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ESG-labelled financing gains further traction as regulation tightens
The winners of The Asset Triple A Country Awards 2021 - North Asia
The Asset 7 Jan 2022

The emergence of the Omicron variant is a grim reminder that the Covid-19 pandemic is far from over and Asia, like the rest of world, will continue to face economic challenges. This is being exacerbated by other factors, including a slowing Chinese economy and rising inflation, which could usher in higher interest rates in 2022.

The regulatory tightening in China has also unsettled the markets and exacted a good deal of pressure particularly on technology companies. The resulting tech stock rout underpins market volatility and impacted the deal flow. “Everyone is wary about regulatory risks and investors have to navigate what has been a choppy market environment,” says one senior banker in Hong Kong.

The events surrounding a number of Chinese real estate companies as highlighted by the saga of China Evergrande Group, which defaulted under a heavy debt burden, has effectively shut down the Asia G3 high-yield bond market, which is skewed towards this sector, in the latter part of 2021. These property developers have to look elsewhere for funding, resorting to asset sales and tapping the equity capital market (ECM) to raise financing.

What gained further traction in 2021 is the issuance of ESG-labelled loans and bonds – green, social and sustainability – not just in China, but across the region. The board of editors at The Asset, during the course of the evaluation process for The Triple A Country Awards 2021, noted several renewable energy companies continue to actively access the green bond market to fund their projects, while banks are raising green and sustainability bonds to boost their sustainable lending portfolio. The issuers and borrowers are also increasingly arranging sustainability-linked loans (SLLs) and sustainability-linked bonds (SLBs) that are usually linked to achieving sustainability performance targets relating to, for instance, greenhouse gas emissions intensity, environmental impact and workplace diversity.

Leading issuers

In North Asia, Chinese and South Korean corporates and financial institutions continue to be at the forefront of ESG-labelled bond offerings. The big Chinese quasi-sovereign banks and policy banks are leading the issuances through their different global branches.

For example, in 2021 Bank of China (Hong Kong) printed CNH green and transition bonds, while BoC (Macau) priced a CNH biodiversity-themed green bond. BoC (Singapore), BoC (Luxembourg), BoC (Frankfurt) and BoC (Sydney) likewise priced green bonds during the year. With such an intense ESG commitment, BoC is once again voted as the Best issuer for sustainable finance in China during the review period.

Chinese corporates are active issuers as well. Alibaba Group Holding priced in February a US$5 billion multi-tranche bond offering that included a 20-year sustainability bond for US$1 billion, while Xiaomi Corporation raised a US$400 million green bond with a tenor of 30 years as part of its total US$1.2 billion fundraising in July.

Several ESG-labelled deals were also noted in the China onshore bond market with issuances of carbon-neutral green bonds in response to China’s carbon neutral goal by 2060.

Securitization financing

Over in Korea, Samsung Card Company launched the first-ever ESG securitization financing as it priced in March a US$300 million floating rate social notes. The transaction is backed by a portfolio of high-quality credit card receivables by Samsung Card, which was able to achieve significant savings compared to the funding costs of its domestic senior unsecured issuances. Another credit card company, KB Kookmin Card, followed suit in May with the first sustainability bond issued by a credit card issuer globally amounting to US$300 million.

Hong Kong likewise picked up the pace in the issuance of ESG-labelled bonds, with the HKSAR pricing its second green bond in January amounting to US$2.5 billion in three tranches. This is the largest US dollar bond by the HKSAR, which included its first 30-year tranche issuance. The HKSAR is selected as the Best issuer for sustainable finance in Hong Kong.

In terms of ECM, the Stock Exchange of Hong Kong announced in December new rules to create a listing regime for special purpose acquisition vehicles (SPACs) effective January 1 2022. This comes as a number of SPAC initial public offerings were launched in 2021.

For the complete list of winning banks and advisers in North Asia, please click here.

For the complete list of winning deals in North Asia, please click here.

An awards ceremony will be held sometime in 2022. Please reserve your place by contacting events@theasset.com.

This concludes our announcements of the Triple A Country Awards 2021. Congratulations to all the winners!

To view the full list of The Asset Triple A Country Awards 2021 winners please go here.

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Robert Coughlan
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