KUALA LUMPUR: The Association of Southeast Asian Nations (ASEAN) banks have to navigate a challenging path amid pressure from investors, regulators and social forces to decarbonise their loan books and meet country-level net-zero emission targets that go beyond 2050, Moody's Investors Service said.

       Senior vice-president Alka Anbarasu said disclosures related to climate risks by companies differ, making it difficult for banks to assess climate risks for their corporate clients.

       Across ASEAN, between 15 per cent and 30 per cent of banking system loans are catered to carbon-intensive industries that have high carbon-transition risks such as coal-fired power generation, coal mining, and oil and gas, Moody’s said in a statement.

       So far, only a few large banks in Singapore, Malaysia and the Philippines have explicit policies to refrain from financing new coal-fired power plants, the statement said, based on findings in a round table discussion Moody's co-hosted with the Institute of International Finance themed "Advancing net zero goals: ASEAN views."

       Moody's noted that the countries and corporates within ASEAN itself are at varying levels of readiness to meet their carbon neutrality targets and although they are making progress, insufficient data and disclosure pose challenges for banks to incorporate climate risks in loan underwriting.

       The study also noted that banks themselves are making slow progress in disclosing climate risks.

       Moody's review of 28 large banks in the US, Europe and Asia in 2021 found that just 21 per cent reported carbon emissions funded through their lending and investments, with very few disclosing how climate change may affect their profit, apart from revenue they expect to generate from developing green products.

       The transition to a low-carbon economy will create vast financing opportunities for banks as it will require material investment in infrastructure and technology.

       In ASEAN in particular, sustainable economic development that requires the protection of biodiversity will entail significant investment from the public and private sectors.

       However, a limited supply of green and sustainability-linked bonds due to the lack of standardised taxonomies is a challenge for institutional investors.

       "Green and sustainability-linked bonds issued by ASEAN countries and companies amounted to just more than US$30 billion in the first half of 2021, while more than US$190 billion were issued by Chinese firms, and more than US$490 billion globally in the first half of 2021,” said Moody's, quoting data from the Climate Bond Initiative. - Bernama