Alter Domus Sensus Magazine Issue 8 - Flipbook - Page 11
DEBT CAPITAL MARKETS
“It all comes down to this:
we can either use finance as
merely an arbitrage platform
to solve the lender/borrower
conundrum, or we can use it to
make the world a better place.”
Head of Debt Capital Markets,
Asia Pacific at Alter Domus
THE GROWTH OF GREEN LOANS
A green loan is exactly like its more
traditional counterparts, with one
exception: In addition to the more
familiar goal of financing a project, it
also seeks to better the environment.
It is a loan linked to sustainability. For
instance, a commercial real estate
developer might secure a green loan to
build a project that incorporates water
conservation and other environmentally
sustainable aspects within the project
Green bonds have a similar purpose.
For example, some states in the
US now issue green muni-bonds.
Instead of using the funds to finance
infrastructure projects, these bonds
seek to improve environmental
concerns such as cleaning up pollution,
improving water quality, and financing
renewable energy projects.
Europe led the way in green financing
by creating the first green bond
more than a decade ago. Issued by
the European Investment Bank, the
bond was created to raise funding
for climate-related projects. Nearly a
decade later, the Bank of China got
onboard, issuing a green bond that
appeared on the Luxembourg Stock
Exchange. While the US has been slow
to catch up, Bank of America says that
in the first half of 2021, the country
issued USD $122 billion in sustainabilitylinked loans. That’s up from USD $19
billion in 2020.
While green financing and ESG are on
the rise, not all ESG is created equal.
Reid says that “In Europe, investors
focus on the environmental aspect
of the scoring system, while both the
US and APAC tend to concentrate on
social and governance issues.”
WHAT’S THE FUTURE OF ESG?
It’s difficult for Reid to hide his
enthusiasm when speaking about the
future of ESG and its possibilities. He
believes that the ability to connect
environmental science and ESG
reporting mechanisms will change the
investment world, creating firms that
employ scientists, lawyers, software
engineers, and financial experts who
work together to innovate and educate
a world ready for a more sustainable
and just environment.
“The current challenge is wrangling all
of the data, especially from non-public
companies, and organising it in a way
that is useful to investors,” he says.
Although a few companies now provide
that data, he is confident that innovators
will emerge to make it even more useful.
But his zeal doesn’t end there. Reid
believes that in the not-so-distant future,
investors will use ESG data as a source
of predictive capabilities not currently
available. In other words, he believes
that the combination of ESG plus AI plus
diverse data sets will provide greater
insight into the overall performance
of organisations. Reid thinks ESG will
swiftly evolve from a niche investment
strategy, to encapsulate big data-driven
“I believe that stakeholders will soon
discover that not only is ESG good for
society, but that it can be a defining
competitive advantage for those
organisations that learn to leverage the
power of diverse data perspectives to
generate additional alpha,” he said.
10 SENSUS ISSUE 8