Photo: Simone Millward / Unsplash
South-east Asia is experimenting with innovative financial tools to help protect and restore critical natural habitats, but a new report suggests that regulators should do more to improve the transparency, credibility and scalability of the tools to reduce the risk of greenwashing.
Academics at the Grantham Institute at the London School of Economics studied the regional market for sustainability-linked finance (SLF), which ties borrowing costs to environmental targets such as offering lower interest rates to companies that restore critical habitats.
The study found that 60% of nature-related performance indicators that were disclosed in corporate reports —particularly those related to water usage and waste management — were missing from the sustainability targets in the SLF deals, which the authors said presented significant opportunities for improved ecological accountability.
The academics said the study underlines the need for regional frameworks like the sustainability-linked bond standards developed by the Association of Southeast Asian Nations to be harmonised with global guidelines like the Taskforce on Nature-related Financial Disclosures.
“Financial institutions must standardise nature-related metrics in SLF deals by adopting global frameworks,” the report says.
It also noted that the tropical rainforests and freshwater systems of the region are under acute pressure from land-use change and water stress, with any collapse in the ecosystem causing potentially substantial economic costs.
It urges financial regulators to align corporate sustainability performance indicators with SLF targets and to consider introducing penalties for non-compliance.
The report says lead arrangers and underwriters should be accredited as independent sustainability coordinators to vet and approve SLF targets to improve credibility and prevent conflicts of interest.
Meanwhile, governments in the region should consider introducing incentives such as tax exemptions and credit guarantees to mobilise private investment in projects that support nature.
A separate study shows the need for banks to better understand nature-related risks and dependencies in their portfolios.
The study, produced by the University of Cambridge’s Institute for Sustainability Leadership with the Monetary Authority of Singapore and three Singapore banks, examined the potential impact on bank lending to the palm oil industry in Indonesia and Malaysia under a severe and disruptive climate–nature loss scenario.
The study found that companies with relatively better financial strength were more resilient to the short-term acute stress but the impact was higher for some companies in the severe scenario.
“This scenario analysis emphasises the importance of understanding nature-related dependencies as a potential risk factor in the credit risk analysis,” the Cambridge report says. “If society continues to erode nature, impacting the nature-based services on which all businesses depend, considering those dependencies and risks will become increasingly important.”
This page was last updated July 2, 2025
Written by
Emma Thomasson is a British journalist, consultant and trainer based in Berlin. She is an expert in economics, politics, business and technology. She previously worked for Reuters as a correspondent and bureau chief in Germany, Switzerland, the Netherlands, South Africa and the UK.
