Nature-linked finance in Southeast Asia: implications and policy options for regulators, lenders and borrowers
Southeast Asia’s economies sit at the epicentre of nature risk, and unchecked deforestation, biodiversity loss and water scarcity threaten to significantly cut regional gross domestic product in the coming years. Sustainability-linked finance (SLF), which links a borrower’s interest margin to its progress against clear, verifiable environmental or social performance targets, has emerged as the flagship vehicle for translating sustainability ambition into capital flows. This paper from the Centre for Economic Transformation Expertise (CETEx) highlights the significant potential for scaling up such products, but also reveals a persistent gap between corporate disclosures, loan covenants and global standards, which may increase greenwashing and pricing inaccuracy risks, potentially undermining investor confidence and limiting capital flows to nature-positive projects.