MANILA, PHILIPPINES (21 March 2024) — The sustainable bond market of member economies of the Association of Southeast Asian Nations (ASEAN), the People’s Republic of China (PRC), Japan, and the Republic of Korea expanded 29.3% last year, outpacing the 21% growth of the global and euro-area sustainable bond markets, according to a new report by the Asian Development Bank (ADB).

Outstanding sustainable bonds in these economies, known collectively as ASEAN+3, reached $798.7 billion by the end of 2023 and accounted for around 20% of global sustainable bonds, according to the latest edition of Asia Bond Monitor, released today.

The global and euro-area sustainable bond markets reached $4.0 trillion and $1.5 trillion, respectively, by the end of 2023. Sustainable bonds are bond instruments that are used to finance projects and programs with environmental and social benefits.

“ASEAN sustainable bond issuance made up a higher share of local currency financing and long-term financing in 2023, driven by public sector participation,” said ADB Chief Economist Albert Park. “The public sector’s participation not only adds to the supply of sustainable bonds, but also serves as a model case for the private sector and helps set a long-term pricing benchmark for these bonds in domestic markets.”

ASEAN markets recorded $19.1 billion of sustainable bond issuance last year, accounting for 7.9% of aggregated issuance in ASEAN+3 sustainable bond markets. This compares with ASEAN’s 2.5% share of ASEAN+3’s general bond issuance.

ASEAN recorded a higher share of local currency financing and long-term financing in sustainable bond issuance, with 80.6% of sustainable bond issuance denominated in local currency and a size-weighted average tenor of 14.7 years. This outperformed the corresponding numbers of 74.3% and 6.2 years in ASEAN+3, and compares with 88.9% and 8.8 years in the euro area.

Financial conditions in emerging East Asia improved marginally between 1 December and 29 February, as the United States (US) Federal Reserve was expected to ease its monetary stance, while inflation continued to moderate and most economies posted sound economic growth in the region. Equity markets gained in 6 of 9 regional economies, and a total of $17.4 billion in net foreign equity inflows was recorded. Emerging East Asia includes the member economies of ASEAN; the PRC; Hong Kong, China; and the Republic of Korea.

Emerging East Asia’s local currency bond market grew 2.5% in the final quarter of last year to $25.2 trillion. Overall bond issuance contracted 4.8% from the previous quarter, as most governments had fulfilled their funding requirements in prior quarters, while the PRC led a contraction in corporate borrowing amid a weak economic outlook.

The latest issue of Asia Bond Monitor features the first bond market summary for the Lao People’s Democratic Republic. It also presents the results of the AsianBondsOnline 2023 Bond Market Liquidity Survey. The survey notes improved liquidity conditions last year, narrowed bid–ask spreads, and an increase in transaction sizes in both government and corporate bonds.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.

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