reported. (theacmf.org) (afcwp.asean.org) A green bond works like a regular bond, but the money is ring-fenced for named projects such as renewable power, cleaner transport, efficient buildings or water systems. Investors get fixed-income exposure, and issuers get a pool of capital tied to environmental spending. (adb.org) (ieefa.org) In Southeast Asia, that matters because the region still leans heavily on debt financing for energy investment. The ASEAN Centre for Energy said in its 2024 investment report that about 60% of the region’s energy financing comes from commercial debt, while capital-market funding remains underused. (aseanenergy.org) The region also needs far more power investment. The International Energy Agency said in its Southeast Asia Energy Outlook 2024 that energy demand is set to keep rising as economies grow, making financing choices central to how quickly cleaner capacity gets built. (iea.org) Asian Development Bank data show ASEAN’s sustainable bond market is still small relative to its overall bond market, even after the recent expansion. That leaves room for more issuance from governments, banks and companies if projects and reporting standards keep improving. (asianbondsonline.adb.org) Other regional analysts have argued that public-sector issuance could help deepen the market further by setting pricing benchmarks and improving liquidity. The Institute for Energy Economics and Financial Analysis made that case in a 2024 report on sustainable bond markets in Asia. (ieefa.org) The result is a financing market that now looks more established than it did seven years ago, but still far from saturated. In ASEAN, green bonds have moved from a niche label in 2017 to a mainstream funding channel for climate-linked projects by 2023. (theacmf.org) (asianbondsonline.adb.org)