Korea Overtakes China as Top Asia Sustainable-Debt Seller
Borrowers in Korea have sold $11.9 billion of ESG notes so far this year, the most in the Asia-Pacific region.
(Bloomberg) -- South Korea has overtaken China to lead Asia in sales of socially-responsible bonds this year, as global issuance of debt to fund the fight against Covid-19 surges.
Borrowers in Korea have sold $11.9 billion of environmental, social and governance notes so far this year, the most in the Asia-Pacific region, followed by Japan with $9.5 billion and China with $9 billion, Bloomberg-compiled data show. China was Asia’s biggest issuer of such debt from 2016 to 2019.
Korean policy makers have introduced steps that may fuel more interest in sustainable debt, with President Moon Jae-in’s government announcing “green New Deal” projects last month to cut carbon emissions and foster enviromentally-friendly industries. The National Pension Service, which oversees 749 trillion won ($631 billion), said it will boost socially-responsible investment, prompting other investors to follow the trend.
“Issuers prefer to sell bonds labeled ‘ESG’ due to growing investor demand for them in Korea,” said Han Gwangyeol, a Seoul-based credit analyst at NH Investment & Securities Co. “The ESG debt market will continue to expand globally, and that boom will help improve the performance of the notes in the mid- to long-term.”
See also: New Normal: Virus and Green Stimulus Fuel Transition
Issuance of social bonds by Asian borrowers has surged to $17.6 billion in 2020 from $3.6 billion a year earlier. Driving the increase is a rush to sell notes to pay for the battle against the pandemic, which has caused more than 749,000 deaths around the world and which the International Monetary Fund predicts will result in the global economy shrinking 4.9% this year.
Investor reception for bonds to fight Covid-19 is strong in Asia-Pacific and more sales of the debt are expected this year, according to HSBC Holdings Plc. Global issuance of ESG notes has climbed 27% to a record $191.7 billion so far this year, Bloomberg-compiled data show.
Korea SMEs and Startups Agency, a government-funded organization to support smaller businesses, has led ESG bond sales in the nation this year, while Korea Housing Finance Corp. and Kookmin Bank have also been active issuers.
©2020 Bloomberg L.P.