Nature-linked finance in Southeast Asia: implications and policy options for regulators, lenders and borrowers

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 study examines sustainability-linked finance (SLF) as a tool for mobilising corporate finance for nature in Southeast Asia, addressing gaps in how nature-related risks and opportunities are incorporated into financial instruments. As businesses and their supply chains depend heavily on ecosystem services, they are increasingly exposed to the risks of nature degradation. Embedding SLF within a coherent transition finance framework would help businesses to transition, reducing impacts and dependencies on nature while managing emerging nature-related risks. In Southeast Asia, the SLF market has grown rapidly to nearly US$20 billion, driven mainly by sustainability-linked loans. Using data from SLF deals and nature-related key performance indicators (KPIs), we combine market statistics, network analysis and an AI-assisted review of corporate reports to examine how nature-aligned finance is being mobilised. The findings highlight significant potential to scale such products, but also reveal a persistent gap between corporate disclosures, loan covenants and global standards, which may increase greenwashing and pricing inaccuracy risks, potentially undermining investor confidence and limiting capital flows to nature-positive projects. To address these challenges, we recommend: a shared taxonomy of nature-related KPIs; modest fines or accelerated re-verification to align disclosures with performance targets; integrating nature within emerging transition finance frameworks; licensing sustainability coordinators; targeted fiscal and prudential incentives; and partial credit guarantees or concessional refinancing for taxonomy-aligned transactions.

JEL-codes: F3 G3 N0 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2025-09-04
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:130730

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