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
Rixos debuts in Southeast Asia on Vietnam’s 'Pearl Island'

Rixos debuts in Southeast Asia on Vietnam’s 'Pearl Island'

A new chapter in travel is unfolding in Southeast Asia as Rixos Hotels, the world’s leading all-inclusive brand, prepares to unveil its first-ever resort in the region.

Travel - Sat, July 12, 2025 | 6:48 pm GMT+7

Vietnam’s biggest airport project ‘races to the finish line’

Vietnam’s biggest airport project ‘races to the finish line’

The Ministry of Construction has requested investors of the Long Thanh International Airport to complete the main route by August 2025 to facilitate trial operations of the passenger terminal and other components.

Infrastructure - Sat, July 12, 2025 | 6:19 pm GMT+7

Singapore's YCH Group eyes developing logistics center in southern Vietnam economic zone

Singapore's YCH Group eyes developing logistics center in southern Vietnam economic zone

Tay Ninh province has pledged full support to Singapore’s YCH Group in developing a logistics center within its Moc Bai Border Gate Economic Zone.

Industries - Sat, July 12, 2025 | 1:48 pm GMT+7

Vietnam PM asks US firms to sustain support for 'reasonable, detailed tariff pact'

Vietnam PM asks US firms to sustain support for 'reasonable, detailed tariff pact'

Prime Minister Pham Minh Chinh has called on U.S. businesses to continue supporting the Vietnamese government in dialogues with U.S. agencies to soon reach "a reasonable, detailed tariff agreement for individual products and product groups".

Economy - Sat, July 12, 2025 | 11:32 am GMT+7

Mergers of Vietnamese provinces unlock new property development opportunities

Mergers of Vietnamese provinces unlock new property development opportunities

The merging of Vietnamese localities is expected to create a strong "boost" for the real estate market as expanded planning space, synchronized infrastructure, and new land reserves are key factors driving the market's transformation.

Real Estate - Sat, July 12, 2025 | 11:00 am GMT+7

Measures proposed for Thailand to minimize US tariff impacts

Measures proposed for Thailand to minimize US tariff impacts

Financial and banking experts in Thailand have warned that the U.S.'s proposed 36% tariff on Thai goods is likely to severely undermine Thailand's export competitiveness.

Southeast Asia - Sat, July 12, 2025 | 9:06 am GMT+7

Chinese construction major PCG eyes $383 mln underwater tunnel project in northern Vietnam

Chinese construction major PCG eyes $383 mln underwater tunnel project in northern Vietnam

Pacific Construction Group (PCG), one of China’s leading construction firms, has expressed interest in developing a VND10 trillion ($383 million) underwater road tunnel in Quang Ninh, a coastal province in northern Vietnam.

Infrastructure - Sat, July 12, 2025 | 8:04 am GMT+7

Vingroup stocks pull VN-Index up for sixth consecutive session

Vingroup stocks pull VN-Index up for sixth consecutive session

VN-Index, which represents the Ho Chi Minh Stock Exchange, on Friday increased for the sixth consecutive session thanks to large-cap stocks, with foreign investors continuing to strongly net buy.

Finance - Fri, July 11, 2025 | 7:20 pm GMT+7

Coca-Cola inaugurates largest-scale Vietnam factory in Tay Ninh province

Coca-Cola inaugurates largest-scale Vietnam factory in Tay Ninh province

Coca-Cola Beverages Vietnam on Friday inaugurated a $136 million factory in Tay Ninh province, the largest-scale among its four facilities in Vietnam.

Industries - Fri, July 11, 2025 | 5:27 pm GMT+7

Vietnam halts use of German ODA loans for HCMC metro line

Vietnam halts use of German ODA loans for HCMC metro line

The Government has approved a proposal by Ho Chi Minh City to stop borrowing official development assistance (ODA) loans from Germany’s KfW development bank for Metro Line No. 2 and instead use domestic funds to avoid further delays.

Economy - Fri, July 11, 2025 | 3:25 pm GMT+7

Seventeen housing projects foreigners allowed to buy in HCMC

Seventeen housing projects foreigners allowed to buy in HCMC

Ho Chi Minh City has announced a list of 17 residential projects located in areas where foreign organizations and individuals are allowed to own houses.

Real Estate - Fri, July 11, 2025 | 3:17 pm GMT+7

Auto enterprises to enjoy preferential import tariff policies

Auto enterprises to enjoy preferential import tariff policies

The Government has issued a decree amending and supplementing Decree No. 26/2023/ND-CP on the export and preferential import tariff schedules, as well as the lists of goods subject to absolute tax, mixed tax, and out-of-quota import duties.

Companies - Fri, July 11, 2025 | 2:13 pm GMT+7

Korean chaebol Samsung’s revenue makes up 13% of Vietnam’s GDP in 2024

Korean chaebol Samsung’s revenue makes up 13% of Vietnam’s GDP in 2024

Samsung’s revenue and export in Vietnam accounted for approximately 13.12% of the country’s GDP and 13.4% of its total export turnover in 2024, respectively, according to the National Statistics Office.

Companies - Fri, July 11, 2025 | 2:09 pm GMT+7

JPMorgan upgrades Vietnam stocks to overweight following US tariff deal

JPMorgan upgrades Vietnam stocks to overweight following US tariff deal

JPMorgan Chase has upgraded Vietnam stocks to overweight after the country became the first Southeast Asian nation to reach a preliminary tariff deal with the U.S.

Economy - Fri, July 11, 2025 | 11:38 am GMT+7

Vietnam government bond issuance surges nearly 70% in June

Vietnam government bond issuance surges nearly 70% in June

The Hanoi Stock Exchange (HNX) held 16 government bond auctions in June, raising nearly VND30.5 trillion ($1.2 billion), up 68.8% from May.

Finance - Fri, July 11, 2025 | 9:30 am GMT+7

Xuan Truong Company asked to make feasibility study for airport proposal in northern Vietnam

Xuan Truong Company asked to make feasibility study for airport proposal in northern Vietnam

The Ministry of Construction has asked Ninh Binh authorities to prepare a feasibility study on the potential development of an international airport in the province, the ministry said in a report submitted to the Government regarding a proposal from private construction company Xuan Truong.

Companies - Fri, July 11, 2025 | 9:18 am GMT+7