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ASEAN moves towards Common Sustainable Finance Taxonomy Seen ‘Catalysing Additional Investment Inflows’
Regional cooperation will help develop green bond markets in both advanced and emerging economies in the Asia-Pacific region, Moodys’s Investors Service says.
In a report released Monday, the U.S. rating agency noted that ASEAN countries had announced the start of talks for a common sustainable finance taxonomy for the region following the UN climate conference in November.
“The taxonomy, a collaboration among ASEAN central banks, finance ministries and other stakeholders, would eventually standardise the sectors and activities to be financed across the countries with the aim of catalysing additional investment inflows,” it said.
Moody’s said the region’s big post-pandemic financing needs as well as its focus on carbon transition and other environmental, social and governance (ESG) risks “will propel issuance of sustainable bonds.
“At the same time, investor demand is rising for instruments that cater to the sustainable market.” Between 2021 and 2023, Moody’s expects 19 economies — including Cambodia — to have wider primary deficits or narrower primary surpluses, on average, than in the five years before the Covid pandemic.
Cambodia has the seventh-highest sustainable development and infrastructure needs in the region after Pakistan, India, Laos, Bangladesh, Mongolia and the Philippines.
“Conditions are ripe in Asia-Pacific for increased issuance of sovereign sustainable bonds, initially from established issuers,” Moody’s Assistant Vice President Nishad Majmudar said. “Although the development of regulatory standards and taxonomies across the region is still at an early stage, it will gradually facilitate markets,” he said.
As countries and companies focus on green recoveries, Moody’s said efforts in train may boost issues of green, social, sustainability and sustainability-linked bonds “Such measures will help to address investor concerns surrounding transparency and green washing and provide clarity around use of proceeds and project availability.” According to the report, “institutional investors are increasingly adopting environment-related investment considerations.”
As a result, “the endorsement of projects through clear, standardised criteria on what defines a green bond and the requirement of mandatory disclosures, will increase investor confidence and support further demand for green bonds.”
Uniform international standards are seen as key to assess targets as companies and governments progress on ESG-related goals. “These not only establish prerequisites for projects to be certified as ‘green’ but also performance criteria to be met by these projects.
“With the rapid development of new green technologies and services, updated and clear guidance on the scope of regulatory frameworks will enable the continuous expansion of green bond markets. “Furthermore, the defining of environmentally sustainable activities and assets in these frameworks will help direct more financing toward these projects from green investors.”
The report said China had the “most advanced” green bond regulatory standards in the region. China’s Green Bond Endorsed Projects Catalogue – launched in July last year — “provides a uniform national standard defining green industries and projects,” it said.
The catalogue “will strengthen alignment with European standards, such as through the removal of ‘clean coal’ technology assets, which are not considered investable for several overseas green bond investors.”
The report needs that Hong Kong and Singapore had intensified the development of such standards as they aim to become green finance hubs. Such hubs “will create competition for issuance, supporting the development of standards, regulatory oversight and formation of best practices which will help boost international integration of these bond markets and widen the investor pool.”
The report noted that ASEAN governments had unveiled a five-year plan targeting 23 percent of primary energy in the region coming from renewable sources and 35 percent installed renewable energy capacity by 2025.
“This translates into a requirement of roughly 35 GW – 40 GW additional renewable energy capacity annually,” it said. Green bond issues in the region have used ASEAN Green Bonds Standards established in 2018.
These are based on the Green Bond Principles of the International Capital Markets Association and provide further guidance specific to ASEAN. “Regional cooperation in establishing frameworks will help facilitate the development of green bond markets in both advanced economies and emerging markets,” the report said. Sao Da – AKP
Source: https://www.khmertimeskh.com/501025314/asean-moves-towards-common-sustainable-finance-taxonomy-seen-catalysing-additional-investment-inflows/