Investors and intermediaries such as banks and insurers have an important role to play in ensuring that the transition is orderly and measured taking into account the different development paths of each country.
“The emerging development of carbon credits to mitigate and offset will certainly help countries as well as hard-to-mitigate sectors achieve 2050 net zero carbon.”
Market development in Asia-Pacific is approaching a point where every bond issuer and borrower benefits from a well-articulated sustainability strategy – even if they issue a vanilla loan or bond.
This demand for a strong and clear corporate approach tied to issuer funding strategy is most evident in the developed markets of Australia, Hong Kong, New Zealand and Singapore.
Adoption of disclosure standards and reporting guidelines FSB Task Force on Climate-Related Financial Disclosures (TCFD) and other regulatory initiatives from more Asian governments and businesses will build investor confidence in the region’s debt issuance.
Global disclosure and reporting regimes are continually developing as the GSSS market evolves. Created in June 2021, the Nature-Related Financial Disclosures Working Group (TNFD) is the latest market-led global initiative that aims to provide financial institutions and businesses with a more complete picture of their environmental risks and opportunities. (ANZ is among more 100 organizations to join the TNFD Forum.)
The TNFD aims to publish a risk management and disclosure framework for organizations to report while acting on the evolution of nature-related tasks in 2023, building on the success of the TCFD.
Sustainability reporting – although in its infancy in some emerging markets – is changing rapidly. The International Sustainability Standards Council is developing new sustainability disclosure standards to provide a global benchmark for integrating climate and sustainability disclosures into annual financial reports.
The new framework will improve consistency and expand standards as well as the quality and reliability of environmental, social and governance (ESG) data. This enhanced data will allow investors to calculate the relative value of their portfolio, helping to increase investor confidence and ultimately drive growth.
Already, Singapore Mandated TCFD Disclosures from 2023 for issuers in the financial, energy, agricultural, food and forestry sectors with the materials, building and transport industries to follow from 2024.
Improved disclosure and data should also help assuage growing market skepticism from investors and the general public about companies’ and governments’ commitment to net zero. The International Monetary Fund had flagged a risk of greenwashing in its October report Global Stability Report.
Financial institutions also face the risk of greenwashing as underwriters, bookrunners and issuers of GSSS credit. It is the role of the sustainability coordinator to work with companies to structure meaningful and ambitious sustainability goals, ensuring that sustainable financial transactions reflect best practice and can withstand market scrutiny.
Despite rising interest rates, issuers are not expected to refrain from tapping the markets as the wave of decarbonization continues unabated.
The emerging development of carbon credits to mitigate and offset will certainly help countries – emerging and developed – as well as hard-to-mitigate sectors, to achieve 2050 net zero carbon.
Companies such as Carbon account – which provides data to calculate soil carbon levels – will go some way to ensuring that markets have measurable and consistent measures to create financial instruments to trade in global markets.