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▼ ADB Gives Japanese Individuals Chance to Fund Eco-friendly Projects
- Category:Event
YOKOHAMA - The Asian Development Bank has provided Japanese retail investors with an opportunity to tackle global warming and environmental pollution while making money.
The Manila-based ADB, through Daiwa Securities Group Inc in Tokyo, has decided to issue its first "green bonds" in the Japanese market, aiming to procure resources to support the mitigation of climate change in the Asia-Pacific region.
There are expectations that more issuances of green bonds, which are sold by both the private and public sectors to fund projects beneficial to the environment, may stimulate the debt markets in Japan down the road.
The ADB, established in 1966, has played a key role in economic expansion and financial stability in the region for the past 50 years by extending loans as well as offering grant aid and technical assistance to developing countries.
The regional development bank said it plans to double its annual financing for climate change alleviation to $6 billion by 2020 from $3 billion in 2015.
In line with its "Strategy 2020," the ADB is "integrating climate change into its planning and investment to ensure continued economic growth and a sustainable future for all in Asia and the Pacific," the bank said in a statement released in March.
From May 12 through May 23, the ADB will sell five-year U.S. dollar-, five-year Australian dollar-, and four-year Turkish lira-denominated green bonds with an annual coupon of up to 1.7 percent, 2.1 percent, and 12.9 percent, respectively.
The coupons are much higher than the razor-thin deposit rates offered by many Japanese banks at 0.001 percent.
Investors have to take foreign exchange risks, but high-yield green bonds are set to gain popularity, as the Bank of Japan's negative interest rate policy has drastically pushed down the country's interest rates, analysts say.
The first green bonds were issued by the European Investment Bank in 2007, according to traders. In 2014, the Development Bank of Japan became the nation's first issuer of the bonds.
The not-for-profit Climate Bonds Initiative, based in London, said a total of $81 billion worth of green bonds were issued in 2016, roughly double from the previous year, adding the issuance is estimated to expand to $150 billion in 2017.
Green bonds limit the use of the proceeds to the financing of environmental projects such as building clean energy facilities and are compliant with stricter total loss-absorbing capacity rules.
The sharp expansion in the green bond market is due primarily to the enactment of the Paris Agreement to fight climate change, signed in 2015 by nearly 200 countries.
"The number of sovereign issuers will likely increase, momentum from the Paris Agreement will expand the market's geographic reach and new security structures will continue to emerge," U.S. rating agency Moody's Investors Service Inc. said.
In Japan, several financial institutions have issued green bonds so far. Last year, Tokyo Gov Yuriko Koike said the metropolitan government will issue green bonds in late 2017 to fund measures to improve the environment ahead of the 2020 Summer Tokyo Olympics and Paralympics.
The domestic market for green bonds is still very limited.
The total issuance of green bonds in Japan from 2007 through 2016 accounted for less than 1 percent of that across the globe, said Yoko Monoe, a researcher at the Daiwa Institute of Research.
"There is big room for expansion of green bond issuance in Japan," given the size of the nation's economy, the world's third largest, she said.
Against the backdrop of the BOJ's aggressive monetary easing, Japan's long-term interest rates have stayed at extremely low levels, with the yield on the benchmark 10-year Japanese government bond moving just above zero percent.
Many banks in Japan, including the three mega banks -- the Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corp. and Mizuho Bank -- have already cut their deposit rates to as low as 0.001 percent.
"With interest rates historically low, our customers are looking for financial products with higher yields," a sales person at a major Japanese bank said.
"Green bonds are sold with higher yields and purchases of them would contribute to improving the environment in the world. More people would become interested in buying them in Japan, which could invigorate domestic bond markets," the sales person added.
Financial institutions would also receive benefits by issuing green bonds as that could give the impression to society that they fulfill their "corporate social responsibility."
"Green bonds are an example of Daiwa Securities Group's ongoing Impact Investment initiative. Under this initiative, Daiwa Securities Group actively pursues its commitment to social responsibility by seeking out investments that achieve social impact," the joint statement with the ADB said.
