With the UN predicting continued massive population growth in Asia, green bonds could help secure a long-term sustainable infrastructure for all .
ESG integration can propel some of Asia’s major economies
Asia’s demand for new buildings could be a boom for ESG investors
Bigger doesn’t always have to be better. Financing small-scale projects can make a real difference
Asia’s fast-growing economies, which are increasingly focused on renewable energy sources and sustainable infrastructure, could be fuelled by the rise of ESG investing, according to Albert Tse, CEO South Asia at Amundi.
‘South Korea and Japan have pledged net-zero emissions by 2050, while China has committed to carbon neutrality by 2060. But it is not just an increasing climate awareness and the desire for better environmental quality that is fuelling ESG mentality’, Tse said. The vast trend of urbanisation is also playing a part. To put this in perspective, Asia is expected to be one of the biggest sources of urban population growth over the coming years: the UN predicts that by 2050 India will have added another 416 million urban dwellers, while China will have added 255 million. 
‘Asia is facing a huge demand for new buildings as more and more of its population move from rural areas to the cities, Tse said.
He cites the case of a real estate builder in Vietnam who needed to issue debt to finance the creation of a new building. ‘He could either have issued a conventional bond or a green bond. The advantage of the green bond is that the finished building will be expected to have a much greener profile, with better insulation and lower energy costs. So, the added value of the building may be greater than a conventional one in 10 years’ time,’ he said.
Asia is facing a huge demand for new buildings as more and more of its population move from rural areas to the cities
ALBERT TSE, Amundi
Drawn from a real encounter, we believe this example brings home the fact that someone investing in a project financed through green bonds effectively takes a more holistic stance that the value of the finished project may be higher because of the intrinsic green component, Tse said. ‘This is particularly relevant as Asian economies start to re-open and governments prioritise re-building in the wake of the pandemic,’ he said.
At the same time, the Covid-19 pandemic has resulted in profound social consequences through the region: in particular, disruption to education, employment crises and the impact on healthcare systems have all increased social inequality which may well have lasting effects. ‘It has been difficult to find ways to invest in this field, and that is why we launched an innovative solution in late 2020. Our social bond strategy seeks to promote the financing of social projects to address these areas and we hope it will follow what we consider to be the success of our social thematic strategies,’ he says.
Bonds dedicated to social projects present particular challenges, because many such projects are by nature small scale, often at the level of microfinance: for example, a scheme to help people in a particular locality. And this requires particular investment capabilities, Tse points out. ‘It is possible that in the wake of the pandemic, we may see companies investing in bigger projects on the social side, because of the greater inequality that will be evident throughout the region. We could, for example, see larger scale initiatives within education. But at present most of the projects remain small in scale. This is where Amundi’s size and experience enables the company to channel money secured from its international investors to provide finance for smaller projects that have the potential to have a real impact.’
1] United Nations ‘Around 2.5 billion more people will be living in cities by 2050, projects new UN report’
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 30 May 2022. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
Date of first use: 30 May 2022
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