# Green finance in ASEAN+3: balancing sustainability and financial stability

- Link: https://www.thailand-business-news.com/banking/180956-green-finance-in-asean3-balancing-sustainability-and-financial-stability
- Published: 2024-12-19T09:18:00+07:00
- Author: News Desk

ASEAN+3 is intensifying its commitment to green finance, marking a significant step
in the fight against climate change.ASEAN+3 is intensifying its commitment to green
finance, marking a significant step in the fight against climate change. By fostering
collaboration among its member nations and partners, the group aims to promote sustainable
investments, develop eco-friendly infrastructure, and encourage the adoption of 
renewable energy solutions.

## Key takeaways

 *  The region is projected to contribute 20% of global green bond issuance by early
   2024, supported by competitive pricing advantages like the “greenium.”
 * Greenwashing and stranded assets pose significant threats, highlighting the need
   for robust monitoring and regulatory frameworks.
 * ASEAN+3 regulators are adopting climate risk integration, enhanced taxonomies,
   and stress testing to foster transparency, investor trust, and financial resilience.

The [region](https://amro-asia.org/green-finance-in-asean3-balancing-sustainability-and-financial-stability)
is emerging as a leader in sustainability, projected to contribute approximately
20% of global green bond issuance by early 2024.

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These bonds often benefit from a “greenium”, a premium associated with their eco-
friendly label, averaging 15 basis points lower in ASEAN+3’s primary market for 
certified green bonds.

This pricing advantage supports long-term investments in green projects, positioning
the region as a hub for sustainable development financing.

However, this rapid expansion is not without risks. Financial stability concerns
are emerging, with greenwashing, the practice of falsely labeling assets as environmentally
sustainable, posing a significant threat to investor confidence.

In some cases, green bonds have even been linked to increased carbon emissions, 
raising alarms among regulators. Although green bonds currently represent a small
fraction of the broader bond market, their growing prominence could heighten systemic
risks if verification and monitoring mechanisms remain inadequate.

Stranded assets present another challenge, particularly for banks heavily exposed
to carbon-intensive industries. A swift transition to greener economies could render
these assets obsolete, weakening loan portfolios and raising default risks.

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To address these issues, ASEAN+3 financial regulators are introducing measures to
integrate climate risks into banking regulations.

Efforts include updating climate risk management guidelines, developing transition
plans, and conducting climate stress tests. While these align with global standards,
further steps, such as incorporating climate factors into risk-weighted asset calculations,
could bolster the region’s resilience.

Additionally, robust green taxonomies are being promoted to combat greenwashing.
These frameworks aim to reduce information asymmetry, ensuring that green finance
truly supports sustainable outcomes.

As ASEAN+3 seeks to bridge its green finance capital gap and support the global 
transition to a sustainable economy, transparency, verifiable practices, and effective
regulatory oversight will be critical.

By addressing these challenges, the region can enhance investor trust and secure
financial stability while advancing its climate goals.