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1. Good morning, and welcome to this Asian edition of Environmental Finance’s ESG in Fixed Income Conference.
2. We are very pleased to be a partner of this conference, where bond issuers, investors and other stakeholders discuss and learn from each other’s perspectives on the sustainable debt market – a fast-evolving market that is gaining considerable attention globally, as investors increasingly place more emphasis on investing with purpose.
Growth in GSSS issuance
3. Green, social, sustainability and sustainability-linked bonds, or GSSS bonds in short, as a share of global bond issuance have been growing in recent years, and it is a trend that is set to continue.
4. According to data from Environmental Finance, 2021 was the year the GSSS bond market passed the US$1 trillion issuance milestone. This was an increase of nearly 70% compared to the year before, and more than triple the amount issued in 2019.
5. Notwithstanding a challenging environment with market volatility and rising rates, volumes this year have actually been quite steady, and we believe that this trend will hold strong.
6. Issuance of GSSS bonds as a percentage of total global bond issuance rose from roughly 2 per cent at the start of 2018 to a peak of over 12 per cent at the end of 2021, according to research by rating agency Moody’s. In line with this global trend, over the past twelve months, almost one-fifth of bond listings on SGX Group were GSSS issuances.
SGX Group’s role
7. Massive investments are required by governments and businesses in their decarbonisation journey in the years to come. Investors today also want to combine financial returns with positive impact. In this respect, we see SGX as playing a unique role in the ecosystem. As a listed company ourselves, a regulator, and as a business, we are embracing sustainability and supporting our stakeholders in the same journey.
8. Being at the centre of the market ecosystem, we are in a unique position to mobilise capital flows towards sustainable finance, to educate and influence the ecosystem’s move towards decarbonisation.
9. Through our multi-asset offering across equities, fixed income, commodities, indices and more, we are able to: 1) support companies in their fundraising efforts; 2) facilitate investors’ sustainability exposure via our products such as ETFs; and 3) provide risk management tools and facilitate price discovery with commodity derivatives, as the markets transit to cleaner energy sources.
10. On the fixed income front, we experienced tremendous growth in the sustainable bond business, as issuers seek to list these bonds in a market with deep and diverse investor base, market-orientated regulatory framework, and a fast, seamless issuance and listing process.
11. Today, more than 50% of Asia-Pacific G3 currency GSSS bonds are listed on SGX, making us the leading venue for such bond listings. Since our first green bond listing in 2013, we have to-date, welcomed more than 360 GSSS bonds by issuers including corporates, governments and financial institutions from 19 countries, raising over S$200 billion in total.
12. We are also very pleased to have supported the issuance of Singapore’s S$2.4 billion inaugural sovereign green bond in August this year, as well as the maiden green bond listings by HDB and PUB earlier this year.
Overcoming challenges in the GSSS bond market
13. Interest in issuing and investing in GSSS bonds is growing, but there are challenges to overcome.
14. For example, limited data availability and aggregation was one of the biggest challenges in the sustainability space. To solve this pain point, in December last year, Marketnode, the joint venture between SGX Group and Temasek, launched Greennode, an ESG bond information hub.
15. Greennode contains public information on APAC GSSS bonds, including bond frameworks, allocation and impact reporting data, with functions such as detailed analytics, search and filter tools, allowing issuers to raise their visibility and profile among investors.
16. In expanding this service further, Marketnode partnered China Chengxin Green Finance to launch Greennode RMB, a portal that captures bilingual information on the Chinese onshore GSSS bond market, serving the needs of offshore bond investors. To-date, the Greennode and Greennode RMB platforms covers a total of 850 bonds from over 400 issuers globally.
New sustainable bonds initiative
17. As part of our efforts to further support a robust sustainable finance ecosystem, SGX is looking to develop a new sustainable bonds initiative, that will provide regulatory backing for SGX-listed bonds that meet established standards for GSSS fixed income securities.
18. For a bond to be recognised under this initiative at the time of issuance, a reputable external reviewer must confirm the bond’s alignment with the established standards, and the reports setting out the bond’s alignment with these standards must be made publicly available. To maintain the recognition on an ongoing basis, issuers will also need to publish post-issuance reports on an ongoing basis.
19. So, what benefits does the recognition bring to issuers and investors? For issuers, this demonstrates their commitment to the established standards, and raises their visibility and profile with investors. For investors, they will have the added assurance that the bonds awarded with the recognition have been independently verified for alignment with the established standards. Further details of this new initiative will be unveiled in the very near future.
20. In closing, I wish you all a fruitful conference, and at SGX we look forward to continue working with you, as we seek to grow a flourishing sustainable bond market in Asia. Thank you.
