Malaysian green bonds should move beyond power projects: Report

RINGGIT sustainable bonds will continue to grow - but issuers also have to expand their offerings, analysts from Maybank Kim Eng said in a recent report.

That's as issuances in Malaysia's green finance market came to US$1.3 billion in 2019 - the fourth-largest market in Asean, after Singapore, Indonesia and the Philippines.

Growing awareness among institutional investors, as well as the Securities Commission Malaysia's Sustainable and Responsible Investment Roadmap, are expected to spur more environment, social and governance (ESG) investing domestically. Outstanding sustainable bonds in Malaysia already stand at some 10.9 billion ringgit.

At the same time, the Maybank Kim Eng team flagged a need for issuers to broaden the types of available green bonds and go beyond just renewable energy projects.

Eleven out of Malaysia's 15 sustainable bond issuers are in the energy segment, and solar and hydroelectric power plants accounted for more than 70 per cent of the outstanding sustainable bonds as at end-Sept 2020, the analysts noted. The bulk of these are from a refinancing issuance in 2016 for mega-hydro project Bakun.

Amid concerns about misleading environmental claims worldwide, the analysts added: "With the issue of greenwashing and gap in ESG disclosures, external party reviews or second opinions play an important role in verifying sustainable bonds and frameworks."

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Globally, more than US$200 billion in green bonds for environmental projects were issued from Jan to Sept 2020, according to BloombergNEF, which tracks clean energy, advanced transport, digital industry, innovative materials and commodities. Green bonds made up nearly half of all sustainable debt issued worldwide in that period.

"Amid global turmoil, green bond issuance is serving as a beacon for sustainability," said BloombergNEF in a statement. Its data showed that green bond issuances have increased by 12 per cent in the year to date, compared with the first nine months of 2019.