Asia, the center of sustainable finance
Interest in green bonds is growing around the world, but Asia is emerging as the center of “sustainable finance,” which is the finance that supports a sustainable economy. In this article, I’ll show you why China is at the forefront.
China focusing on the green pound
While there is a growing focus on sustainable finance in Asia, China in particular has made green finance a national priority for the five years following 2021. Green finance is one of the means of financing for projects aiming to solve environmental problems, and it is mainly raised through “Green Pound”.
Green bonds are bonds that enable financing and investment in new and existing environmentally friendly projects, such as climate change mitigation, and are of growing interest around the world.
China has set a “30/60 target” to encourage large-scale green investment and the development of a wide range of green finance products such as green bonds. In this target, the year when carbon dioxide emissions peak is set as 2030, and the numerical target of achieving carbon neutrality by 2060 is set.
Mr. Yi Gang, the head of the People’s Bank of China, gave a speech at the roundtable of the China Development Forum held the other day, entitled “Maximizing China’s Monetary Policy and Promoting Green Finance.” In that, he made the following statement about the “30/60 target”.
Achieving the 30/60 target is not only a high hurdle not only for the government but also for China’s private sector, it also requires hundreds of trillions of yuan. However, only a small part of it can be covered by public funds.
To do so, it is necessary to introduce sound public policy incentives and fill the gap with the power of the market.
“Sustainable” without definition
UK-based global green bond market issuance in 2020, according to the Climate Bonds Initiative, a non-profit organization dedicated to mobilizing $ 100 trillion in bond markets to solve climate change Increased from $ 266.5 billion in 2019 to a record high of $ 269.5 billion. So far, more than $ 1 trillion (about 100 trillion yen) of green bonds have been issued in total.
However, according to a survey by the Bank for International Settlements (BIS), the share of the green bond market in the world’s bond issuance is still small, at about 3.5%.
According to BlackRock’s 2020 Global Sustainable Investing Survey, a survey of 425 investors in 27 countries found that global investors will double their sustainable assets by 2025. We are planning to increase the allocation of sustainable fixed income to the asset class.
However, the report points out that the poor quality and difficulty of using environmental, social and governance (ESG) data and analysis are the biggest obstacles to the spread of impact and sustainable investment. I will.
According to the Green Bond Principles (GBP, Guidelines for Stakeholders on Green Bonds), green bond issuers are required to use funds, process evaluation and selection of projects, manage funds, and report to investors in a timely manner. The four elements must be clarified.
Experts have also argued that the terms “green” and “sustainable” have no consistent definition, which makes monitoring and reporting results less transparent.
In an interview with Forkast.News, Robert Greenfield said:
It takes a very complex follow-up to see if a green bond really has that literal impact.I think tokenization is one step in measuring its impact.
Blockchain boosts green finance
Mr. Greenfield mentioned above cites traceability as an example of how blockchain can be useful.
Tokenization can be used as proof that a particular product is unique. Tokenization is a great way to do it as part of a traceability solution.
You can also leverage Internet of Things (IoT) devices and artificial intelligence to collect real-time data to improve traceability and investor reporting.
Related: NFT explanation that even beginners can understand: What is the mechanism of “tokenization” | Forkast contribution
Oi Yee Choo, Chief Commercial Officer of iSTOX, a Singapore-based digital stock exchange, responded to Forkast’s questions about blockchain technology and digital securities:
(Blockchain technology) could be a game changer for all private market issuances by automating the manual process, distributing securities in smaller units and allowing them to trade freely on exchanges. There is.
Tokenization will allow us to attract smaller investors such as institutional and individual investors.
Through blockchain technology and smart contracts, we can expect to significantly improve the current situation and management costs, which were previously limited to large issuers who have access to the bond market.
The cost savings of adopting blockchain technology can be enormous, the HSBC Center of Sustainable Finance and the Sustainable Digital Finance Alliance report. The estimated cost of issuing a green bond using the standard process was 6.4 million dollars (about 170 million yen), while the automatic issuance by blockchain is only $ 692,000 (about 70 million yen). He stayed at, he said in the report.
Green finance gaining momentum
The UN’s “Sustainable Development Goals” initiative aims to be achieved by 2030. With the United Nations Climate Change Conference scheduled to be held in November 2009, green finance and fintech are receiving even more attention from the government and private companies.
Mark Carney, a former Bank of England Governor and now a UN Special Envoy on Climate Change and Finance, said at the Singapore FinTech Festival last December:
For example, for pension funds, sovereign wealth funds, asset management companies, banks, etc., the total balance sheet that requires information on climate change is 170 trillion dollars (about 1.7 Kyen).
In the field of blockchain and fintech, especially when it comes to tokenization, Asia far surpasses Europe and the United States.Singapore is a perfect example of this, trying various things at the institutional level that have not yet been implemented in the United States.
Green Finance Hub in Asia
Asia accounts for about a quarter of the world’s green bond issuance, and in recent months many green finance initiatives have been announced in the region.
Singapore, which is the largest green finance market in Southeast Asia and accounts for about 50% of the cumulative issuance of ASEAN green bonds and loans, is worth $ 14 billion (about 1.5 trillion yen) in public sector infrastructure projects in March. Announced that it will issue a bond. As part of its Green Finance Action Plan, the government will increase market liquidity for green bonds, attract green issuers, capital and investors, and drive capital flows towards sustainable development in Singapore and around the world. We are working to create it.
According to a report by the International Capital Markets Association (ICMA), Hong Kong is the largest base for arranging international bond issuance in Asia, 34% of the Asian international bond market in 2020, $ 196 billion (about 20 trillion). Yen) was won, followed by the United States at 18%, the United Kingdom at 17%, and Singapore at 5%. By the end of 2019, $ 26 billion of green bonds have been arranged and issued in Hong Kong, a significant number of which are issued by mainland and international entities.
In February, Hong Kong announced plans to issue an additional $ 22.6 billion in green bonds over the next five years. This follows in January when the government issued a $ 2.5 billion green bond.
“Hong Kong, which has adopted international standards for green bond issuance, is seeking green capital from international investors to support this transition,” said Howard Lee, Deputy Director of the Hong Kong Monetary Authority, in a recent speech. We believe it is an ideal platform for our company, and we are looking at ways to facilitate this move, especially within the Greater Bay Area (Guangdong-Hong Kong). “
The Hong Kong government will pilot green bond issuance in a wide range of currencies, project types and issuance channels and will issue retail green bonds for consumers.
The Bank for International Settlements Innovation Hub in Hong Kong is exploring the potential of small token-type green bonds issued to individual investors. With this token-type Green Pond, we plan to demonstrate how this technology can be used to reduce greenwashing (cheating and trying to be environmentally friendly) and increase transparency. ..
Images used under Shutterstock license
“Cryptocurrency” means “cryptographic assets”