Asset owners from both Southeast Asia and Greater China are expected to enjoy easier access to green bonds in each other’s markets as China and Singapore deepen their collaboration on green finance.
The Monetary Authority of Singapore (MAS) and the People’s Bank of China (PBOC) in late April announced the establishment of the China-Singapore Green Finance Taskforce.
The taskforce is expected to deepen bilateral cooperation in green and transition finance and trading in related instruments could be encouraged through a potential 'bond connect' scheme and digital green bonds.
Major asset owners across the region, such as Singapore's Temasek, Prudential, and China's Ping An Group have previously told AsianInvestor that they are committed to participating in the region's decarbonisation efforts via investments and engagement.
“It's good because Singapore serves as a gateway to international markets besides Hong Kong. It's always useful for Chinese investors and Chinese issuers to leverage both Hong Kong and Singapore to connect to international capital,” said Ou Yong Xuan Sheng, green bonds and ESG analyst at BNP Paribas Asset Management.
Initially, the taskforce will focus on three areas: The first is taxonomies and definitions. MAS and PBOC will work together under the International Platform on Sustainable Finance (IPSF) to achieve interoperability between Singapore's and China's taxonomies.
Nicolas Moreau, global chief executive officer of HSBC Asset Management, welcomed efforts to create a common taxonomy. “I think it's a very good initiative and very positive [for investors],” he told AsianInvestor.
Second, the Singapore Exchange (SGX) and China International Capital Corporation will work together to strengthen sustainability bond market connectivity between the two countries, including tissuances of and mutual access to green and transition bond products in both markets.
SGX and Shenzhen Stock Exchange, for example, successfully established ETF links and started ETF cross-listings in late 2022.
The third focus area is encouraging the development of digital green bonds.
Even as it strives for carbon neutrality by 2060, China is already the world’s largest issuer of green bonds.
In 2022, China issued the highest level of green bonds -- totalling $76.2 billion -- aligned with the commonly accepted global definition, the International Capital Market Association's Green Bond Principles.
Germany came next with $60.8 billion, according to Climate Bonds Initiative.
“From a capacity building and capital flow perspective, for us [in Singapore] to be able to access some of the green bonds or securities [in China] through SGX could be very interesting, which means lower cost,” Ou Yong told AsianInvestor.
“You don't really have to do it through the Hong Kong Connect, that's definitely a good thing for local asset owners and local asset managers [in Singapore and the rest of Southeast Asia],” he said.
Under the taskforce, Singapore’s digital exchange platform Metaverse Green Exchange and Beijing Green Exchange will also leverage technology to promote sustainable finance, including piloting of digital green bonds with carbon credits.
Digital green bonds are very niche as of now, utilising blockchain technology to tokenise issuances.
Trading proceses such as settlement and coupon payments can be executed more quickly.
Hong Kong has already started to experiment in this arena: In February, the goverment offered HK$800 million ($102 million) of one-year tokenised green bonds at a coupon rate of 4.05%.
It was the world’s first government-issued tokenised green bond, or digital green bond.
HSBC AM's Moreau is particularly supportive of the digital bond initiative.
“If you can access green bonds through digital ways, that's going to be great. It will make green bonds more accessible,” he told AsianInvestor.
HSBC is part of the four-bank syndicate that distributes Hong Kong government's digital green bond.
The other three are Bank of China (Hong Kong), Crédit Agricole CIB, and Goldman Sachs.