Issuances of green, social and sustainability bonds in Asia-Pacific could increase by 10 percent this year, a report from credit analyst S&P Global Ratings says.

S&P believes this growth will be mostly driven by issuances from the government and financial firms.

Its data show public-sector issuances alone surged by 55 percent last year from the 2022 level.

The Asia-Pacific region is the biggest issuer of green, social and sustainability bonds, with a total of 43 percent growth in volume and a 25 percent share of all issuances of such bonds in the world last year.

Consistent growth

S&P adds Asia-Pacific is the only region that has posted consistent growth in such bond issuances since 2019. In 2023, bonds issued for decarbonizing industries amounted to $235 billion.

Top issuers were developed economies in North Asia, namely China, Japan and South Korea.

The credit analyst also says most of the bond proceeds have been used to develop environment-friendly transportation and affordable housing.

"After a record year in 2023, we expect sovereign issuance to climb further in 2024, supported by national commitments to sustainability and third-party support schemes," the credit analyst says.

"Other sovereigns are likely to seek similar loans that alleviate interest costs in return for achieving verifiable climate targets, especially as official lenders offer more concessional funding to create incentives for borrowers to seek such loans," S&P continues.

Government-issued green bonds

In the Philippines, government-issued green, social and sustainability bonds amounted to over $3.6 billion last year, according to the Department of Finance.

The Bangko Sentral ng Pilipinas last December announced private banks will be allowed to gradually reduce their reserve requirement for sustainable bonds from 3 percent to 0 percent in two years.

The BSP reported universal banks have approved sustainability loans worth at least P830 billion and P780 million from commercial banks.

However, S&P says growth in green, social and sustainable bonds from financial firms was relatively flat, with a total of $241 billion last year.

Huge funding for environment-friendly projects

S&P says lower-income countries like the Philippines will likely have wider access to green, social and sustainability bonds as their governments and businesses need huge funding for environment-friendly projects.

"The share of issuance coming from North America and Europe was at a five-year low, at only 57 percent," it says.

"This suggests that high-income countries in Asia-Pacific, Latin America, and the Middle East have increased their share of issuance, which could lay the groundwork for issuers in lower income countries in these regions to access the green, social and sustainability bond market as well," S&P continues.

Globally, it expects the issuances of these bonds to increase from $0.95 trillion last year to $1.05 trillion this year, bringing up its share in the overall bond market to 14 percent.