MEMBERS of the Executives’ Meeting of East Asia-Pacific Central Banks (EMEAP) have agreed to promote green bond investments through the Asian Bond Fund (ABF) to develop a market for funding sustainability projects.
“This is aimed at helping to catalyze further deepening of local currency-denominated green bond markets in the region,” the Bangko Sentral ng Pilipinas (BSP) said in a statement.
EMEAP members include the BSP, Reserve Bank of Australia, People’s Bank of China, Hong Kong Monetary Authority, Bank Indonesia, Bank of Japan, Bank of Korea, Bank Negara Malaysia, Reserve Bank of New Zealand, Monetary Authority of Singapore and Bank of Thailand.
The oversight committee for the EMEAP Asian Bond Fund has tapped IHS Markit, which maintains the iBoxx ABF Index. Officials asked IHS Markit to review the index rules to encourage the inclusion of green bonds.
“The details will therefore be based on the outcome of the review and disclosed once confirmed by IHS Markit,” the BSP said.
The ABF includes the Pan-Asia Bond Index Fund and eight single-market funds. With the Bank of International Settlement (BIS) as its administrator, the fund tracks the iBoxx ABF Index and is passively managed by private-sector fund managers.
The ABF was launched in 2005 to deepen local-currency bond markets in the region.
Central banks have been promoting sustainable financing as the threat of climate change escalates. The BSP has invested $350 million in the green bond fund of the BIS, which is a component of its reserve management strategy.
The BSP launched its sustainable finance framework in 2019 and gave banks three years to adopt its provisions. The framework directs banks to adopt sustainability principles in their governance frameworks, risk management systems, strategies and operations.
BSP Governor Benjamin E. Diokno said monetary authorities are looking to unveil the second phase of regulation for sustainable financing. This phase will take into account climate change risk in the assessment of credit and operational risk management in the banking industry. — Luz Wendy T. Noble