ASEAN sustainable finance needs grow as regulations evolve

Governments across the region are seeking blended financing solutions – among others – to scale up investments.

June 4, 2024

4 mins

Corporate, commercial & institutional banking

Originally published in The Business Times (the article title has been revised to fit SC.com editorial guidelines)

As sustainability regulations evolve and disclosures are enhanced, sustainable finance is poised for a surge with governments across South-east Asia increasingly seeking blended financing solutions to scale up investments, according to a corporate and investment banking (CIB) executive. 

In turn, the changing regulation and policies – driven by data, science, emerging risks and new opportunities – are creating strong foundations for sustainability-focused finance activities at national and regional levels, said Sunil Kaushal, Standard Chartered Bank’s CIB co-head.

“This will continue to inform how we use capital to support the growth and development of markets, channelling capital to where it can have the greatest impact,” said Kaushal in an e-mail interview with The Business Times.

Some of the initiatives include the Just Energy Transition Partnerships in Vietnam and Indonesia, through which the bank is working to support the responsible transition away from reliance on
coal-fuelled power in these markets.

Tremendous opportunities

Pointing out that there are tremendous opportunities in Asean drawing businesses to set up or expand their presence in the region, Kaushal said these opportunities mostly revolve around three key growth themes – trade and investment, digitalisation and sustainability.

Underpinning these themes are the region’s rising middle class, accelerating urbanisation, vibrant trade and investment environment, rising digital penetration and e-commerce.

The focus on environmental, social and governance factors in finance is crucial in supporting decarbonisation goals and achieving an inclusive, sector-by-sector transition, as capital is redirected to low-carbon jobs and sustainable growth. This requires significant capital, making increased financial flows essential, Kaushal pointed out.

Asean is the world’s fourth-largest energy consumer, with energy demand increasing by about 3 per cent annually over the past two decades, a trend that is expected to continue until 2030, according to the International Energy Agency.

Transition finance is key to increasing financial flows towards hard-to-abate industries – such as steel or power – that need to decarbonise, said Kaushal, who, besides overseeing the bank’s newly reorganised CIB, is also responsible for the Asean and South Asia markets.

Standard Chartered defines transition finance as any financial service provided to clients that supports them in aligning their business or operations with a 1.5 degree trajectory. The bank has a suite of over 40 sustainability products.

On the back of rising demand for innovative financing solutions, the bank has launched four thematic innovation hubs – adaptation finance, blended finance, carbon markets and nature-positive solutions. 

These solutions are based on emerging sustainability themes that are “nascent but ripe for scale”, Kaushal said.

For example, through the carbon market innovation hub, Standard Chartered has supported Climate Impact X in Singapore, a global carbon marketplace to accelerate climate action through quality carbon credits that can be complementary to a credible corporate net-zero transition plan.

Asean is a fast-growing trade bloc, and Singapore serves as a strategic node and super-connector for businesses to access the whole region. 

This, he said, cuts across established sectors such as infrastructure, real estate, energy transition, food and beverage, healthcare, as well as newer ones like data centres, digital infrastructure, battery and waste-to-energy.

Upsides of resilient supply chain

Kaushal highlighted that the need for supply chain resilience has brought clear benefits for the region, with businesses increasingly adopting risk-diversification strategies. 

In this respect, Asean markets, including Indonesia, Malaysia, Thailand and Vietnam, will continue to benefit from their roles as alternative manufacturing hubs, drawing more foreign direct investments, he added. 

In 2021, Standard Chartered created an Asean hub in Singapore that consolidates the bank’s subsidiaries in Malaysia, Vietnam and Thailand, allowing it to deploy capital and liquidity more flexibly within the region. 

It also collaborates with governments, having served as one of the most frequently mandated bookrunners for the Indonesian government in US dollar issuances for over a decade.

Kaushal noted that cross-border business is crucial to the bank’s CIB operations. In FY2023, the bank reported US$6.9 billion in global CIB cross-border income, marking a 31 per cent increase from the previous financial year.

He also pointed out that the bank’s total Asean inbound and outbound client network income rose by double digits year on year for FY2023.

Asean has developed rapidly over the past two decades and is a major engine of global economic growth, but there are strong country-by-country variations.

Sunil Kaushal, Co-Head, Corporate & Investment Banking

Source: The Business Times © Singapore Press Holdings Limited. Permission required for reproduction.