(Bloomberg) -- JPMorgan Chase & Co. expects Asian companies to raise as much as $100 billion next year through environmental, social and governance dollar-denominated bonds, with an increasing number of firms considering notes that can be converted into equity.
ESG debt sales by Asian issuers total $74 billion so far in 2021, nearly triple the level in the same period last year, with about 85% sold in U.S. dollars, according to data compiled by the bank. JPMorgan expects Asian ESG dollar bond issuance of between $90 billion and $100 billion in 2022.
“Convertible-bond issuance in Asia Pacific is already 60% up on the whole of last year with the favorable rate environment, high stock volatility and ample investor liquidity providing the ideal backdrop for these products,” Wilfred Chia, JPMorgan’s executive director for equity-linked origination for Asia-Pacific, said in an interview.
“Greater attention on the ESG strategy of issuers, be it at the board or investor level on greater disclosure requirements, has meant that now more than ever we’re having conversations with clients about having CBs with an ESG focus,” he said.
Chinese video-streaming platform operator Bilibili Inc. was the first technology firm in the Greater China region to issue ESG convertible bonds. It raised $1.4 billion in five-year notes last month, with an option to purchasers of an additional $200 million. Before that, South Korean steel producer Posco raised 1.07 billion euros ($1.21 billion) through zero-coupon green convertible bonds in the third quarter.
Read more: Asia’s Convertible-Bond Rush Spurred by Volatility
Convertibles are coming up more frequently as a theme within the tech sector, according to Chia. Several real-estate firms have tapped the market to finance eligible green or sustainable projects, while others in the energy, metals and mining and even traditional industries are also looking at ESG options as they transition their business models, he said.
The structure of the notes has to be aligned with each issuer’s ESG framework, including measurable commitments related to energy efficiency and water usage, and validated by a second-party opinion provider.
“We’ve recognized a trend that there are more and more $1 billion-plus transactions,” said Gaurav Maria, head of equity-linked origination and private capital markets, Asia Pacific, in the same interview. “Larger deals attract more investors, and certainly there will be a portion of those deals that will be ESG-related.”
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