Transition finance or labelled bonds and loans are expected to gain traction in the coming years amid a growing number of companies pledging to reach sustainable goals, Maybank Investment Bank said.
Maybank Investment Bank chief executive officer Datuk Fad’l Mohamed said transition finance is a relatively new addition to the suite of sustainable finance instruments to help companies deliver long-term strategies to achieve their net-zero carbon commitments.
He said the potential investments that fell under transition bonds as opposed to green bonds are a lot larger as the former includes industries that are not readily green but are taking steps to decarbonise.
“So, in this instance, for example, ship company Seaspan Corporation has raised about US$750 million (US$1=RM4.39) in transition bond this year and the proceed were channelled towards exploring energy efficiency of its vessels with alternative fuels,” he said at the Sustainable and Responsible Investment (SRI) Virtual Conference 2022 titled “Preserving the Climate through Sustainable Business and Living” today.
However, he said the country still needs to have clear standards and principles to encourage greater product innovation in Malaysia.
“Our issuers will need to gain more confidence to go to market, especially for product such as sustainability-linked bond,” he said.
He said standards that take into account the local context would be critical in helping sustainable finance be more inclusive and innovative.
Fad’l said relevant guidelines are still being developed on the domestic front.
“Currently, many jurisdictions are actively seeking to develop countries’ specific taxonomies on sustainable finance, which in turn has created a plethora of taxonomies,” he said.
Therefore, he said taxonomy harmonisation is highly imperative to encourage further market penetration.
He said the world also starting to see efforts to map guides and screening criteria across regions such as in China and the European Union.
“We applaud the efforts of regulators and parties involved in the development of the ASEAN Taxonomy launched last November and we look forward to contributing further towards this development,” he said.
The World Bank (Malaysia) senior financial sector specialist Rozani Osman said a possible shortage of skilled workers also needs to be addressed to support the development of the sustainable agenda.
Citing a study by the world’s largest professional networking website Linkedln, he said demand for green jobs currently matches the supply of the people with related skills but projection indicated that demand would outstrip supply within the next five years.
“Most jobs that require this kind of skills are not the traditional green jibs but other regular jobs that needed knowledge or ability to incorporate green or SRI elements into the job,” he said.
Therefore, he said understanding sustainable elements, regardless of the job scope, is crucial to achieve companies’ net zero goals.