Back to main menu
Search
Search
Overlay
Sustainability

Helping our APAC clients embed ESG in their financial instruments

“There’s a clear cultural shift towards ESG amongst Asian investors and issuers” was one of the key messages NatWest ESG specialists – Dr Arthur Krebbers, Head of Corporate Climate and ESG Capital Markets; and Tom Cascales, Climate and ESG Capital Markets – shared with participants during NatWest’s ESG webinar for APAC customers.

Climate change in Asia

  • Asia has a major opportunity to decarbonise: in 2019, Asia represented 56% of all global carbon emissions (China alone accounted for 29%). Between 2000-2019, carbon emissions in Asia rose to 127% of all global carbon emissions, while they dropped within the EU by 19% and in the US by 13%. However, there is some positive news: Asia accounts for almost half of the growth in global renewable power generation [Source: Carbon Global Project]. 
  • Many Asian countries are particularly vulnerable to climate change: due to climate change, China’s maize production yields are predicted to drop by 17% by 2030, while rice production in India is estimated to drop by 9% by 2050 [Source: IPCC AR6 Climate Change 2022: Impacts, Adaptation and Vulnerability]. 

Climate change and ESG are moving to the top of Asian investors’ agendas


Chart 1: NatWest Markets APAC Investor ESG Survey 2022
 

Source: NatWest data - download pdf

The Asian market is seeing a rise in ESG KPI-linked innovation across financial instruments

  • A cultural shift towards ESG: with Asian investors campaigning for ESG considerations to be embedded in business practices, there’s a noticeable cultural shift amongst Asian companies: treasurers understand that, in order to be successful, they need to take ownership of their ESG agenda. This also includes embedding ESG key performance indicators (KPIs) into financial products – a move which is also motivated by government initiatives across Asian countries which promote the use of sustainable finance.
  • Similar to the global rise in sustainability-linked financial instruments (see chart below), Asian companies are formulating ESG-linked KPIs to drive forward their sustainability journey as well as access the sustainable finance market: Malaysian bank, CIMB, for example, entered an ESG-linked Interest Rate Swap, which is linked to two KPIs: 1) Percentile ranking for banks based on the S&P Global Corporate Sustainability Assessment, and 2) Reductions in Scope 1 and 2 greenhouse gas (“GHG”) emissions. Hong Kong property investment company, Hysan, agreed an ESG-linked cross-currency swap, with KPIs related to inclusion in the HK Seng Corporate Sustainability Benchmark and a reduction in purchased energy. Meanwhile, Chinese agricultural science and technology firm Syngenta’s Sustainability-linked term loan facility is the largest of its kind in the Asia Pacific loan market and has been the largest executed term loan facility in the Greater China loan market since the beginning of 2022.
  • So far, most of the KPIs in the Asian market for ESG financial products have been purely environmental KPIs, but with social factors such as socioeconomic advancement and diversity/equality/inclusion (DEI) already featuring prominently across multiple sectors (as the International Capital Market Association (ICMA) has found in a recent study), Asian companies’ KPIs will equally include the ‘S’ in ESG for their choice of financial ESG products.

 

Chart 2: Sustainability-linked instrument market review
 
Source: NatWest data - download pdf

Want to know more?

To learn more from our specialists on this topic, please follow this link to the recording of our webinar.  Or please get in touch through James or your usual bank contact.
 

This article has been prepared for information purposes only, does not constitute an analysis of all potentially material issues and is subject to change at any time without prior notice. NatWest Markets does not undertake to update you of such changes.  It is indicative only and is not binding. Other than as indicated, this article has been prepared on the basis of publicly available information believed to be reliable but no representation, warranty, undertaking or assurance of any kind, express or implied, is made as to the adequacy, accuracy, completeness or reasonableness of the information contained in this article, nor does NatWest Markets accept any obligation to any recipient to update or correct any information contained herein. Views expressed herein are not intended to be and should not be viewed as advice or as a personal recommendation. The views expressed herein may not be objective or independent of the interests of the authors or other NatWest Markets trading desks, who may be active participants in the markets, investments or strategies referred to in this article. NatWest Markets will not act and has not acted as your legal, tax, regulatory, accounting or investment adviser; nor does NatWest Markets owe any fiduciary duties to you in connection with this, and/or any related transaction and no reliance may be placed on NatWest Markets for investment advice or recommendations of any sort. You should make your own independent evaluation of the relevance and adequacy of the information contained in this article and any issues that are of concern to you.

This article does not constitute an offer to buy or sell, or a solicitation of an offer to buy or sell any investment, nor does it constitute an offer to provide any products or services that are capable of acceptance to form a contract. NatWest Markets and each of its respective affiliates accepts no liability whatsoever for any direct, indirect or consequential losses (in contract, tort or otherwise) arising from the use of this material or reliance on the information contained herein. However this shall not restrict, exclude or limit any duty or liability to any person under any applicable laws or regulations of any jurisdiction which may not be lawfully disclaimed.

NatWest Markets Plc. Incorporated and registered in Scotland No. 90312 with limited liability. Registered Office: 36 St Andrew Square, Edinburgh EH2 2YB. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. NatWest Markets N.V. is incorporated with limited liability in The Netherlands, authorised and supervised by De Nederlandsche Bank, the European Central Bank and the Autoriteit Financiële Markten. It has its seat at Amsterdam, The Netherlands, and is registered in the Commercial Register under number 33002587. Registered Office: Claude Debussylaan 94, Amsterdam, The Netherlands. NatWest Markets Plc is, in certain jurisdictions, an authorised agent of NatWest Markets N.V. and NatWest Markets N.V. is, in certain jurisdictions, an authorised agent of NatWest Markets Plc. NatWest Markets Securities Japan Limited [Kanto Financial Bureau (Kin-sho) No. 202] is authorised and regulated by the Japan Financial Services Agency. Securities business in the United States is conducted through NatWest Markets Securities Inc., a FINRA registered broker-dealer (http://www.finra.org), a SIPC member (www.sipc.org) and a wholly owned indirect subsidiary of NatWest Markets Plc.

Copyright © NatWest Markets Plc. All rights reserved.

Related articles

scroll to top