Written by: Kenneth Cheong | Managing Director of Corporate Trust, Asia Pacific, BNY Mellon
As described in part one of this series, green bonds have found a new moment in the sun across APAC. Multiple factors are driving this growth, both as a financial opportunity and as a philosophical and ethical commitment. One key factor to explore at further length is what we at BNY Mellon call the “Race for Assets.”
According to our research, more than half of investors expected allocations to alternative assets to increase in 2018. This mega-trend on the demand side raises the stakes for asset supply across many alternative asset classes from hedge funds to private equity to infrastructure and debt. It is these last two that inform the over 50% rise in green bonds that both BNY Mellon and other researchers are seeing. In addition, the Asian Development Bank finds that emerging Asia, for example, will require US$26.2T of infrastructure investment between 2016 and 2030 to support economic growth, combat poverty and respond to climate change¹. It’s not hard to connect the dots between these findings and the ever-increasing trend to ESG investing.
All this demand, however, requires two things: first, the market needs assets to invest in. Second, the investors flowing into these asset classes, including green bonds, want greater transparency and lower fees from the managers of their alternative investments.
Nearly half (46%) of respondents to BNY Mellon’s Race for Assets survey said they were unhappy with the level of reporting they received on their infrastructure investments, for example, significantly higher than in other asset classes.
In our role as global provider of Corporate Trust capabilities, we see this as an opportunity to address challenges in providing information on a timely basis to investors in infrastructure while providing core trustee and agent services. Key trends we see include improved data capture, analytics, and secure cloud-based systems, all of which offer the opportunity to simplify reporting procedures. This increases efficiency and removes the need for heavy investment in back office personnel.
The need for investment in technology is even more acute with investors entering asset classes that are less familiar to them, exactly as is the case with green bonds in the APAC region. Funds require systems that can provide ever more up-to-date information to ensure investors can make effective decisions about investment and redemption.
This means managers will likely need to develop new structures and strategies to meet these demands, and in turn it means exciting times ahead for BNY Mellon since trustees, too, need to bring new knowledge, creativity, and flexibility to navigate new and complex structures.
To learn more about BNY Mellon Corporate Trust, please visit our website.
Media Contact:
Peter Gau
+1 212 815 2754
peter.gau@bnymellon.com
¹ Asian Development Bank, “Strategy 2030,” https://www.adb.org/sites/default/files/institutional-document/435391/strategy-2030-main-document.pdf