Building Momentum For Transition Finance In Southeast Asia

VERSION 222OCTOBER 2024 A copy of this publication is available from:www.theacmf.org FOREWORD ByChair of the ASEAN Capital Markets Forum Since the publication of the ASEAN Transition Finance Guidance Version 1, theconversation surrounding therole of transition has gainedfurthertraction.The Association of Southeast Asian Nations (ASEAN) has beenat the forefront of discussionson transition financeas the need for transition isreal,significant and urgentfortheregion.It would not be an exaggeration to say that transitionfinance is key to achieving ASEAN’sdecarbonisation goals.ASEANis ina unique position andwith wideperspectives,giventhe varying contextand needs ofthetenASEAN Member States (AMS).Geographicalcontextualisation iscrucial,andthis iswhere a credible framework for assessing and demonstrating a credible transitioninASEAN, which isgrounded in existing global and regional transition finance guidelines, to facilitate access to financing, isimperative. The ASEAN Capital Markets Forum (ACMF)’sRoadmap for ASEAN Sustainable Capital Marketsand the ASEANWorking Committee on Capital Market Development (WC-CMD)’sReport on Promoting Sustainable Financein ASEAN, both published in 2020,identifiedkeyelementsthat are needed to advance ASEAN’s sustainabilityagendaand ensure that capital is directed towards credible sustainability efforts.Theseelementsare: (i)anASEANtaxonomy, (ii)transitionfinanceframeworks, (iii)disclosures, and (iv)creating a virtuous cycle fordemandandsupplyofsustainablefinance.The first three elementsform the three pillarsof the region’ssustainable finance ecosystemand thefourth, theleverto drive sustainable finance. The ASEAN Transition Finance Guidance(ATFG)serves as a framework for transition finance for ASEAN. It wasdeveloped with regional contextualisation in mind, including relevance to the70 million of micro, small andmedium-sized enterprises in Southeast Asia1and the need for real economy transitions.TheATFGVersion 1,releasedin October 2023,provided a realistic and practical approach to transition finance for emergingmarketsand developing countries and received positive response from stakeholders.One majorcontextualisation was the recognition that not everyone in the region can currently commit to a1.5°Ctargetand as a result, a tiered approach, similar to that of the ASEAN Taxonomy for Sustainable Finance, wasintroduced, allowing for companies to be categorised asAligned and Aligning 1.5°C, Aligned and AligningWell Below 2°C,orProgressing.The other issue addressed was the lack of geographicallycontextualisedtransition pathways. As such, the ATFG Version 1 proposed the use of a wider variety of transition pathways,both sciencebased,and industry published. Since its publication, theACMFhas engaged stakeholders on itsapproach, design and content and the conclusion of those engagements have been incorporated inthisdocument, the ATFG Version 2.The ACMF remains committed to proactively supporting the capital marketsto finance transition and has designed the ATFG to be a living document that is responsive to progress inevolving global transition approaches and the changing needs of theASEAN region and the AMS. The momentum for transition finance continues to growand ASEANiscognizantof the significant rolethecapital marketsplayindriving the sustainability agenda.TheACMFcontinues to striveto ensurethat no oneis leftbehind in ASEAN’s transition journeyandhopesthat ASEAN’s unique perspectivescan be addressedusing the ATFG Version 2 approach, andcapital is directed towards credible transition effortsin the region.The ACMF willalso promote moreinternationaldialogue on transition finance using the ATFG Version 2 todeploy the‘common but differentiated responsibilities’approach through geographicalcontextualisation. Mrs. Phengsy PhengmuongSecretary-General of the Lao Securities Commission OfficeACMF Chair2024 FOREWORD by Asian Development Bank Asia’s companies require substantial financing to implement their climate transition plans,demandinginnovative solutions to bridge thiswide fundinggapand to createsustainable and resilient economies.Assuch, the release of the ASEAN Transition Finance Guidance (ATFG) in 2023 was a major achievement for theASEAN Capital Markets Forum (ACMF) and marked an importantmilestonein the regional dialogueandcollaborationon the challenges of transitioning to low-carbon economies. This update of theguidance, its second version,was createdto help drive urgent action to develop newinnovativefinancingsolutionsforasustainable future for all, recognizingthe region's vulnerability to climatechange and its dependence on carbon-intensiveindustries. To this end, capital markets can play a catalytic roleinmobilizing climate finance from the private sector andinsupporting a green transition.Building on the ASEAN Taxonomy for Sustainable Finance, the ATFGisprovidingmuch-needed guidancetocompaniesin the Association of Southeast Asian Nations (ASEAN)onassessing and demonstrating a c