Q&A: ING’s head of APAC sustainable finance

CorporateTreasurer recently caught up with Martijn Hoogerwerf, head of Sustainable Finance, ING in Asia Pacific, on the trends shaping sustainable finance for corporates in Asia. 

Given current sustainable finance issuance trends, which products—green bonds, green loans, or sustainability-linked loans (SLLs)—are in highest demand among corporates, and why? 

In Q2 2024, global sustainable finance issuance was led by green bonds, which accounted for a substantial $183 billion in supply. This aligns with previous Q2 trends and underscores the continued appeal of green bonds among corporates. Similarly, sustainable bond issuance reached $57 billion, consistent with the quarterly average, while green loans totalled $26 billion, reflecting stable demand. 

There is also sustained interest in social bonds and SLLs, with Q2 issuance at $35 billion and $64 billion, respectively. While these volumes were lower than in the same quarter last year, demand for both products remains strong. 

A significant highlight in H1 2024 was global corporate green bond issuance, which surged to $120 billion—doubling the half-year averages of previous periods. This increase was notable in both USD and EUR-denominated issuance. Conversely, sustainability-linked bonds (SLBs) saw limited uptake, with just $22 billion issued globally—a continuation of the subdued activity observed since H2 2023, particularly in EUR issuance. 

While Q1 2024 started strong, ESG issuance is typically more concentrated in the second half of the year. For 2024, we expect issuance to surpass 2023 levels and potentially approach record-breaking 2021 figures, despite uncertainties surrounding the US elections, central bank decisions, and evolving economic conditions. 

Market participants have expressed concerns over increased regulatory scrutiny and the complexities of sustainability-linked loans. Companies are finding it challenging to manage the intricacies of sustainability data and the annual targets tied to these loans, leading some to question whether the benefits outweigh the costs and resource commitments. 

How do sustainable finance preferences across APAC compare to other regions? 

APAC has emerged as a robust sustainable finance market, driven by improving ESG disclosures and growing net-zero commitments across the private sector, corporates, and financial institutions. This progress is supported by the region’s efforts to align with global sustainable finance policies. Countries such as China, Japan, South Korea, the Philippines, Singapore, Malaysia, Bangladesh, and Australia are incorporating the International Sustainability Standards Board’s (ISSB) sustainability reporting standards, with initial implementation slated for 2025 or 2026. 

However, sustainable finance preferences vary significantly across APAC. For instance, sustainability-linked loans are declining in Australia and China but are experiencing rapid growth in Taiwan. Social bonds are prevalent in South Korea, while sustainability bonds are the primary choice in the Philippines. 

A key challenge for APAC is applying sustainable finance principles in high-emission sectors without compromising standards. For example, China updated its Green Bond Principles (GBP) in 2022, mandating that 100% of proceeds be allocated to green projects, aligning with the International Capital Market Association (ICMA). 

Increasing alignment in taxonomy frameworks is fostering a more consistent approach to sustainable finance across the region. Taxonomies such as the Common Ground Taxonomy (CGT), Singapore’s ASEAN Taxonomy, and the Hong Kong Taxonomy are being developed to ensure global interoperability with similar frameworks in China and the European Union (EU).

With increased scrutiny on sustainability metrics, how can companies best align reporting frameworks to reduce compliance costs and maximise access to green financing? 

Accessing green financing, such as green loans or bonds, requires companies to have green assets or projects that meet specific classification criteria. 

Increasingly, however, the focus extends beyond the assets themselves to include the company’s overall transition strategy and commitments. Aligning sustainability reporting with established market practices is critical. 

Starting in 2025, regulators will require companies to disclose more detailed information about their ESG impact, including: 

• Activities within their operations and throughout their value chain 

• Key metrics related to climate change, biodiversity, pollution, human rights, and governance structures 

• Forward-looking transition plans and insights into the ESG risks they face 

These evolving requirements place significant pressure on companies to adopt comprehensive and transparent reporting frameworks. By aligning their disclosures with global standards such as the EU’s Sustainable Finance Taxonomy, companies can reduce compliance costs and position themselves for better access to green financing. 