In preparation for expansion of the green bond market in Japan, the Environment Ministry has started to map out its "Green Bond Guideline," saying, "Japan has few examples of green bond issuance and investment."
© KYODO
The Manila-based ADB, through Daiwa Securities Group Inc in Tokyo, has decided to issue its first "green bonds" in the Japanese market, aiming to procure resources to support the mitigation of climate change in the Asia-Pacific region.
There are expectations that more issuances of green bonds, which are sold by both the private and public sectors to fund projects beneficial to the environment, may stimulate the debt markets in Japan down the road.
The ADB, established in 1966, has played a key role in economic expansion and financial stability in the region for the past 50 years by extending loans as well as offering grant aid and technical assistance to developing countries.
The regional development bank said it plans to double its annual financing for climate change alleviation to $6 billion by 2020 from $3 billion in 2015.
In line with its "Strategy 2020," the ADB is "integrating climate change into its planning and investment to ensure continued economic growth and a sustainable future for all in Asia and the Pacific," the bank said in a statement released in March.
From May 12 through May 23, the ADB will sell five-year U.S. dollar-, five-year Australian dollar-, and four-year Turkish lira-denominated green bonds with an annual coupon of up to 1.7 percent, 2.1 percent, and 12.9 percent, respectively.
The coupons are much higher than the razor-thin deposit rates offered by many Japanese banks at 0.001 percent.
Investors have to take foreign exchange risks, but high-yield green bonds are set to gain popularity, as the Bank of Japan's negative interest rate policy has drastically pushed down the country's interest rates, analysts say.
The first green bonds were issued by the European Investment Bank in 2007, according to traders. In 2014, the Development Bank of Japan became the nation's first issuer of the bonds.
The not-for-profit Climate Bonds Initiative, based in London, said a total of $81 billion worth of green bonds were issued in 2016, roughly double from the previous year, adding the issuance is estimated to expand to $150 billion in 2017.
Green bonds limit the use of the proceeds to the financing of environmental projects such as building clean energy facilities and are compliant with stricter total loss-absorbing capacity rules.
The sharp expansion in the green bond market is due primarily to the enactment of the Paris Agreement to fight climate change, signed in 2015 by nearly 200 countries.
"The number of sovereign issuers will likely increase, momentum from the Paris Agreement will expand the market's geographic reach and new security structures will continue to emerge," U.S. rating agency Moody's Investors Service Inc. said.
In Japan, several financial institutions have issued green bonds so far. Last year, Tokyo Gov Yuriko Koike said the metropolitan government will issue green bonds in late 2017 to fund measures to improve the environment ahead of the 2020 Summer Tokyo Olympics and Paralympics.
The domestic market for green bonds is still very limited.
The total issuance of green bonds in Japan from 2007 through 2016 accounted for less than 1 percent of that across the globe, said Yoko Monoe, a researcher at the Daiwa Institute of Research.
"There is big room for expansion of green bond issuance in Japan," given the size of the nation's economy, the world's third largest, she said.
Against the backdrop of the BOJ's aggressive monetary easing, Japan's long-term interest rates have stayed at extremely low levels, with the yield on the benchmark 10-year Japanese government bond moving just above zero percent.
Many banks in Japan, including the three mega banks -- the Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corp. and Mizuho Bank -- have already cut their deposit rates to as low as 0.001 percent.
"With interest rates historically low, our customers are looking for financial products with higher yields," a sales person at a major Japanese bank said.
"Green bonds are sold with higher yields and purchases of them would contribute to improving the environment in the world. More people would become interested in buying them in Japan, which could invigorate domestic bond markets," the sales person added.
Financial institutions would also receive benefits by issuing green bonds as that could give the impression to society that they fulfill their "corporate social responsibility."
"Green bonds are an example of Daiwa Securities Group's ongoing Impact Investment initiative. Under this initiative, Daiwa Securities Group actively pursues its commitment to social responsibility by seeking out investments that achieve social impact," the joint statement with the ADB said.
In preparation for expansion of the green bond market in Japan, the Environment Ministry has started to map out its "Green Bond Guideline," saying, "Japan has few examples of green bond issuance and investment."
© KYODO
- May 9, 2017
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