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

Author

Listed:
  • Resendiz, Jose L.
  • Ranger, Nicola
  • Sulaeman, Johan
  • Broadstock, David C.

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.

Suggested Citation

  • Resendiz, Jose L. & Ranger, Nicola & Sulaeman, Johan & Broadstock, David C., 2025. "Sustainability-linked finance: bridging nature disclosure gaps in Southeast Asia," LSE Research Online Documents on Economics 129042, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:129042
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    References listed on IDEAS

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    3. World Bank & Bank Negara Malaysia (BNM), 2022. "An Exploration of Nature-Related Financial Risks in Malaysia," World Bank Publications - Reports 37314, The World Bank Group.
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    Keywords

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    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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