ESG bonds and new energy funds are on the rise in China, while solar and offshore wind projects are expanding across Asia
by Bethan Rees
Several Asian high-yield issuers have tapped into the environmental, social and governance (ESG) bond market in the first week of 2021, reports Darryl Yu for The Asset. He writes that they are seeking to achieve some fundraising objectives early in the new year, following the "momentum of a strong Asian G3 bond 2020 issuance year".
Chinese property companies Yuzhou Group, Zhenro Properties and Modern Land have executed green bond deals, "with Yuzhou Group and Zhenro Properties raising US$562m and US$400m respectively". India's Shriram Transport is also "in the market with its second social bond". Its debut transaction in 2020 focused on generating employment opportunities for individuals in India, Yu reports.
"The sustainable bond market … has rebounded to pre-Covid-19 levels after experiencing a strong Q3 2020," he writes. A record US$127.3bn was generated by issuers in Q3 2020, according to Moody's Investor Service data.
Yu concludes by quoting an Invesco Fixed Income commentary: “Green bonds not only provide Asian corporates with essential funding for infrastructure and environmentally friendly capital expenditures, they also provide investors with a wide range of yield choices and potential value resilience amid volatile markets.”
The Asset article
China's new energy funds
In September 2020, China's president Xi Jinping announced a plan for the country to achieve carbon neutrality by 2060. As a result of this, Chinese money managers are "rushing to launch new energy funds, seeking to capitalise on investors' green fever", report Samuel Shen and David Stanway for Reuters.
They report that “China's first photovoltaic industry exchange-traded fund, launched by Huatai-PineBridge Fund Management in December, attracted hot demand, with assets under management jumping nearly six-fold in just a month” to US$1.55bn, Shen and Stanway report.
Another fund house, Yinhua Fund Management, is raising money for a rival product, while Tianhong Asset Management plans to launch an index fund on 11 January that invests in solar power.
China's new energy index doubled in 2020, and president Xi has pledged to raise wind and solar capacity to more than double its current level by 2030. Harvest Fund Management, Guotai Asset Management and Penghua Fund Management are preparing to launch solar energy funds.
"But soaring stock prices are fuelling fears of a bubble, with China’s new energy index already jumping over 8% in the first two trading days of 2021," write Shen and Stanway. They quote Stephen Huang, vice president at Shanghai See Truth Investment Management, who says that although the sector's prospects are bright, “valuation is too high".
Solar and offshore in Asia
Despite the Covid-19 pandemic, solar power and offshore wind "will drive steep growth in non-hydro renewables in Asia", reports Bernd Radowitz for Recharge. Radowitz points to a forecast by an analyst at Fitch Solutions, which says that the growth will more than double between 2020 and 2029m with an expected acceleration of growth over the coming years as several countries, such as China, Japan, South Korea and New Zealand, have made carbon neutral pledges.
The forecast, according to Radowitz, points out that South Korea has established a ‘Green New Deal’ that is similar to Europe's, and is looking to invest US$67.41bn in the next five years to expand its renewable energy capacity, green mobility sector, and the development of ‘smart’ green cities.
In addition, solar will remain “the key growth driver in renewables, given its rapidly falling component costs, led by China, which is expected to remain the largest individual market for solar growth". Radowitz notes that China is adding more than 263GW of net solar capacity over the next ten years, followed by India and Japan, which are adding 78GW and 35GW respectively.
The report also highlights the increasing momentum of offshore wind in Asia, writes Radowitz, with Taiwan remaining one of the largest markets worldwide, with nearly 11.2GW of offshore wind capacity in the pipeline. Japan has also increased its focus on the offshore wind sector, launching its first offshore wind tender in June 2020.