Bright and "greener" prospects for green bonds in Malaysia

HSBC Bank Malaysia Bhd deputy chairman and CEO Mukhtar Hussain

PETALING JAYA: The prospects of green bonds, which has been in the spotlight of late, has strong growth potential in Malaysia, thanks to Asean’s focus on green financing and China’s One Belt One Road initiative (BRI).

Fixed income analysts contacted by StarBiz agreed that initiatives like the introduction of the Asean Green Bond Standards (AGBS) will be a boon to the launching of green bonds going forward.

“The green financing and investment schemes have good growth potential with the introduction AGBS and will gain traction as well as pave the way for issuance of green bonds. 

“We expect more conglomerates and Government-linked companies to tap the AGBS to issue green bonds,’’ said a fixed income analyst with a bank-backed brokerage.  

Permodalan Nasional Bhd (PNB) will be adopting the AGBS to finance the construction of the Warisan Merdeka Tower. 

For the Warisan Merdeka Tower project, PNB’s wholly owned subsidiary PNB Merdeka Ventures Sdn Bhd will be the first issuer in the region to adopt the AGBS.

AGBS aims to enhance transparency, consistency and uniformity of Asean Green Bonds which would also contribute to the development of a new asset
class, reduce due diligence cost and help investors to make informed investment decisions.

Meanwhile, HSBC Bank Malaysia Bhd CEO Mukhtar Hussain said “The green bond market may be a late developer, but it is now critical to financing a lower carbon economy. 

“It enables companies to tap the growing pool of cash globally that is looking for climate-friendly investment opportunities, converting those funds into capital for environmentally sustainable projects.”

HSBC Malaysia in statement said at present, green bonds account for less than 1% of the overall global bond market but added that it believe the market was rapidly growing. 

“Firstly, there have been profound changes in the way businesses, consumers and investors perceive the risks stemming from pollution and rising global temperatures. The 2015 Paris Agreement established an overwhelming global consensus on the need to address climate change. 

“It required the nearly 200 signatories to develop their own national plans to meet the target of limiting the increase in global temperatures to two degrees celsius or less over pre-industrial times. This has galvanised global greentech investments and financing,” it noted.

Secondly, technological advances are making more and more low-carbon alternatives (from alternative energy technologies, to electric vehicles and batteries) economically viable. Green investments are increasingly not just ethically but also financially sound.

Lastly, the authorities in China and India have thrown their considerable weight behind efforts to green their economies. 

By launching green bonds for the first time in 2015, Chinese and Indian institutions added geographical diversity to a market that had until then been dominated by the likes of Scandinavia, the US and Britain. Last year, more than US$33bil worth of Chinese green bonds were issued. 

That’s over one-third of the global total – and up from just US$1bil in 2015. Indian volumes are more modest, at just over US$1bil last year, but the country is likewise going through a paradigm shift in low-carbon technologies, HSBC noted.