INTHEBLACK June 2022 - Magazine - Page 21
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T
he appetite for sustainable finance is growing
across the globe as more corporations and
governments tap into green capital markets to
meet their environment, social and governance
(ESG) goals – and the mounting expectations of
investors.
While the European market continues to lead
the way, Asia-Pacific is gaining ground thanks to
the increasingly green ambitions of centres like
Singapore and Hong Kong and the overwhelming
acknowledgment of a carbon-constrained future.
Last year, global issuance of ESG-themed bonds
exceeded US$1 trillion (A$1.4 trillion), according to
Climate Bonds Initiative, a UK-based not-for-profit
that aims to mobilise the US$100 trillion (A$143
trillion) global bond market for climate change
solutions. In Asia-Pacific, ESG-themed bonds made
up 15 per cent of bond offerings for the year and, as
the market continues to mature, accountants face fresh
challenges in managing and integrating ESG data into
overall financial performance.
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TRENDS ACROSS THE REGION
In broad terms, ESG-themed bonds are financial
instruments linked to sustainability. The majority are
classified as “use of proceeds”, and are issued to fund
specific green, social or sustainability projects.
However, sustainability-linked bonds (SLBs)
are also growing in popularity. Performance-based
instruments, the interest margins of SLBs, vary
according to the issuer’s performance against predetermined, measurable ESG targets.
In June last year, for instance, Australian
conglomerate Wesfarmers issued the first SLB in
the local market, raising A$1 billion in a transaction
that was over-subscribed by approximately 2.5 times.
The interest rates are linked to Wesfarmers’ progress
against two sustainability performance targets, and
a step-up of 25 basis points will apply on the SLBs’
trigger dates if the targets are not met.
While Australia’s ESG-themed bond market is
expected to grow by about 25 per cent to more than
A$25 billion this year, China remains the region’s
largest issuer. Last year, its green bond issuance grew
just over 230 per cent year on year to US$60.5 billion
AT A G L A N C E
The European market
continues to lead the way
in sustainable finance
initiatives, but Asia-Pacific
is now rapidly gaining
ground, driven by financial
centres such as Hong
Kong and Singapore.
Global issuance of
environment, social
and governance (ESG)themed bonds exceeded
US$1 trillion (A$1.4 trillion)
in 2021.
In Asia-Pacific, ESGthemed bonds made
up 15 per cent of bond
offerings last year and,
as the market evolves and
matures, so too does the
role accountants play in
managing and integrating
ESG data into overall
financial performance.
intheblack.cpaaustralia.com.au June 2022 21