Investors are keen to invest in Asia’s growing renewable energy sector but development continues to be hampered by a lack of bankable projects, according to panellists at the ANZ Finance & Treasury Forum 2020.
The perennial challenge in Asia has been the lack of bankable projects for the private sector, according to Richard Lancaster, Chief Executive Officer of Hong Kong-listed energy company CLP Holdings.
“Often if you have a good project, the finance will be there,” he said. “It's finding that good project that is the challenge.”
“We're more short of an ability to work at the pace we need to, [in order] to develop enough of the good-quality projects we need to see the energy transition take place.”
Another issue facing developers in the region is land acquisition. “Acquisition of land in Asia is always a challenge,” Lancaster said. “That's where regulatory support is often needed.”
Real growth in the market is coming from investors incorporating meaningful and ambitious targets in their portfolios, Olivia Albrecht, Executive Director, Head of ESG Strategy at US asset manager PIMCO said.
“This is where I think the real growth is - a focus [by investors] on building sustainability objectives into their portfolios,” she said.
This “active” management strategy include incorporating carbon metrics to reduce emissions in their portfolio compared to benchmarking, active engagement with management of portfolio companies, having defined and meaningful allocations to green, social and sustainability linked bonds.
“Yes, [these investors are] still looking for the same risk adjusted returns in their portfolios, but they also want to see commitments and objectives that are focussed on sustainability factors,” Albrecht said.
There is another camp of investors who are focused on due diligence and working with their asset managers to devise clear processes to evaluate the environmental, social and governance (ESG) – essentially non-financial factors - impact of their investments.
“How ESG factors influenced the valuations that we use on business models of the investment decisions and recommendations that are being made from a bottom up perspective,” Albrecht said.
“These asset owners globally are also looking for the incorporation of these factors in the top down macro processes.”
Stella Saris Chow, Head of Sustainable Finance International at ANZ, said the market continued to maintain its momentum despite concerns early in the pandemic would impact interest.
“Really, we've been surprised in a very positive way that momentum has continued and it will only grow from here,” she said.