BUILDING NEW MARKETS

Why Asia’s green economy is growing fast 

With the UN predicting continued massive population growth in Asia, green bonds could help secure a long-term sustainable infrastructure for all ^[1].

Key takeaways:

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. [1]

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.’

Sources:

1] United Nations ‘Around 2.5 billion more people will be living in cities by 2050, projects new UN report’