The rise of ‘S’ Bonds in Asia Pacific (APAC)
Published
April 2024
- Issuance of Social Bonds now represents a higher percentage of overall ESG-Labelled Bond issuance in APAC, compared to other regions.
- Japan and South Korea have been leading the increase in Social Bond issuance in APAC.
- The APAC Social Bond issuance has increased 94% over the past three-years, compared to a 52% decline globally, excluding APAC.
Social Impact across APAC
Social bonds have historically represented a relatively smaller percentage of overall ESG-Labelled Bond issuance, with Green Labelled Bonds usually the prominent category. Indeed, 2023 was no different as recently highlighted by ICE’s analysis of Global ESG-Labelled Bond issuance data.
Exhibit 1: Global ESG-Labelled Bond Issuance by Bond Type ($ Bn)
Source: ICE
However, there is one region where the significance of social bonds has been increasing in recent years, and this trend accelerated last year. The region in question is Asia-Pacific (APAC).
Issuance of Social Bonds now represents a higher percentage of overall ESG-Labelled Bond issuance in APAC, compared to other regions. APAC Social Bond issuance as a percentage of overall ESG-Labelled Bond issuance has grown year-on-year since 2021, while Social Bond issuance globally excluding APAC (referred to throughout as “Globally Ex-APAC”) has been on a declining trend as a percentage of overall ESG-Labelled Bond issuance since the 2020 peak.
Exhibit 2: Social Bonds Issuance as % of Total ESG-Labelled Bonds - APAC and Global Ex-APAC
Source: ICE
Over the past year, Social Bonds represented only 17% of all ESG-Labelled Bonds issued globally (in terms of USD value issued). This compared to Green Bonds representing 62% of total global issuance last year, and Sustainability bonds representing 20% of ESG-Labelled Bond issuance.
However, in APAC, Social Bond issuance represented 22% of all ESG-labelled bonds issued in the region in 2023, up from 18% the previous year. This compares to Social Bond issuance accounting for only 15% of all ESG-Labelled Bond issuance elsewhere globally (Global Ex-APAC) last year, down from 18% the year before.
The sharp increase in Social Bond issuance in APAC over recent years has been running counter to the global trend.
The APAC Social Bond issuance has increased 94% over the past three-years, compared to a 52% decline Globally Ex-APAC. Social Bond issuance in APAC represented 39% of total Global Social Bond issuance in 2023, almost closing the gap with Europe, which accounted for 41% of total Global Social Bond issuance last year. While Europe remained the largest issuer of Social Bonds in 2023 in absolute terms (USD bn issued), European issuance has been on a declining trend since the 2021 peak.
Exhibit 3: Social Bonds Issuance ($ Bn) - APAC and Global Ex-APAC
Source: ICE
Japan and South Korea leading the way
Japan and South Korea have been leading the increase in Social Bond issuance in APAC. Of the major Social Bond issuers globally, Japan and South Korea are the only two countries to show consistent year-on-year increases in issuance since 2019. In Japan, Social Bond issuance accounted for 36% of all ESG-Labelled Bond issuance last year, while in South Korea 64% of all ESG-Labelled bonds issued last year were Social Bonds.
Exhibit 4: Social Bonds Issuance ($ Bn) - Japan and South Korea
Source: ICE
Exhibit 5: 2023 All ESG-Labelled Bond and Social Bond Issuance by Region
2023 All ESG-Labelled Bond Issuance by Region
2023 Social Bond Issuance by Region
Source: ICE
APAC closing the issuance gap
While Social bonds still represent a relatively low percentage of all ESG-Labelled Bonds issued globally and APAC has historically represented a relatively smaller percentage of overall ESG-Labelled bond issuance, recent trends suggest that the gap between APAC and Europe (Europe still the largest region for ESG-Labelled bond issuance) is closing. APAC ESG-Labelled bond issuance has been accelerating, with Social Bond issuance playing a significant role.