Moody’s: Asean banks making progress, however going through challenges to decarbonise finance

KUALA LUMPUR: The Affiliation of Southeast Asian Nations (ASEAN) banks need to navigate a difficult path amid strain from traders, regulators and social forces to decarbonise their mortgage books and meet country-level net-zero emission targets that transcend 2050, Moody’s Buyers Service stated.

Senior vice-president Alka Anbarasu stated disclosures associated to local weather dangers by corporations differ, making it tough for banks to evaluate local weather dangers for his or her company shoppers.

Throughout ASEAN, between 15 per cent and 30 per cent of banking system loans are catered to carbon-intensive industries which have excessive carbon-transition dangers equivalent to coal-fired energy era, coal mining, and oil and gasoline, Moody’s stated in a press release .

To this point, only some giant banks in Singapore, Malaysia and the Philippines have express insurance policies to chorus from financing new coal-fired energy vegetation, the assertion stated, primarily based on findings in a spherical desk dialogue Moody’s co-hosted with the Institute of Worldwide Finance themed “Advancing web zero objectives: ASEAN views.”

Moody’s famous that the international locations and corporates inside ASEAN itself are at various ranges of readiness to satisfy their carbon neutrality targets and though they’re making progress, inadequate information and disclosure pose challenges for banks to include local weather dangers in mortgage underwriting.

The research additionally famous that banks themselves are making sluggish progress in disclosing local weather dangers.

Moody’s overview of 28 giant banks within the US, Europe and Asia in 2021 discovered that simply 21 per cent reported carbon emissions funded by way of their lending and investments, with only a few disclosing how local weather change might have an effect on their revenue, other than income they count on to generate from growing inexperienced merchandise.

The transition to a low-carbon financial system will create huge financing alternatives for banks as it would require materials funding in infrastructure and know-how.

In ASEAN specifically, sustainable financial improvement that requires the safety of biodiversity will entail vital funding from the private and non-private sectors.

Nonetheless, a restricted provide of inexperienced and sustainability-linked bonds as a result of lack of standardized taxonomies is a problem for institutional traders.

“Inexperienced and sustainability-linked bonds issued by ASEAN international locations and firms amounted to simply greater than US$30 billion within the first half of 2021, whereas greater than US$190 billion had been issued by Chinese language companies, and greater than US$490 billion globally within the first half of 2021,” stated Moody’s, quoting information from the Local weather Bond Initiative. – Bernama


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