This is despite the report also finding that 68 per cent of investors are expecting to grow their allocations to sustainable finance over the next year and 27 per cent are expecting to have 25 per cent to 50 per cent of their assets under management allocated to sustainable investments in three years’ time.

The report found that those that have financed or refinanced projects using sustainable finance often reap the benefits, with 63 per cent of global issuers surveyed agreeing that their sustainable financings have performed better financially than their equivalent traditional investments, and 85 per cent of all issuers agreeing or strongly agreeing that they see greater demand for their sustainable financing compared to other forms of finance.

Further, the results revealed that regional investors are also seeking more diverse products like sustainability-linked loans and green deposits, although sustainability and green bonds remain the most popular at present.

As for motivators towards ESG investment, portfolio diversification is the primary motivation for investors’ allocations to sustainable finance, followed by investing for sustainability or impact outcomes and enhanced financial returns.

Among issuers, meeting the company’s sustainability objectives is the most important factor in their decision, followed by increasing awareness of the company’s sustainability objectives and achieving financial benefits.    

“The results of The EIU survey show sustainable finance is moving from being a niche product for Asia-Pacific investors to becoming a mainstream part of a portfolio,” said the Economist Intelligence Unit’s managing editor of thought leadership, Georgia McCafferty.

“Despite the strong demand, issuances have not yet caught up, mainly because companies are unsure of what constitutes a sustainable asset or are put off by the upfront work required for such issuances.”

Ms McCafferty said education is needed to help companies realise that they often do have green assets and that the strong demand for their issuances may result in lower pricing.

“The results show government leadership can also go a long way in helping companies adapt, while transition bonds could be a viable option to expand supply, with 70 per cent of all investors surveyed willing to consider investing in companies that are attempting to transition from a brown to a green business model,” Ms McCafferty said.

The report is based on two surveys — one of 161 investors in Australia, New Zealand, Japan, Hong Kong and Singapore; and the other of 154 global issuers — and 10 expert interviews.