Few sovereigns from anywhere, let alone Asia, have sold green bonds. Indonesia is the only Asia sovereign to do so. It has sold two bonds, both in sukuk format.
Other countries are not idle when it comes to green finance. Some governments have opted for initiatives such as subsidy schemes to cover the costs of green verification or the development of country-specific green guidelines to encourage more borrowers to sell green bonds.
But those sovereigns that have sold green bonds have seen the largest upticks in issuance from their compatriots. After France sold its maiden green bond in 2017, it saw a 250% spike in green bond issuance from the previous year, according to Dealogic data.
While Indonesia’s issuance volumes are still low — just two companies sold green bonds last year after the sovereign’s debut — it still represents growth. Before the government sold a green bond in early 2018, Indonesia had not had any such issuance.
Still, Indonesia returned for a second green offering early this year and there could be more to come from the country’s issuers. Bank Rakyat Indonesia announced a mandate for a sustainability-labeled dollar bond on Tuesday.
Asia has a huge opportunity for a surge in green issuance. It is ripe for infrastructure funding, real estate spending and a boom in renewable energy. Corporations and banks are starting to catch on to the green funding trend, but market watchers agree that sovereign issuance would support the market’s growth, encouraging other borrowers to follow.
There are plenty of places where the next sovereign bond could come from. Hong Kong seems the most likely; it has been toying with the idea of a green bond for nearly two years. The first green bond under the government’s HK$100bn ($12.7bn) green bond programme is expected to be sold in the first half of this year.
Hong Kong’s bond market is small, but tied with China’s green ambitions, a deal would trigger further green borrowing in Greater China.
The Philippines is also a possibility. The country's first public green bond was sold less than three months ago. The sovereign has hinted that it would consider a green bond sale itself. Such a deal would encourage a slew of borrowers, many of whom have already developed, or are developing, sustainability frameworks.
There are others. South Korea, particularly as a rare sovereign borrower, would be a notable green issuer. Last year, South Korean sustainability issuance grew. Malaysia could sell a green sukuk. China, a regular foreign currency borrower again, could become a leading green bond issuer if it chose the label for its annual deal in 2019. Meanwhile, Japan is the second largest green bond market in Asia and would enjoy plenty of domestic demand.
Asia has much promise as a supplier of green bonds but if it is to realise its potential, its sovereigns must lead the way.