Asia needs clearer standards, less complexity, for green projects to accelerate net-zero transition

By David Liao
Thu, April 20, 2023 | 8:49 am GMT+7

David Liao, co-chief executive, Asia Pacific at HSBC, explains what Asia including Vietnam is supposed to do to lure investors who embrace environmental, social, and corporate governance (ESG) issues.

The world needs more green investment than ever if we are to achieve net zero by 2050, but rising interest rates, constraints on public finances and persistent confusion over the definition of what constitutes a green investment are all conspiring to make it harder to fund sustainable projects.

Higher rates are making it more difficult to raise capital for marginal but vital green projects. Years of cheap money, a combination of quantitative tightening, and a $30 trillion mark-down in the value of stocks and bonds last year have reduced liquidity, and the double-blow of definitional confusion and greenwashing has made investors warier than ever.

Some of these factors are beyond the control of governments, let alone the financial services industry, but it is within our power to collaborate to create more transparent systems that facilitate green investment by reducing risk.

This should become easier as new regulations come into force. The European Union (EU) has already brought in rules on disclosures relating to green finance, and China, the United States, and Britain have all proposed new measures to promote robust standards.

Asia’s financial centers have everything to play for. Green finance is still in its infancy, and the city or market that can attract the growing number of ESG-focused investors will win a first-mover advantage.

But the region risks losing ground to jurisdictions, like the EU, which are aiming for global leadership in designing the policy and regulatory framework for delivering net zero. Where should Asia direct its efforts, and what can it learn from the European experience? For example, the EU was among the first to introduce a classification system to assess the sustainability of investments – a so-called taxonomy – and, more recently, has tightened up its disclosure rules. How should Asia respond if it wants to attract those ESG-focused investors?

First, there is little doubt that well-designed disclosure rules will help create confidence about what constitutes a sustainable investment. A clear, widely adopted and well-policed taxonomy will not only give investors confidence in the sustainability of the projects they support, it will also give project managers a design roadmap.

The European Union has gone further, creating Sustainable Finance Disclosure Regulations intended to make financial market participants provide the information end-investors need to make informed decisions. The SFDR should encourage both more sustainable investing practices and a more transparent and therefore liquid secondary market in green financial products.

Regulators and the financial services industry should press on with finding ways to bring more transparency to the market, and to standardize the reporting of ESG risks. But the careful design of regulation is also essential to avoid creating fragmentation and confusion.

Better information will help avoid risk mispricing and will mobilize market forces towards scaling up green financing, helping to make it mainstream.

It is important, however, to avoid creating a patchwork of regulation or too many ad hoc standards for green products, since this will reduce the market’s efficiency and deter issuers and investors alike.

Governments and regulators can and should set minimum standards on disclosure and enact penalties for misleading investors on sustainability. But if we are to achieve the liquid market in sustainable products the world needs, policymakers should work with the financial services industry to make sure these ground rules are both user-friendly and successfully target the real problems in growing the market.

For all the potential of green investment, it is widely recognized that it is a shortage of sustainable assets, not sustainable finance which is the major impediment to growth.

Taxonomies have a role to play but they need to avoid creating excess complexity or setting standards that mean only the very greenest of green activities or entities are in scope. Better disclosure is key, but regulators should work to ensure international sustainability standards – such as those being finalized by the International Sustainability Standards Board – are embedded in national or regional frameworks.

Above all, it is important to remember that in product design, well-established market standards, such as ICMA’s Green Bond Principles, have made a significant contribution and should be built upon. Newer market standards – such as the FAST-Infra labeling scheme HSBC and others launched – also can help investors to identify what constitutes sustainable infrastructure. This is crucial to Asia and other emerging markets, where the battle against climate change will be won or lost.

Banks and other makers and traders of green financial products must work with the public sector on regulation to help clarify and refine definitions for sustainable assets and provide comprehensive, transparent, and rapid ways to rate climate risk. We need to invest in training and hiring talent that can assess and manage these risks and, importantly, help customers seize the opportunities in the transition to net zero.

Mobilizing the trillions of dollars needed will require rapid acceleration of sustainable investment flows. The financial services industry must play its part in moving from the bespoke, artisanal processes in use today, to assembly line manufacturing of green financial products based on a common language and backed up by robust and clear disclosure rules.

Comments (0)
  • Read More
First wave of ETF buying could exceed $680 mln if Vietnam secures FTSE market upgrade: broker

First wave of ETF buying could exceed $680 mln if Vietnam secures FTSE market upgrade: broker

Vietnam’s stock market has a strong chance of being upgraded by FTSE Russell in its October 2025 review, a move that could unlock billions of dollars in foreign inflows, said an analyst at broker ASEAN Securities.

Economy - Wed, September 17, 2025 | 4:16 pm GMT+7

Vietnam Education Publishing House faces challenges in curbing fake textbooks

Vietnam Education Publishing House faces challenges in curbing fake textbooks

The Vietnam Education Publishing House (VEPH) is encountering a range of difficulties in fighting counterfeit textbooks as the situation is becoming increasingly sophisticated and complex.

Companies - Wed, September 17, 2025 | 3:54 pm GMT+7

Vietnam Airlines the largest holding in gov’t investment arm SCIC’s portfolio

Vietnam Airlines the largest holding in gov’t investment arm SCIC’s portfolio

National flag carrier Vietnam Airlines has overtaken Vinamilk and Sabeco to become the largest holding in State Capital Investment Corporation's (SCIC) stock portfolio following the latest capital funding.

