On 21 October 2024, the ASEAN Capital Markets Forum (“ACMF“) held its 41st Chairs’ Meeting in Vientiane, Lao PDR, hosted by the Lao Securities Commission Office (“Meeting“). At the Meeting, the ACMF endorsed the ASEAN Transition Finance Guidance Version 2 (“ATFG Version 2“).
The first version of the ATFG released on 17 October 2023 sought to guide entities in assessing or demonstrating a credible transition in the ASEAN context, so as to obtain financing from capital markets. The first version of the ATFG aims to:
- Facilitate financial institutions in channelling finance to transitioning companies, by standardising which companies should be the focus of such efforts.
- Incentivise real economy companies to develop more ambitious and credible transition plans, by differentiating what commands a greater demand premium from investors.
The ATFG Version 2 replaces the first version of the ATFG and offers further guidance in two key areas:
- Clarity on the various types and applications of transition finance to help unify terminology; and
- Reference transition pathways to help ASEAN companies set up their individual transition plans and how to assess them.
The enhancements aim to enable a better understanding among market participants regarding a just, affordable, credible and orderly transition to a low-carbon economy.
The main focus of ATFG Version 2 is on climate change mitigation; however, moving forward, ACMF will also be exploring ways as to how the capital markets can support the building of climate adaptation pathways.
Apart from the ATFG, the Meeting also made note of other key developments such as the launch of the Asia Green Transformation Consortium (Asia GX Consortium) to encourage finance towards an orderly and just transition by developing common approaches to transition finance, including through the ASEAN Taxonomy for Sustainable Finance and the ATFG amongst others. The Meeting also noted progress regarding the ASEAN Voluntary Carbon Markets Study. The plan for 2025 will be to study the role of capital markets in the Voluntary Carbon Markets area, given the need for more oversight.
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