Over 50% of APAC companies likely to issue social bonds in the next year: survey

OVER 50 per cent of companies in the Asia-Pacific (APAC) are expected to issue a social bond in the next 12 months, with employee welfare seen as a top priority, a fresh survey by ING showed on Thursday.

The companies surveyed said employee health and well-being (35 per cent) will take precedence over emissions reduction (29 per cent) in the next year. Investors, too, cite this as a key ESG (environmental, social and governance) priority, behind only climate and sustainable supply chains.

APAC (53 per cent) and North American (51 per cent) companies are more likely to issue a social bond in the next 12 months than their European (44 per cent) counterparts, according to the survey.

About 80 per cent of companies across each region are also expecting new government sustainability policies to intensify action on improving access to healthcare, significantly more than any other areas, including renewable energy projects.

Still, despite short-term momentum on social issues, only 17 per cent of investors globally would like to see companies making more externally-focused social targets a top priority. About 38 per cent see more ambitious environmental targets as a bigger priority.

Globally, Covid-19 has accelerated green transformation plans among corporates. In APAC, about 57 per cent of companies surveyed said they are ramping up their green plans, on par with their global counterparts. Some 65 per cent will also likely tie executive compensation to ESG targets this year. Currently, less than one in 10 companies do so.

"The disruption inflicted by the global health crisis has injected greater urgency to transform, and it has amplified the link between companies' social responsibilities and financial performance," said Helge Muenkel, ING head of sustainable finance and global capital markets in APAC.

Some 74 per cent of investors surveyed have increased commitments for portfolio alignments to the goals of the Paris Climate Agreement, and 72 per cent are adopting more ambitious targets for sustainability outcomes of ESG investments.

Against this backdrop, companies, investors and governments must move faster and further in making progress on ESG as the pandemic raises the bar for ambition, said ING.

While 68 per cent of companies in APAC have effectively integrated ESG information within corporate reporting, better alignment with investor demands is needed.

When it comes to disclosure, there are still misalignments between information being reported and that which investors believe is most material, said ING. The top challenges for companies trying to improve ESG accountability are the lack of common industry standards, and integrating ESG issues with financial targets.

APAC companies pointed out that obtaining reliable, comparable data on ESG is the most significant challenge in improving ESG accountability (43 per cent), compared to companies in North America (34 per cent) and Europe (39 per cent).

"More can be done. Coordinated action and convergence on areas such as ESG standards and policy are essential to accountability and to meet ambitious targets," said Mr Muenkel.