Indonesia is the first sovereign green bond issuer in Asia, but probably not the last

Green sukuk could fill a void in institutional investor portfolios Last month, Indonesia became the first sovereign green bond issuer in Asia, raising $1.25 billion in a five-year offering. In addition to the distinction of being the first sovereign issuer, Indonesia also made headlines because the product was a sukuk, or Islamic bond. The country’s finance ministry plans to use the proceeds of the green bond to invest in renewable energy projects, green tourism, and waste management. Although Indonesia is one of the world’s top emitters of greenhouse gases and the largest exporter of coal, it has committed to cutting emissions by at least 29% by 2030 and has set targets to reduce coal use in energy production. The country also aims for renewables to make up nearly one quarter of its energy mix by 2025, up from 12% currently. Plus, around 1,800 megawatts of wind projects are targeted for completion by that time. The green sukuk is expected to help advance these goals. Few governments have issued green bonds; Poland and France are the biggest. Most other issuers are corporate entities. In Asia, Chinese companies have led the way in tapping the green market to finance environmentally friendly projects,

March 1, 2018 No Comments

Why sub-zero interest rates are good for Asian debt

The BOJ effect Why sub-zero interest rates are good for Asian debt Despite warnings that outflows following the 2013 “taper tantrum” would continue into this year, investor interest in emerging market (EM) debt — specifically Asian — has made a comeback. July’s asset inflows for EM debt funds, for example, stood at $13.3 billion globally, the highest monthly total for the category since Morningstar began collecting data. The asset class has benefited from several tailwinds since the start of the year, including a rebound in commodity prices and a restrained U.S. dollar. But central bank intervention, specifically negative interest rates in the developed world, stand out as the proximate cause for recent attention. Asian credit markets in particular have benefited from easy money. The Bank of Japan, which adopted negative rates in early 2016, has taken extreme measures in an effort to counter deflationary trends in the country, including yield curve management. The impact on Asia is most pronounced in Indonesian and Malaysian debt. Take, for instance, sukuk from the region. These Islamic bonds have enjoyed outsized attention thanks to BOJ intervention. In addition to the low levels of sukuk issuance, negative rates have created what experts describe as a

October 17, 2016 No Comments