With debt markets becoming more turbulent, global environmental, social and governance (ESG) bonds saw their first full-year decline last year. In Asia, however, sustainable funding held up thanks to strong local demand. Chinese entities issued more than half of the ESG bonds in Asia-Pacific, with total proceeds totalling US$84 billion.
Observers are now optimistic that China's post-Covid reopening presents ESG opportunities. For the International Sustainability Standards Board (ISSB) working to develop a baseline for climate-related disclosures, it sees Beijing as an ideal base for it to engage with its other Asian stakeholders. China was among the first countries in Asia to publish its green taxonomy. It wants standards in Asia to further align with its own, and having an ISSB office located in its capital city ensures that its enterprises can play a leading role in shaping new ESG rules.
In other sectors, China continues to drive market dynamics. The start of 2023 saw a flurry of activity around the region's push for electric vehicles (EVs). The major power has its eye on Southeast Asia, for the supply of key battery metals, essential for EV production. It is also tapping on it as a low-cost hinterland, to set up production plants. A lull in its solar sector during the pandemic slowdown, however, has allowed smaller players in developing Southeast Asia to fill the void.
For China, Southeast Asia will remain a strategic market for a long time. The challenge for countries in the region will be to keep a nuanced and balanced attitude towards how they view China's interests.
The International Sustainability Standards Board, a standard-setting body launched after COP26 to harmonise ESG reporting is opening an office in Beijing by mid-2023. Plans are underway for Tokyo to host another Asia office.
Observers say that member nations of regional grouping Asean should be adopting the Asean Taxonomy. Interoperability is key if countries were to launch their own taxonomies.
Smaller projects could be more manageable, but local governments need to tackle bottlenecks, from building regulations to metering schemes and subscription plans.
A new US$2 billion EV green fund, set up by a Chinese battery supplier in partnership with an Indonesian sovereign wealth fund, was announced at the Bali G20 summit.
Asia’s sustainable economy – set to reach US$5 trillion by 2030 – is a wealth of opportunity. But that value requires assurance by governments and financial markets that sustainability is more than a label. Taxonomies provide clarity.
With climate change now China’s top environmental issue, organisations that once helped tackle smog need a new approach to be heard on climate governance.
The journey from fossil fuel dependence to renewable energy sources for Asian countries is fraught with complications for those who work in and live around energy-related industries, and requires a massive amount of financial capital.
EV makers eye Southeast Asia
Plans are underway for Chinese electric vehicle (EV) maker BYD Auto Co to build a plant in Vietnam to produce car parts, according to insiders. The more than US$250 million investment is expected to help BYD lower its costs as it moves its production base away from China. Chinese EV makers have been making their foray into Southeast Asia, an untapped market with few established players. Observers also note how China is on course to displace Japan as the world’s top electric car exporter. Fresh statistics show that in 2022, Chinese EV exports were up 54.4 per cent year-on-year.
China’s nickel need
Some key strategic deals were struck during Philippines’ President Ferdinand R. Marcos, Jr.’s recent visit to China. Chinese firms pledged to invest US$7.32 billion in ventures that involve nickel processing, power batteries, EVs, electronics and steel. This comes as the Philippines deliberate a plan to ban the export of its raw materials. China stands as a giant of the rare mineral supply chain but has started to face mounting competition from North America and Europe.
New green ideas
China’s state council office released a seven-chaptered white paper titled “China’s Green Development in the New Era”. It outlines how the country has firmly committed to green development, actively engaged in global climate governance, and initiated international cooperation. The paper also calls Western countries out for their lack of historical responsibility and empty declarations.
