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

Resendiz, Jose L., Ranger, Nicola, Sulaeman, Johan and Broadstock, David C. (2025) Sustainability-linked finance: bridging nature disclosure gaps in Southeast Asia. Grantham Research Institute on Climate Change and the Environment Working Papers (427). Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science, London, UK.

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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.

Item Type: Monograph (Working Paper)
Official URL: https://www.lse.ac.uk/granthaminstitute/publicatio...
Additional Information: © 2025 The Author(s)
Divisions: LSE
Subjects: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
JEL classification: G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development; Environment and Trade; Sustainability; Environmental Accounting; Environmental Equity
G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
K - Law and Economics > K3 - Other Substantive Areas of Law > K32 - Environmental, Health, and Safety Law
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q51 - Valuation of Environmental Effects
Date Deposited: 05 Aug 2025 11:03
Last Modified: 06 Aug 2025 09:27
URI: http://eprints.lse.ac.uk/id/eprint/129042

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