Green bonds investors are becoming more selective. They want to know the overall ESG practices even when they already sell conventional bonds. Not only individual and institutional inventors, most banks from Europe and the U.S. take a hard line in deciding to which they want to fund in green projects.
A managing director and co-head of DCM Asia Pacific at BNP Paribas, Manoj Agrawal, argued that banks working on thermal coal projects have reduced significantly. The discrepancy between non-compliant and compliant ESG is getting more obvious. Indika Energy for instance has had the vision of going into greener and cleaner business but they are yet to convey the improved cost and funding in the ESG bond market.
ESG, based on Agrawal’s perspective, is central to a growth perspective. It is not merely about what investors want to hear about. So issuers strongly believe that ESG as a business strategy is vital. Petrosea, a coal-servicing company, bought almost the entire 70% stake from Indika Energy in early March this year. Indika has a carbon neutral goal by 2050. That is why the company aims at increasing the revenue contribution of non-coal business to over 50% by 2025.
The company has been involved in ESG businesses recently.
For example they have joint ventures for a solar project and an electric vehicle project. They also have increased their stake in a gold mining company, Nusantara Resources, from 45.8% to 100%. CreditSights noted that greater interest from ESG-conscious investors are from continued deviation from coal mining activities.
Other companies also plan to set the goal of diversification during the settlement of the U.S. dollar bond market. However, according to Lakshmanan R, a senior research analyst at CreditSight argued that there would be less investor interest in the bonds, except the coal companies are doing like what Indika Energy does. So, companies which failed to propose effective transition plans will face troubles.
