About this project

The report, based on two executive surveys of 150 investors and 150 issuers, examines the sustainable finance market in the Asia-Pacific region. It explores key trends, challenges, and opportunities for financial professionals while building on previous research.

Executive summary

Investors and issuers in the Asia-Pacific region are increasingly integrating ESG factors into mainstream financial decisions. This is driven by frameworks like taxonomies and reporting standards, alongside improved data integrity. Forty percent of investors and 36% of issuers are targeting net-zero emissions for Scope 1 and 2 by 2031-2040. Barriers such as greenwashing concerns, inflation, and limited eligible assets continue to challenge market growth. Governments, including Australia and Singapore, are taking proactive steps with sovereign green bonds to meet global targets.

ESG market progression

The Asia-Pacific sustainable finance market has consolidated in line with global trends. Issuances of sustainable bonds declined across South-East Asia in 2022 and 2023, while Australia showed minor growth. Higher interest rates are dampening sustainable debt sales globally. However, 33% of surveyed companies plan to utilise sustainable finance in the next year. The proportion of investors relying on positive screening has grown to 63%, reflecting the sector’s growing maturity.

Shifting sustainability drivers

The focus in sustainable finance has shifted from risk mitigation to impact outcomes. In 2024, investors are primarily motivated by sustainability strategies rather than ESG risk management. Investments in renewable energy, the circular economy, and sustainable water management are the top themes. Responsible investment strategies are used by 93% of professionally managed funds in Australia. This reflects a broader shift towards prioritising impact rather than short-term financial gains.

Greenhushing and barriers to growth

One of the emerging concerns in the market is “greenhushing,” where companies avoid promoting their sustainability initiatives due to fear of greenwashing accusations. Sixty-three percent of issuers and 64% of investors acknowledge this issue. Additionally, the limited availability of eligible sustainable assets is hampering growth. The lack of sufficient asset pipelines has been identified as a significant challenge for many issuers. Regulatory scrutiny is also tightening, as demonstrated by Australia’s ASIC fining a superannuation fund for greenwashing.

Collaboration: The key to evolution

Collaboration among regulators, businesses, and investors is essential for overcoming obstacles in sustainable finance. Regulatory frameworks, such as the Taskforce on Nature-related Financial Disclosures (TNFD), are expected to improve transparency and drive market growth. Seventy-three percent of investors believe that the development of sustainable finance taxonomies will enhance confidence in the market. Regional harmonisation is also crucial, with 70% of investors agreeing that standardised reporting improves confidence in sustainable investments.

Key recommendations

• Governments should accelerate the development of clear taxonomies and reporting frameworks to avoid greenwashing and foster transparency.
• Investors and issuers should adopt rigorous reporting and verification mechanisms to mitigate reputational risks and regulatory challenges.
• Financial professionals should align portfolios with sustainability goals, considering market opportunities like sovereign green bonds and evolving ESG frameworks.