KUALA LUMPUR: Transition finance, which includes labelled bonds and loans, is expected to gain prominence as more businesses work to meet their sustainability goals in the years ahead.
Maybank Investment Bank Bhd CEO Fad’l Mohamed said that unlike green bonds, transition bonds capture a wider range of potential investments because they also include industries that have not readily agreed to decarbonise, yet are taking steps to do it.
Transition bonds and loans are relatively new additions to the suite of sustainable financial instruments to help companies deliver on their long-term strategies to achieve their net-zero carbon commitments.
To illustrate the rise in popularity of transition finance, Fad’l cited the example of shipping company Seaspan Corporation that had raised US$750 million (RM3.3 billion) this year to underwrite the cost of exploring the use of alternative fuels in its vessels to achieve energy efficiency.
“The development of relevant guidelines, taking into account the local context, will encourage the growth and inclusiveness of sustainable finance and spur product innovation,” he said at the Sustainable and Responsible Investment Virtual Conference 2022 today.
The theme of the conference is “Preserving the Climate through Sustainable Business and Living”.
Fad’l said issuers of products such as sustainability-linked bonds would need to gain more confidence before going to market.
“There is now a plethora of country-specific taxonomies on sustainable finance. Therefore, taxonomy harmonisation is highly imperative to encourage further market penetration,” he said.
He said efforts are already under way to map sustainability guides and screen criteria across China and the European Union.
“We applaud the efforts of regulators and other parties involved in the development of the Asean Taxonomy launched in November and we look forward to contributing further towards this,” he added.
World Bank (Malaysia) senior financial sector specialist Rozani Osman said a possible shortage of skilled labour must be addressed before any effort to support the development of a sustainability agenda is launched.
Citing a study by professional networking website LinkedIn, he said projections indicated that the demand for “green” jobs would outstrip supply within the next five years.
He said most jobs that require the specific skills needed to achieve sustainability goals will include knowledge or ability to incorporate green or sustainably responsible investment elements.
“Therefore, understanding sustainable elements, regardless of job scope, is crucial to achieving a company’s net zero goals,” he added.