Sustainability-linked finance: bridging nature disclosure gaps in Southeast Asia

Jose L. Resendiz, Nicola Ranger, Johan Sulaeman and David C. Broadstock

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper examines Southeast Asia’s sustainability-linked finance (SLF) market—an emerging class of instruments that tie borrowing costs to sustainability outcomes—and its treatment of risks such as deforestation and biodiversity loss. Using market analysis and a retrieval-augmented generation approach to extract corporate-report data, we assess the alignment between Sustainability Performance Targets (SPTs), firms’ disclosed KPIs and the TNFD’s global guidance across 2017-2024, covering over 200 deals worth nearly USD 20 billion. Companies frequently report performance that exceeds their SPTs; although this appears positive, the excess metrics are not subject to SPT-level verification, weakening accountability and increasing greenwashing risk. We find that over 60% of nature-related KPIs—especially water and waste—are omitted from SPTs, exposing inconsistencies between what firms monitor and what their financiers reward. Sustainability-linked loans dominate activity, led by Singapore, Thailand and Indonesia, while other SLF instruments lag behind. We recommend aligning disclosures with SLF SPTs using emerging standards, accrediting financial institutions that act as sustainability coordinators to vet SPTs in the SLF deals, and introducing fiscal incentives like tax exemptions and credit guarantees to mobilise investment and reduce greenwashing risks.

Keywords: nature-related risks; corporate reporting; sustainability-linked finance; key performance indicators (search for similar items in EconPapers)
JEL-codes: G18 G32 K32 Q51 Q56 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2025-06-26
New Economics Papers: this item is included in nep-cfn, nep-env and nep-sea
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