The report “ASEAN economies exposure to climate transition risks: Applying taxonomy to enhance climate disclosures” examines ASEAN exposure to transition risks. The report describes the major channels by which these risks will be transmitted through to the financial economy and examines possible local and global sources of transition risk. 

Sources of transition risk vulnerability are revealed through analysis of ASEAN bond and loan data, with a particular focus on Indonesia, the Philippines and Viet Nam. The report provides recommendations on how taxonomies can be used to address these risks and follows the 2021 report Embedding Sustainability into the COVID recovery: A Primer for ASEAN Central Banks.


This report aims to increase the awareness of ASEAN financial policy decision makers and market participants about the threat posed by climate transition to commercial and public finances. We assess the financial risks stemming from a high dependence on fossil fuels by looking borrowing by carbon intense activities within the ASEAN region and how high carbon investment is financed. We have extracted data on large, syndicated loans by AMS entities.

The ASEAN member states (AMS) continue to demonstrate commitment to addressing climate change. The ASEAN State of Climate Change Report states that the region must enhance mitigation actions to aim for net-zero emissions as soon as possible in the latter half of the 21st century and to meet the global Paris Agreement goal of 1.5–2°C.2 To accomplish this, ASEAN will need to develop a transition management vision for how fossil fuel related industries involved in mining, processing, power generation and material use can smoothly and inclusively transition to a new mode powered by low-carbon technologies, this is particularly the case regarding energy generation, which is a primary driver of the ASEAN’s climate footprint and a sector that is rife with climate transition risk.

Figure 1 below illustrates the composition of each ASEAN country’s electricity generation mix and the total production of electricity, showing that fossil fuels in particular coal and natural gas, are the primary sources of fuel for electricity generation for all countries except Cambodia and Lao PDR.

Not only does this configuration contribute substantially towards the ASEAN region’s overall carbon footprint, but, as this paper will show, it implies that many of the region’s energy utilities may face increasing financial pressures due to climate-transition risks. This report seeks to increase awareness among ASEAN financial regulators and decision makers about the potential threats to financial stability and economic growth posed by climate change and the global transition towards a low-carbon world.

Borrowers and local financial institutions should be encouraged to begin developing ambitious and credible climate transition strategies so they can maintain their creditworthiness in a climate changing world. Motivating the relevant stakeholders to participate in this transition will require building more awareness about the risks and challenges the climate transition presents.

Governments and the private sector are making efforts to end coal financing. Indonesia, Philippines, and Viet Nam have signed the COP26 Global Coal to Clean Power Transition Statement. Indonesia has suggested that it could bring forward its phase out of coal-fired power plants to 2040 (from 2056) if it gets sufficient financial help from the international community to wind down and retire existing plants. With the support of the initiatives such as the Asian Development Bank’s Energy Transition Mechanism to help Asia transition away from coal, we have a chance to meet the Paris Agreement targets. Understanding the risks of not doing so, but also the challenges that will occur as this transition happen will be critical pieces of information for policymakers.

Quantitative analysis of loan and bonds data

As ASEAN countries and the world transition to a low carbon energy system, fossil-fuel companies will become vulnerable to climate transition risks and have negative consequences on their creditors. Energy is a strategically important sector; in some countries, notably Indonesia, governments have taken a large direct stake in the sector. Hence any climate transition risks might sit on the government’s balance sheet through implicit or actual guarantees. Transition risks will often crystallise when the loans or bonds mature and the company seeks refinancing. This is when investors re-evaluate whether and at what price it offers finance.

A more detailed analysis of three countries, Indonesia, Philippines, and Viet Nam, provides a flavour of how climate transitions risks manifest in countries with markedly different sizes, patterns of government ownership and share of energy in their exports. The table above summarises these differences. 

Aggregate lending to, and bond issuance by the ASEAN corporate sectors


Figure 3 shows the distribution of USD783bn non-government outstanding bond issuance across the major ASEAN economies.39 This comprises USD524bn local currency and USD258bn foreign currency bonds (there were incidentally USD1,288bn of government bonds outstanding at the end of 2021). Malaysia and Singapore are the largest regional issuers of bonds. Local currency bonds predominate, except in Indonesia where the local currency bond market is underdeveloped.

Figure 4 shows the same economies’ banks provided USD1,745 billion of credit, over twice the amount of corporate bond issuance. All the countries, except Malaysia, rely much more on bank credit than bond issuance to provide corporate credit. We excluded lending to financial corporations from the lending data, but it is included in the bond data.

We made a top-down assessment of the outstanding bank lending as reported to the national central banks to obtain a more detailed industrial breakdown than could be gleaned from the BIS data. Data had a good level of industrial disaggregation in Indonesia and Philippines, but little disaggregation in Viet Nam.

Table 1 summarises the findings for the three countries of focus. Indonesian data reported loans in Indonesian Rupiah and FCX. This showed a radically different pattern across sectors with 76% of outstanding debt to mining, 57% to electricity and gas supply being in foreign currency. For the other sectors only around 10% of lending was in foreign currency. The total lending to Indonesian broad-brush carbon intensive sectors was around USD124 billion at the end of 2021, USD57 billion for Philippines and USD132 billion in Viet Nam.

The entire report can be accessed here.