There is no question that 2022 was a challenging year, with geopolitical turmoil, rising inflation and interest rates, slowing economic growth and real concern over energy security and supply chains.

While these issues have, rightly, risen up the agenda for corporations and investors, they cannot afford to lose their focus on the pursuit of sustainability and, in particular, the energy transition. Over the longer term, this is where the battle for the future will be won or lost.

As a result, financing decarbonisation and ESG-aligned projects and investments have remained front and center of Societe Generale’s activities across the Asia Pacific region.

We have been one of the global leaders in arranging and financing renewable energy projects for many years, globally and in Asia too. Following the completion of multiple solar and offshore wind developments in Australia over the past decade, we have been also active in North Asian offshore wind market– where we have been closely involved in many of the early projects since 2018. In fact, Japan’s largest offshore wind and storage project, off the country’s northern island of Hokkaido, achieved its financial close in 3Q 2022.

Another emerging asset class that is attracting both money and attention is green hydrogen. While this simplest of elements promises to decarbonize hard-to-abate industrial and transport sectors, investors have to be careful not to succumb to hype: building a fully-fledged hydrogen ecosystem will take time, government incentives and experienced partners.   

We see accelerating momentum in India’s energy transition as the government is putting the right legal and regulatory frameworks into place and the public and private sectors are working together to come up with the billions of dollars that will be required to move this giant country towards net zero emissions by 2070. 

China is on the same journey and its ‘green’ technology is advancing rapidly. As the country is now gradually reopening its borders, this has led multinationals and foreign portfolio investors to question whether China is on a path to a sustained recovery? The answer to this question is a resounding ‘yes’, conclude Societe Generale’s top economists and strategists in the region.

This is underlined by the practical, bottom-up steps being taken by regulators in these countries to improve the efficiency of capital markets and to promote sustainable investment. In China, for example, we see growing demand for ESG-aligned cash management products and arranged a pioneering green working capital loan for a Chinese solar operator. The country is also using its leadership in digital payments to transform cross-border trade and cash management.

More generally, the innovationin sustainable bonds across the Asia Pacific region is encouraging. Both corporates and investors, however, have to be clear – and rigorous – when it comes to defining what they mean by ESG disclosures, standards and ratings. This is something that regulators, customers and other stakeholders across the region are increasingly demanding – and an issue on which Societe Generale can advise clients, given its long-standing leadership in ESG products and solutions.

As one of the continent’s foremost financial centres, Singapore is seeing growing issuance of such bonds. In fact, the city state is functioning as a hub for all of Southeast Asia, as countries and companies there work together to finance the move to cleaner, low-carbon energy.

As the drive to achieve sustainability spreads to all corners of the financial system, even trade finance, where banks issues letters of credit and export guarantees for clients, is moving in that direction. By supporting companies that are willing to shift to more sustainable value chains and by fostering the trade in climate-related technologies, trade finance can have an outsized impact in promoting the energy transition.

Sustainable financing goes beyond environmental issues, of course, so we are proud to have helped arrange a sustainability loan facility that will help two schools in New Zealand modernise their facilities with environmentally friendly features and offer individualised learning programmes for children with disabilities. 

We are not, however, neglecting the shorter-term issues that many of our clients are wrestling with. Our market specialists are thinking hard about inflation hedges that institutions can use to de-risk their portfolios as monetary policy tightens. And in such an environment, we continue to see opportunities in certain hard asset classes, specifically in Australian commercial real estate and in shipping, where we have expanded our advisory capacity in Hong Kong and Singapore, allowing us to come up with innovative financing structures for clients.