Asia’s sustainability transition is a global opportunity
A clear focus on sustainability can help Asia access the trillions of dollars needed for the transition to a cleaner, greener future
By Gaelle Olivier, Chief Executive Officer for Asia Pacific, and Daniel Mallo, Head of Natural Resources and Infrastructure for Asia Pacific at Societe Generale
The rapid growth of sustainable finance has the power to accelerate Asia’s transition to a cleaner, lower-carbon future. With the right policy framework and attention to global standards, Asia has a tremendous opportunity to harness this growing pool of capital.
Nowhere is this more evident than in the Taiwan market, where global and local stakeholders have come together on a series of large-scale infrastructure projects to add over 2,000 megawatts (MWs) of renewable energy in just three years.
Beginning with the financing for Taiwan’s first offshore wind project in 2018, Societe Generale has been involved in all four offshore wind projects developed in the Taiwan market, helping mobilize over US$9 billion of debt capital – approximately three-quarters of which has come from international banks. Taiwan has rapidly become the undisputed leader in Asia’s offshore wind power industry.
Our experience in the Taiwan market has taught us how a common focus on sustainability and positive impact finance can deliver enormous results in a short period of time. We believe other markets in Asia can harness this common desire among global capital providers to mobilise additional financing for their own social and economic development.
There are three main reasons for our optimism.
First, Asian market participants are becoming more familiar with new technology and with sustainable finance. Taiwan’s offshore wind industry is now increasingly attracting local investors, as well as the global infrastructure specialists that pioneered the concept. We hope to also be a catalyst for change by introducing Asia to other new technologies, such as distributed generation or floating solar.
Societe Generale recently completed the first green loan for a project financing in China’s distributed solar sector, providing non-recourse financing for a portfolio of rooftop solar projects for TEESS, a joint venture between TotalEnergies and China’s Envision1.
Floating solar, which we helped to introduce in Taiwan with the 181MW Changhua project in 2020, is also catching on elsewhere. In August, Societe Generale helped arrange financing for Indonesia’s first large-scale floating solar installation in Cirata, West Java2.
Second, the growth of Asia’s institutional investor base is creating new opportunities to access long-term finance in the capital markets. According to PwC, assets under management in Asia Pacific are growing faster than in any other region and are on track to reach US$29.6 trillion by 20253.
Infrastructure and energy projects are especially well suited to bond financing, because of their long-term nature and predictable cash flows. But this market has yet to take off in Asia: banks remain the dominant providers of long-term capital even though they are better suited to providing construction financing and medium-term lending, while institutional investors are seeking long-term assets but lack expertise in the infrastructure sector. We believe both sides can learn from each other.
As well as bringing major Asian infrastructure projects directly to the global bond markets, banks like Societe Generale are able to mobilize local institutional investors in Asia’s domestic bond markets. We have been a regular issuer of green bonds in Taiwan market since 2018, raising local currency to support our financing of the offshore wind projects.
Third, we believe a move towards global environmental, social and governance (ESG) standards will unlock more resources for Asia.
We are seeing more global investors dedicate funds to green assets and ESG-aligned portfolios, creating a growing pool of capital that is searching for investment opportunities. Globally, over US$40 trillion is managed by institutions that have committed to making their portfolios carbon-neutral by 20504. As a result, we are starting to see some pricing incentives for companies that can access green or sustainable capital by aligning themselves with investors’ standards.
Regulators in Asia are also paying close attention to global standards, including proposals by the Taskforce for Climate-related Financial Disclosure (TCFD) and the European Union’s green taxonomy. Already the EU and China are working on a common framework for green finance.
Helping to develop global standards is one of the four pillars of Societe Generale’s sustainability strategy, ensuring consistent levels of transparency and accountability across our client base. We must also recognize our impact on the communities we touch, foster innovation, and support the energy transition. Societe Generale has pledged to mobilise €120 billion to support the energy transition between 2019 and 2023, through sustainable bond issuance and dedicated renewable energy financing.
As the momentum behind sustainable finance and investing gathers pace around the world, engagement with Asia will be critical. We believe global banks and providers of capital have an important role to play in ensuring that sustainability is at the core of Asia’s economic development. As we have seen in the Taiwan market, much can be accomplished in a short period of time. We are excited to be part of Asia’s continuing journey towards a more sustainable future.