Sustainable debt markets have financed just 31 non-financial companies from major Southeast Asian economies between 2017-21, according to a flagship report released by the World Bank.
Of these figures, 27 companies leveraged green debt financing, including bonds and syndicated loans, while the remaining six used broader sustainability themes.
Researchers noted that the corporate green debt issuances had longer maturities compared with conventional issuances but roughly similar coupon rates, whereas sustainability debt tended to have shorter maturities and lower coupon rates.
Despite the extremely limited reach of sustainable financing in the region, the report charted a “remarkable expansion” of capital flows, with the total amount of sustainable debt raised annually increasing from $250 million in 2016 to $6.75 billion in 2021. This brings the total outstanding figure to around $24 billion as of last year.
Sustainable debt markets in the five economies accounted for about 2.5 percent of total debt in 2021, which is significantly smaller than shares observed in developed markets such as EU countries, and regional peers Singapore and South Korea where they range from 5-16 percent.
The study was conducted with Beijing’s Institute of Finance and Sustainability (IFS) and looked at five of the largest markets in Southeast Asia: Indonesia, Malaysia, the Philippines, Thailand and Vietnam.
In the same period, private equity markets raised less than 5 percent of the total sustainable debt financing in the region but funded 52 of the most innovative firms with projects in either climate or clean technology, researchers said. Most companies were based in Indonesia and Malaysia.
Financial institutions surveyed for the report, some 100 institutions across the five countries, said a shortage of expertise, limited range of opportunities and the prioritisation of financial performance of ESG considerations had hindered the development of sustainable finance.
Southeast Asian countries are among the most exposed globally to climate-related hazards such as floods, tropical cyclones, drought and extreme heat, with such hazards accounting for 83 percent of all natural disasters since 2000. The region also includes some of the most greenhouse gas-intensive economies in the world and faces a costly but urgent need to transition.
The most conservative current estimates of the financing needed for emerging markets to achieve their sustainable goals are upwards of $1 trillion on an annual basis, according to the World Bank.
The IFS was founded by former Chinese central bank chief economist and Deutsche Bank executive Ma Jun. He is credited with being a key force behind China’s sustainable finance programmes and co-chairs the G20 Sustainable Finance Group.