The Reuters news staff had no role in the production of this content. It was created by Reuters Plus, the brand marketing studio of Reuters.
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Disclaimer: The Reuters news staff had no role in the production of this content. It was created by Reuters Plus, the brand marketing studio of Reuters. To work with Reuters Plus, contact us here.
Championing ASEAN’s net zero ambitions
Rising energy demands; a burgeoning middle class; strong pressure not to increase energy prices and the need to deliver inclusive growth are considerations governments must grapple with alongside the effects of climate change.
While the region accounts for only about 7 percent of global emissions, this is likely to spike, powered by rapid economic, population and manufacturing growth. Undoubtedly, ASEAN’s climate ambitions and actions have global consequences.
The region is expected to account for 25 percent of global energy demand growth between now and 2035 and will overtake the European Union in energy demand by 2050.
ASEAN is said to need a whopping US$1.5 trillion in investments by 2030 to reach net zero. Yet total green investments stood only at US$45 billion as of 2023 in the region, which is woefully short of the target.
With these staggering figures in mind, it is no wonder that 2024 has been dubbed the year of climate finance by the UN Foundation.
Unfortunately, within ASEAN, higher offtake risks due to regulatory uncertainty; creditworthiness and levels of development have hindered climate finance capital flows to the region.
“To improve bankability and offtake risks we need to accelerate efforts to derisk green projects,” says Ranita Abdullah, Head of ESG Strategy & Solutions, Group Global Banking at Maybank. “We must develop strong regulatory frameworks where government policies and regulations are clear, supportive and transparent.”
One of the tools to increase bankability is blended finance where the risks of financing are shared between both the private and public sector, therefore lowering project costs and the overall average cost of capital,” says Ranita.
Vietnamese water purifier Tecomen’s 200 billion Vietnamese dong (US$8 million) five-year bond signed in December 2023 is a good example.
Guaranteed by Credit Guarantee and Investment Facility, a trust fund of the Asian Development Bank, and arranged by Maybank Securities Vietnam, the proceeds were used to expand the provision of affordable, clean and safe drinking water to consumers in Vietnam.
For hard-to-abate sectors, sustainability-linked loans (SLL) provide more flexibility to issuers. Unlike green bonds, where sustainability is linked to the use of proceeds, the sustainability-linked format ties performance to sector-specific, pre-determined sustainability targets. This can be more meaningful for hard-to-abate sectors that require more time to establish eligible green projects.
“Many have adopted loan instruments as their maiden sustainable finance endeavour to familiarise themselves with sustainability-linked financing structures,” says Valerie Ng, Maybank Investment Banking Group’s Head of Sustainable Finance, explaining that lenders have historically been more willing to provide incentives for sustainability performance target achievements.
The year of climate finance
Focusing on the “S” in ESG
The “S” in ESG is also garnering increasing emphasis from the financing world. The need for solutions that address socio-economic challenges is more critical than ever. Social bonds or social sukuks, designed to fund projects that have positive social outcomes—such as affordable housing, education, and healthcare—present a unique opportunity to support inclusive growth in ASEAN.
Bank Syariah Indonesia became the first Indonesian lender to sign a 3 trillion rupiah (US$252 billion) sustainability sukuk in May with Maybank Sekuritas as joint lead underwriter.
Proceeds will be used to finance and refinance activities aligned with Indonesia’s list of Environmental and Social Based Activities to achieve its UN Sustainable Development Goals.
"There are clear parallels between sukuks and sustainability," says Maybank's Ng. "Rooted in ethical considerations with a focus on creating positive social and environmental impacts while ensuring financing returns, investors in sukuk and sustainable finance are aligned in their desire for responsible investing."
Southeast Asia’s commitment towards net zero has grown palpably over the last few years. A growing number of countries are raising climate commitments or considering carbon pricing measures. Despite this progress, however, much more needs to be done.
Oil storage terminal Pengerang Independent Terminals signed a S$330 million (US$250 million) project financing in 2023, structured by Maybank. This was the first independent terminal in the region to arrange SLLs, which is marked against three key criteria — reduction of greenhouse gas emissions; safe performance and spillage.
US$45b
US$1.5t
2023
2030
Green investments made up until 2023 and needed by 2030
Find out more on Maybank’s Sustainability Journey here
“Encouragingly, borrowers are growing more confident with the requirements of labelled debt financing,” says Ng. “We are seeing a larger take-up in terms of sustainable finance frameworks to facilitate sustainability-labelled bonds or sukuk issuances.”
Palm oil company Johor Plantations Group established its sustainable finance framework and sold its inaugural 1.3 billion Malaysian ringgit (US$300 million) sustainability-linked sukuk in September 2024 through Maybank, a global first in the plantations sector.
We must develop strong regulatory frameworks where government policies and regulations are clear, supportive and transparent.
Ranita Abdullah, Head of ESG Strategy & Solutions, Group Global Banking at Maybank
“At Maybank we are fully committed to empower our clients through their sustainability journey as their regional transition partner,” says Ranita, referencing the bank’s Sustainability Product Framework and Transition Finance Framework, which were both firsts for a Malaysian bank. “As banks, we can play a catalytic role by providing clients with clarity and confidence to finance their transition.”
Whether it is banks, governments, companies or individuals, the fact is that everyone needs to play their part if we are to meet the Paris Agreement goals. Malaysia’s recent announcement to introduce a carbon tax on the iron, steel and energy industries by 2026 is a clear step in the right direction.
While there can be a tendency to think of the climate crisis as an existential one, the real-life consequences and social impact can no longer be denied.
The effects of climate change are increasingly evident in ASEAN and across the world.
“Countries need to understand that it is a shared net zero aspiration,” says Maybank’s Ranita. “It is futile to act alone.”
Shared net zero aspiration
Valerie Ng, Maybank Investment Banking Group’s Head of Sustainable Finance
We are seeing a larger take-up in terms of sustainable finance frameworks to facilitate sustainability-labelled bonds or sukuk issuances.
The Reuters news staff had no role in the production of this content. It was created by Reuters Plus, the brand marketing studio of Reuters.
Produced by Reuters Plus for
Disclaimer: The Reuters news staff had no role in the production of this content. It was created by Reuters Plus, the brand marketing studio of Reuters. To work with Reuters Plus, contact us here.