SE Asia on the hunt for green-shift funds

Nations in climate-exposed region tapping global markets to meet goals

Southeast Asian countries are tapping the international credit markets to raise funds to help put their economies on a low-carbon path as the threat of climate change becomes more urgent in the region.

Analysts say emissions reduction, and the need for financing to help achieve it, has become a pressing issue as extreme weather events such as typhoons, drought and intense heat wreak havoc on the region.

Cesar Carlito Baclagon, a regional finance campaigner at 350.org, an international environmental group, said shifting to a low-carbon economy will involve harnessing more renewable energy sources and redesigning buildings, housing and public transport systems. These projects would require huge funding because "you have to spend a lot of money to protect a planet that has a finite number of resources".

"Green bonds may come with tax incentives to enhance their attractiveness to investors. This, together with other financing products and instruments, can help provide the stimulus for the (low-carbon) transition," he said.

Singapore is expected to issue its maiden sovereign green bond later this year to finance the city-state's transition. The Philippines raised over 140 billion pesos ($2.51 billion) in two green bond offerings, in March and April.

Elsewhere in the region, Hanoi-based EVN Finance Joint Stock Company issued Vietnam's first onshore internationally verified green bond in local currency this month, with the issuance valued at $75 million. As for Thailand, it pioneered green bonds in the region, launching a sustainability bond worth 30 billion baht in August 2020, equivalent to nearly $951 million under the exchange rate at the time.

By issuing green bonds, which are designed to support specific climate-related or environmental projects, Southeast Asian economies can continue to grow despite the challenges brought by climate change, Baclagon said.

Commitments required

Climate finance will also require commitments from developed countries, he said, adding that the move away from fossil fuels must be supported by capital "especially from historic and (high) per capita emitters that brought us to the climate crisis".

Le Duy Binh, managing director of consultancy Economica Vietnam, said green, social and sustainability bonds have an "extremely important role" for Vietnam as they can help finance green transportation projects, enable the phaseout or phase-down of coal-fired power plants and support the development of renewable energy sources.

"The demand for capital to finance these green projects is huge and cannot be met only by banks and credit institutions which often offer short-or medium-term financing only," Binh said.

Angelo Kairos Dela Cruz, deputy executive director of the Institute for Climate and Sustainable Cities, a think tank in Manila, said issuing green bonds can be a catalyst to "build an economically sound, climate-inclusive financing strategy". But he added that green bonds are not a silver bullet that can solve all problems related to climate financing.

He stressed it is important to avoid "greenwashing"－making exaggerated or imprecise claims in regard to environmental practices or benefits.

Dela Cruz said that for any financial instrument "that claims to use the not-business-as-usual approach, accountability would always be central to the discussion". He said that there should be an independent body that monitors how the funds are used and the impact on local communities.

Baclagon said greenwashing also can be avoided if there are strict criteria for the funding as well as safeguards for the environmental and social impact of these projects under the investment policies of banks and other financing institutions.

As one of the regions that are most vulnerable to climate change, Southeast Asia could see its economy take a big hit if the global temperature rise exceeds 1.5 C.Reinsurance firm Swiss Re has estimated that under a "most-severe scenario", with a temperature rise of 3.2 C, the region would lose about 37 percent of its GDP by 2048.

The region needs $2 trillion worth of investments over the next decade to shift to a low-carbon economy, according to a joint report by Bain, Microsoft Asia-Pacific and Temasek. But less than $9 billion of capital has been deployed for green assets in 2020, the report said.