THE PHILIPPINES issued $230,000 worth of green bonds last year, data from the International Finance Corp. (IFC) and Amundi showed.
The rise in green and sustainability markets in Asian countries outside China are “likely to be further strengthened by recent policy efforts,” IFC and Amundi said in their “Emerging Market Green Bonds” report.
“Following the publication of a taxonomy for the region, several countries are in advanced stages of developing their own guidelines or classification systems detailing which economic activities qualify for environmental or sustainable investment,” it added.
Among Association of Southeast Asian Nations countries with available data, Indonesia issued the highest volume of green bonds ($2.58 million), followed by Malaysia ($250,000), the Philippines, and Vietnam ($40,000).
From 2012 to 2022, the cumulative volume of green bonds issued by the Philippines amounted to $2.8 million.
The IFC and Amundi said green bonds and other sustainable debt instruments are key to “ensuring enough capital is channeled from international investors toward funding the energy transition in emerging markets.”
“Demand for funding to finance energy transitions as developing-country governments and corporates pursue environmental goals set by the Paris Agreement will drive growth in issuance of green, social, sustainability, and sustainability-linked (GSSS) bonds,” the report said.
IFC and Amundi’s forecast is that green bond issuances in emerging markets outside China will grow by 14% this year, before easing to about 11% in 2024.
Last year, global GSSS bond issuances fell 13%, the first annual decline, indicating the “fragility of private investment flows.”
The report said governments and multilateral institutions must make it a priority to boost the GSSS bond market in developing countries.
“The asset class is crucial for channeling private investment toward green transitions and the need for this type of funding is especially acute in emerging markets where fiscal resources are scarcer than in developed economies. Failure to underpin these markets will leave them struggling to meet climate targets,” it said.
It also called to address “greenwashing,” which means that issuers wrongly state the extent a project or activity meets the sustainability criteria.
Central banks will also be key to pushing financial markets to support the green transition.
“In terms of monetary policy, they could also face a challenge to price stability from ‘greenflation,’ or the rising prices associated with overhauling economies and implementing green transitions. In any case, they will need to incorporate climate risks into regulatory and supervisory frameworks,” the report said.
“These, in turn, could shape the data disclosure and risk management practices required by regulators of the financial institutions that they supervise. In addition, they could also actively support the greening of economies by adapting their lending operations, collateral frameworks, and asset purchase programs to favor green assets, thereby underpinning GSSS demand,” it added.
IFC and Amundi said financial technology (fintech) can also enhance the development of GSSS issuance in emerging markets by “improving transparency, enhancing data collection, and enabling comparability across markets.”
“This would increase these markets’ appeal to international money managers as they assess potential allocations for their funds,” it said. — L.M.J.C. Jocson