With the heightened focus on climate change mitigation and adaptation, financial institutions are putting increased emphasis on sustainable financing and on socially responsible investing initiatives.
Many are shifting their business strategy to support the global transition towards a low carbon economy with more funding allocated to renewable energy and energy-efficient projects. In so doing, these financial institutions sometimes sacrifice business opportunities by moving away from carbon-intensive projects, such as coal-related power projects, which still account for a large percentage of the energy mix in Asia.
This trend was visible in The Asset Triple A Regional House and Deal Awards 2018 as the board of editors sat through the banks' presentations and evaluated their submission materials. Last year's winner, Bank of America Merrill Lynch (BAML), now faces increased competition in its bid to retain the Best ESG Bank award, with ANZ, Credit Agricole CIB, DBS, HSBC and Societe Generale CIB all making a strong case to win top honours.
BAML highlights various initiatives to reduce its operational footprint, citing progress in reducing its energy consumption, office waste to landfill and paper consumption. Asia-Pacific continues to contribute to the bank's US$125 billion commitment to sustainable finance (on a global basis), with US$1.4 billion earmarked as of the third quarter of 2018, bringing the region's total outlay to US$8.6 billion.
ANZ's corporate sustainability framework is aligned with the UN Sustainable Development Goals and has committed to fund and facilitate at least A$15 billion (US$10.64 billion) in low carbon and sustainable solutions by October 2020. By September 30 2017, the bank had committed A$6.9 billion. The bank aims to reduce the direct impact of its business activities on the environment with respect to carbon emissions, renewable energy, water, recycling and paper.
Credit Agricole also makes its presence felt in ESG financing through structuring and arranging green, social and sustainability bonds for Asian issuers. This European bank, along with three US banks, drafted the first version of the green bond principles in 2015. The bank ceased financing coal mining and fossil fuel operations in 2017. Furthermore, in a bid to capitalize on burgeoning opportunities in sustainable finance in Asia, the bank relocated one of its sustainable banking specialists, Dominque Duval, to the region.
DBS also manifested its ESG credentials through a series of sustainability-focused debt transactions, helping several Asian issuers raise green, social and sustainability bonds and loans. It has been making traction in areas to address climate change and transition to a low carbon economy, including managing its environmental footprint, promoting sustainable finance, responsible financing and committing to transparent disclosures. DBS is committed to the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) on voluntary disclosures around climate-related risks and opportunities.
HSBC has engrained sustainable finance as part of its core values and has made five sustainable finance commitments. These include the provision of US$100 billion of sustainable financing and investment by 2025, with China, Hong Kong, India and Singapore functioning as key centres. This UK-headquartered bank hopes to generate 100% electricity from renewable sources by 2030 (90% by 2025), reduce exposure to thermal coal and manage transactions for high carbon sectors. The bank also adopts the recommendations of the Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD).
Societe Generale is likewise at the forefront of the green financing space in Asia-Pacific. It has successfully deployed its technical expertise and experience via a diverse range of unique transactions in the region in 2018, spanning renewable energy, and green and social bonds. In 2017, the bank pledged to help raise 100 billion euros (US$113.64 million) in financing for energy transition between 2016 and 2020, and to report regularly on its achievement. It had already achieved 58% of the target by the third quarter of 2018 with 42 billion euro in green bond issuances led or co-led by the bank, and 16 billion euro in advisory and financing services in the renewable energy sector.
This diverse range of transactions arranged by banks include Asia's first ever green/water bond for Korea Water Resources Corporation, amounting to US$300 million, the first social covered bond by Korea Housing Finance Corporation, amounting to 500 million euro, and the first sustainability project bond by Tropical Landscape Finance Facility, amounting to US$95 million, which spawned other similar transactions during the year.
Three banks distinguished themselves in bringing such deals into the market – BAML, Credit Agricole and HSBC – earning the nomination for the Best Green Adviser award. These banks have worked together on a number of transactions, such as for the Bank of China (London) US$1 billion green bond and Bank of China (Hong Kong) HK$3 billion (US$382.20 million) sustainability bond, where all the three nominees acted as joint global coordinators as well as joint bookrunners and lead managers.
Credit Agricole and HSBC acted as cross-border advisers in the 3 billion renminbi (US$445.10 million) green bond under Bond Connect by the Agricultural Development Bank of China. The two banks were also joint bookrunners and lead managers in the US$500 million social bond by Industrial Bank of Korea.
BAML and HSBC were the joint bookrunners and lead managers in the first green bond by Swire Properties, amounting to US$500 million, while BAML and Credit Agricole were joint bookrunners in the US$500 million sustainability bond by Korea East West Power Company.
In other deals, HSBC and Credit Agricole were both joint global coordinators in the first green bond by New World China Land amounting to US$310 million, though HSBC also acted as green structuring adviser along with another bank. Credit Agricole was a joint bookrunner in the US$300 million green/water bond by Korea Water – a deal missed by both BAML and HSBC.
In the US$1 billion and 500 million euro green bond by ICBC London, Credit Agricole and HSBC both acted as joint green structuring advisers and joint global coordinators, while BAML was a joint bookrunner and lead manager.
In the first deal of its kind in the international debt capital markets, HSBC was the green structuring adviser and a joint bookrunner and lead manager in the first ever green sukuk issued by a sovereign – a US$1.25 billion offering by the Republic of Indonesia.
Meanwhile, Credit Agricole, through its China subsidiary, successfully closed in December 2018 its first onshore green loan in China, amounting to 122 million renminbi for EDF (Electricite de France) Lingbao district project. EDF Lingbao is a joint venture established for the purpose of developing a district heating and biomass project.
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