Moody’s: Asean banks making progress, but facing challenges to decarbonise finance

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

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

Across 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 corresponding to coal-fired energy era, coal mining, and oil and gasoline, Moody’s stated in an announcement.

So far, just a few giant banks in Singapore, Malaysia and the Philippines have specific insurance policies to chorus from financing new coal-fired energy vegetation, the assertion stated, based mostly on findings in a spherical desk dialogue Moody’s co-hosted with the Institute of International Finance themed “Advancing web zero targets: ASEAN views.”

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

The examine additionally famous that banks themselves are making gradual progress in disclosing local weather dangers.

Moody’s assessment of 28 giant banks within the US, Europe and Asia in 2021 discovered that simply 21 per cent reported carbon emissions funded by means 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 anticipate to generate from growing inexperienced merchandise.

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

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

However, a restricted provide of inexperienced and sustainability-linked bonds due to the dearth of standardised taxonomies is a problem for institutional buyers.

“Green and sustainability-linked bonds issued by ASEAN nations 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 companies, and greater than US$490 billion globally within the first half of 2021,” stated Moody’s, quoting information from the Climate Bond Initiative. – Bernama



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