Sustainable Asian bonds—investing in a sustainable future

Optimism surrounding Asia’s growth prospects is matched by the scale of the environmental, social, and governance (ESG) challenges that the continent needs to address and the compelling fixed-income opportunities they can lead to.

Asia’s sustainability journey

 

In years to come, 2020 could be viewed as the year that Asia committed to addressing sustainability challenges. In the final four months of the year, China, Japan, South Korea, and Hong Kong—responsible for roughly 35% of annual greenhouse gas emissions¹—pledged to achieve carbon neutrality within the next four decades. These announcements are likely to form the foundation of the region’s journey toward a sustainable future.

1 “Fossil CO2 emissions of all world countries—2020 Report,” European Commission, September 10, 2020.

ESG drivers in Asia

  • Climate change

    Global warming is widely expected to have a huge impact on Asia. Governments in the region are increasingly aware of the associated risks and have started to devote more resources to mitigate these challenges.

  • Renewables

    Asia’s need for energy is undeniable. A vast amount of investment will be needed to build new infrastructure and transition the region’s economies onto a low-emission path.

  • Electric vehicles

    As consumers in Asia wave goodbye to gas-powered vehicles and move to electric vehicles, demand for relevant components such as lithium ion batteries will rise, creating opportunities for sustainability-minded investors.

  • Sustainable bonds

    Sustainable debt issuance in the Asia-Pacific region slipped in 2020, but rapid growth in the social bonds segment, and carbon neutrality pledges from China, Japan, and South Korea are expected to reverse the downward trend in 2021.

  • Aging population

    We believe Asia isn’t fully prepared for the rapid aging of its population. This can lead to opportunities in technological innovation that can help improve the elderly’s quality of life as well as the financial services sector, which can develop products to help mitigate the challenge.

  • Governance

    Few would disagree that Asian firms have some work to do on the corporate governance front. We believe independent and diverse governance structures can be a meaningful source of alpha.

Sustainable Asia Bond Strategy

  • Endre Pedersen
    Endre Pedersen, Chief Investment Officer, Global Emerging Markets Fixed Income & Deputy Chief Investment Officer, Global Fixed Income
  • Murray Collis
    Murray Collis, Deputy Chief Investment Officer, Fixed Income, Asia ex-Japan
  • Alvin Ong, CFA
    Alvin Ong, CFA, Portfolio Manager, Asia ex-Japan Fixed Income

A strategy that seeks to generate meaningful risk-adjusted returns by investing in Asian corporate and government bond issuers that demonstrate superior sustainability attributes, leveraging proprietary research from our Asian credit research team on the ground and the firm’s global team of ESG specialists.

Find out more
  • A comparable performance: taking the sustainable route

    There's growing recognition that sustainability is an important economic driver for investment returns. Data also suggests that adopting a sustainable approach to fixed-income investing in Asia doesn’t necessarily compromise returns. 

Cumulative returns for J.P. Morgan Asia Credit Index constituents
Cumulative returns for J.P. Morgan ESG Asia Credit Index constituents
Comparable performance, with half the carbon footprint
Important information

Source: Bloomberg, as of December 31, 2020. Figures shown are in gross U.S. dollar (USD) terms. Past performance is not indicative of future results. Investment involves risk. The J.P. Morgan ESG Asia Credit Index (JESG JACI) tracks the total return performance of the Asia ex-Japan USD-denominated debt instruments across the Asian fixed-income asset class, including floating, perpetual, and subordinated bonds issued by sovereign, quasisovereign, and corporate entities. The index applies an environmental, social, and governance (ESG) scoring and screening methodology to tilt toward green bond issues or issuers ranked higher on ESG criteria, and to underweight or remove issuers that rank lower. Carbon intensity data sourced from Trucost ESG Analysis. Carbon intensity refers to Scope 1 and 2 Tons CO2 equivalent emissions per million USD revenues.

A leading voice in Asia fixed income

 

We believe an active approach is the most appropriate way for investors to participate in the creation of a more sustainable Asia while generating meaningful positive returns. Access to an active team of ESG specialists and fixed-income experts is needed to successfully navigate the rapidly evolving sustainable investment landscape in a vibrant, economically diverse region.

  • An extensive Asian footprint

    Most sustainability issues are geographically and culturally specific. With 11 offices in the region, we’re able to view any new development through a local lens and make more informed investment decisions. 

  • Access to a dedicated team of ESG specialists

    The integration of ESG factors into fixed-income investing is an ongoing process—post-integration monitoring is critical. Our Asian fixed-income team has access to a dedicated team of ESG specialists and meets regularly to assess the constantly evolving environment. 

  • Independent proprietary research

    Our team of ESG specialists and Asian credit analysts conduct in-depth proprietary research that isn’t readily available elsewhere, providing us with a unique perspective of the sustainable Asian fixed-income market.

  • A robust ESG engagement programme

    Our ESG team runs a comprehensive corporate engagement programme with the goal of advancing the sustainability objectives and improve the operating strength of our investee firms. The team had more than 900 corporate engagements globally in 2019.

Related viewpoints

Unlocking sustainable investing opportunities in Asian fixed income

We believe the rise of sustainable investing has created compelling opportunities in Asian fixed income. Find out why.
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ESG investing in Asia—an invisible evolution

Ongoing sustainability initiatives in Asia could catalyze ESG investing in the region, particularly Asian bonds. Learn more about it.
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Asian fixed income: optimism amid new focus on sustainable investing

We believe Asian fixed income will continue to shine on the back of a supportive global macro backdrop and continued policy support.
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Contact us

  • Marco Zanuso

    Head of Distribution, EMEA 

    +44 (0)20 7256 3752

    marco_zanuso@manulifeam.com

  • Morten Simonsen

    Head of Distribution, Northern Europe

    +45 2925 5707

    morten_simonsen@manulifeam.com

     

  • Christos Tsaravas

    Head of Distribution, Switzerland and Germany

    +41 44 214 69 31

    christos_tsaravas@manulifeam.com

  • Martin Powis

    Head of Institutional, UK and Ireland

    +44 (0)20 7256 3753

    martin_powis@manulifeam.com