ASEAN for Business – Expanding Green Financing Options through ASEAN Sustainability-Linked Bonds
ASEAN is continuously gearing toward further economic development while remaining committed to the Paris Agreement. All ASEAN Member States (AMS) have a strong commitment to reduce carbon and GHG emissions and accelerate the energy transition by setting more aggressive targets. The Monetary Authority of Singapore (MAS) estimated that USD 200 billions of green investment is needed in ASEAN per year until 2030 to finance green initiatives in the region. However, investments remain below expectations. For example, ASEAN needs USD 27 billions of investment in renewable energy to achieve ASEAN’s target of 23% renewables in the primary energy supply by 2025, but AMS only attracted no more than USD 8 billion annually from 2016 to 2021.
Against this background, The ASEAN Capital Markets Forum (ACMF), which comprises capital market regulators from ASEAN countries, launched several sustainable finance initiatives, namely the ASEAN Green Bond Standards in 2017, the ASEAN Social Bond Standards and ASEAN Sustainability Bond Standards in 2018. Recently, ACMF developed the ASEAN Sustainability-Linked Bond Standards (ASEAN SLBS). A sustainability-Linked Bond is a borrowing instrument where the financial and/or structural characteristics are based on pre-defined sustainability/environmental, social and governance objectives achieved by the issuer. SLB enables the issuer to commit explicitly to future improvements in the sustainability agenda.