Asian Finance Group Pushes Softer Standards for Green Deals

(Bloomberg) -- A group of Asian banks and securities firms with more than $35 trillion in assets is demanding the region have a stronger voice in setting global standards for sustainable finance that better reflect the needs of emerging markets.

The European Union has been leading the charge in establishing guidelines for green bonds and other areas of sustainable finance, yet it often overlooks the reality of regions such as Asia, according to a new report from the Asia Securities Industry & Financial Markets Association.

“We urge Asia's policymakers to work with the EU and other jurisdictions to develop a common global framework,” while ensuring “flexibility” for less developed markets, the report found. That flexibility should allow for “different interpretations of sustainability,” provided there's enough transparency for investors, the group said.

The report released Tuesday underscores the delicate balance facing Asian banks and money managers as they strive to fight climate change while seeking watered-down standards to support their domestic economies. China has the second-largest green bond market in the world yet proceeds can be used to finance “clean” coal plants, running against the EU standard. And even as U.S. and European banks curb coal funding, lenders from China and Japan have filled the void, according to a report last week from BloombergNEF.

With global banks and regulators working on new classifications -- or taxonomy -- for sustainable finance, these regional differences should be taken into account and Asian views heard, said Matthew Chan, the finance group's head of policy and regulatory affairs.

“There still needs to be room for discussion to make sure, even on the taxonomy level, different regions have the ability to influence what the global standard becomes, as opposed to either this or other regions being silent,” Chan said in an interview.

In its current form, the EU rules tend to be binary, classifying economic activities as either ‘green' or ‘non-green,” according to the report. This may discourage investment in so-called transition projects as companies try to reduce emissions and become greener.

Asset-Manager Disclosure Burdens Grow With Green-Finance Agenda

The Hong Kong-based group with 135 member firms called for more uniform standards to ease the “confusing” patchwork of disclosure rules, data collection and monitoring around the world.

“Over time, convergence to common frameworks is needed, whilst still allowing flexibility for nuance and differences between different economies' paths to sustainability,” the group said.

The report notes the progress that some Asian financial institutions are making in fighting climate change. Japan's pension funds added descriptions on environmental, social and governance standards in its investment principles in 2017. And more than than 200 Japanese companies and organizations had expressed support for the Task Force on Climate-related Financial Disclosures by the end of 2019.

For green bonds, China is “leading the pack“ within Asia, according to Hannah Cassidy, a Hong Kong partner at the Herbert Smith Freehills law firm. The country has been issuing guidelines on the use of financial products relating to green finance for more than a decade. The People's Bank of China has also been discussing with the European Investment Bank ways to align their respective definition of green finance since 2017.

Hong Kong last week said it plans to sell HK$66 billion ($8.5 billion) in green bonds over the next five years, following its debut sale last year.

To contact the reporter on this story: Kiuyan Wong in Hong Kong at kwong739@bloomberg.net

To contact the editors responsible for this story: Candice Zachariahs at czachariahs2@bloomberg.net, David Scanlan, Jonas Bergman

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