Finance - Wed, September 17, 2025 | 3:20 pm GMT+7

Hoa Phat Agriculture submits documents for IPO

Hoa Phat Agriculture submits documents for IPO

Hoa Phat Agriculture Development JSC, a subsidiary of Hoa Phat Group, on Tuesday submitted documents for an IPO of its shares as early as December 2025.

Companies - Wed, September 17, 2025 | 3:03 pm GMT+7

Petrovietnam affirms plan to build eco-energy and industrial center in southern Vietnam

Petrovietnam affirms plan to build eco-energy and industrial center in southern Vietnam

Petrovietnam plans to develop an eco-energy and industrial center project in Can Tho city, the "heart" of the Mekong Delta, its representatives stated on Monday.

Energy - Wed, September 17, 2025 | 11:49 am GMT+7

Thailand - one of Southeast Asia’s fastest-growing markets for AI

Thailand - one of Southeast Asia’s fastest-growing markets for AI

Thailand has emerged as one of Southeast Asia’s fastest-growing markets for artificial intelligence (AI), with OpenAI reporting that weekly active users of ChatGPT in the country have quadrupled over the past year.

Southeast Asia - Wed, September 17, 2025 | 10:40 am GMT+7

MoMo co-founder urges single fintech regulator, faster sandbox in Vietnam

MoMo co-founder urges single fintech regulator, faster sandbox in Vietnam

Vietnam should establish a single regulatory focal point and adopt a more flexible sandbox regime to accelerate fintech innovation, said Nguyen Ba Diep, co-founder of e-wallet giant MoMo.

Finance - Wed, September 17, 2025 | 8:00 am GMT+7

Indonesia to end incentives for imported CBU BEVs in 2026

Indonesia to end incentives for imported CBU BEVs in 2026

The Indonesian government has confirmed that it will stop providing incentives for imported completely built-up (CBU) battery electric vehicles (BEVs) from 2026.

Southeast Asia - Tue, September 16, 2025 | 9:44 pm GMT+7

Aquatic sector advised to navigate challenges, secure exports to EU, US

Aquatic sector advised to navigate challenges, secure exports to EU, US

Despite positive production signals with growth in 2025 projected at 4.25%, Vietnam's aquatic sector is facing mounting export pressures, particularly strict technical barriers in major markets such as the EU and the U.S.

Companies - Tue, September 16, 2025 | 9:41 pm GMT+7

Vietnam pledges favorable conditions for UK businesses

Vietnam pledges favorable conditions for UK businesses

Finance Minister Nguyen Van Thang has affirmed Vietnam’s commitment to improving its investment environment and creating favourable conditions for foreign enterprises, including those from the UK.

Companies - Tue, September 16, 2025 | 9:29 pm GMT+7

Lotte Shopping plans to open more shopping malls in Vietnam

Lotte Shopping plans to open more shopping malls in Vietnam

South Korean retail giant Lotte Shopping has unveiled plans to open an additional two to three large-scale shopping malls in major Vietnamese cities by 2030, underscoring the country’s growing role in the group’s international expansion strategy.

Companies - Tue, September 16, 2025 | 9:25 pm GMT+7

Vietnam ratifies WTO Agreement on Fisheries Subsidies

Vietnam ratifies WTO Agreement on Fisheries Subsidies

Vietnam officially deposited its instrument of ratification of the Agreement on Fisheries Subsidies at the WTO General Council’s special session in Switzerland on Monday.

Companies - Tue, September 16, 2025 | 9:21 pm GMT+7

What makes NobleGo - Vietnam’s first home-bidding livestream platform - so notable?

What makes NobleGo - Vietnam’s first home-bidding livestream platform - so notable?

NobleGo – Vietnam’s pioneering AI-powered livestream real estate bidding platform developed by Sunshine Group – has completed its first 20 livestream sessions.

Real Estate - Tue, September 16, 2025 | 4:53 pm GMT+7

Japanese retailer Aeon to debut another northern Vietnam shopping mall by end-2026

Japanese retailer Aeon to debut another northern Vietnam shopping mall by end-2026

Japanese-backed Aeonmall Vietnam is ramping up construction on its Aeon Mall Ha Long project in Quang Ninh province, home to Ha Long Bay, with an aim to open it to the public by end-2026.

Industries - Tue, September 16, 2025 | 3:54 pm GMT+7

Hanoi terminates Vinaxuki auto plant project, repurposes land for commercial complex

Hanoi terminates Vinaxuki auto plant project, repurposes land for commercial complex

A long-stalled automotive manufacturing project by Xuan Kien Auto JSC (Vinaxuki) has been officially terminated by Hanoi authorities, and the reclaimed land in Phuc Thinh commune will be repurposed for a new commercial and service complex.

Industries - Tue, September 16, 2025 | 2:44 pm GMT+7

Central Vietnam province reviews investment proposal for thermal power project after Thai EGATi pullout

Central Vietnam province reviews investment proposal for thermal power project after Thai EGATi pullout

Authorities in the central province of Quang Tri are evaluating a proposal from Power Generation JSC 1 (EVNGENCO 1), a subsidiary of state utility Vietnam Electricity (EVN), to take over the Quang Tri thermal power plant project, following the withdrawal of Thai investor EGATi.

Energy - Tue, September 16, 2025 | 1:44 pm GMT+7