I’m in Cambodia, visiting the amazing Ankgor Wat, ancient religious centre of a city that apparently had a population of half a million people in 1200 AD. The temple’s bas-reliefs are full of triumphal armies, marching through exquisite carvings of trees and forests. They liked their green.
We haven’t yet seen a lot of green bond action in Asia – just Kexim a year ago – but things may be about to change.
First, Reuters reports that Asian investors bought a fifth of KfW’s recent EUR 1.5bn bond.
Now Taiwan’s Advanced Semiconductor Engineering (ASE) has issued Asia’s first corporate green bond – BBB, $300 million, 6 years - and it was SIX times oversubscribed! Yes, six times. I guess that’s “investor interest”.
ASE is an integrated circuit packaging and testing services provider. Proceeds of the bond will go to financing the “Company's transition to low-carbon and climate resilient growth”. By that they mean green building construction, installation of waste water recycling facilities, waste water management and manufacturing energy efficiency.
CICERO reviewed the company’s spending plans and will also monitor use of proceeds. (As you know we love CICERO’s work, although we do wish they could get their clients to always release their reports). ASE will issue an annual investor letter about the use of proceeds.
Pricing was 125 basis points over US Treasuries, comparable with similar (non-green) bonds. HSBC was the global manager for the bond. Bookrunners were HSBC, Citi and DBS.
Why did ASE bother? Investor diversification. As Stephen Liberatore at TIAA-CREF said: "Any time you can increase your investor base and diversify your bond holders, that really improves liquidity,"
ASE may also be looking for reputational benefits. The company is marketing itself as low-carbon, climate-friendly. But it was fined NT$110.1m ($3.7m) for dumping waste water into the environment in October.
From our point of view, if they want to use a green bond to trumpet the pro-active steps they’re taking to address “low-carbon and climate resilient growth”, and we can be confident (thanks to a rigorous independent review), that this is really happening, then we applaud them. If the fine has pushed them in that direction, it worked.