The ING report noted strong demand for green bonds—what specific sectors or projects are driving this demand? 

In APAC, the largest green bonds are typically issued by national or regional governments and financial institutions. Notable examples this year include the Australian government’s $4.65 billion green bond and the Singapore government’s $1.86 billion green bond. Governments and financial institutions often lead in green bond issuance because they manage large-scale green assets or projects and have established green finance frameworks. 

Asian countries are making significant strides in adopting renewable energy and securing sustainable financing for these initiatives. For instance, green hydrogen is projected to grow from $150 billion today to $600 billion by 2050. 

It’s equally important for companies in hard-to-abate sectors, such as steel and cement production, to gain access to sustainable finance markets. The sustainable finance industry must develop a common understanding of what constitutes a credible transition pathway for these sectors, considering factors such as the location of production plants and the dependence on technological advancements and phased implementations. 

A cornerstone of ING’s commitment to sustainable finance is the Terra Approach, which helps guide high-emission sectors towards net zero by 2050. The Terra Approach now includes the aluminium and dairy sectors, both of which are emissions-intensive yet essential for global decarbonisation and the food value chain. 

Despite the momentum in sustainable finance, significant gaps remain, particularly in Southeast Asia. Bridging the financing gap will require a combination of market-based solutions and supportive policies. Key priorities include infrastructure development, scaling renewable energy production, and addressing regulatory barriers that could hinder progress. 

How are CFOs navigating sustainable finance amid economic headwinds and central bank policy changes? 

By adopting sustainable finance products, companies invite greater scrutiny from external stakeholders, which CFOs see as an opportunity to strengthen governance and transparency around ESG metrics. 

Despite global economic uncertainty and central bank policy changes, sustainability and climate change are rapidly rising as strategic priorities. As major economies such as the US and China decouple, we’ve observed intensified trade relationships among other nations, particularly smaller economies. These dynamics create new opportunities for regional agreements and partnerships, underscoring their growing importance in global trade. 

For financial hubs like Hong Kong and Singapore, the introduction of green taxonomies is critical in their aspirations to become global centres for green and sustainable finance. These taxonomies provide foundational guidelines for transition finance, promote interoperability across global sustainable finance standards, and reduce greenwashing risks for investors. 

Taxonomies are valuable tools that provide clear metrics and thresholds for classifying activities as green or transitional, based on their alignment with environmental objectives. 

What innovations in sustainable finance do you see shaping the market over the next five years, particularly regarding newer ESG-focused metrics? 

Banks will increasingly assess their clients’ transition strategies, regardless of whether they are engaged in sustainable finance transactions. This highlights the importance of clients disclosing ESG metrics—both backward-looking and forward-looking. Companies that do not take net-zero commitments seriously will likely face increasingly constrained access to funding. 

The rise of digital trade solutions, such as electronic invoicing, digital signatures, and blockchain technology, is transforming global trade by reducing reliance on paper-based processes, lowering costs, and minimising fraud risks. 

In ASEAN, the upcoming Digital Economy Framework Agreement (DEFA), expected to launch next year, is poised to significantly enhance the region’s digital trade landscape. Supportive legislation is providing businesses with the confidence to adopt digital tools, which are gaining increasing recognition across borders. This facilitates smoother international trade and opens new opportunities for companies to engage more actively in global markets. 

The shift towards digitisation is driving innovation in supply chain management, with real-time tracking and automation becoming standard practices. 

The potential for further innovation in the digital trade sector is immense. We anticipate the development of advanced AI-driven analytics tools that will provide deeper insights into trade data, enabling businesses to make more informed decisions. 

Originally published in CorporateTreasurer: Opens in a new tabhttps://www.thecorporatetreasurer.com/article/qa-ings-head-of-apac-sustainable-finance/499815