Sustainable finance is transitioning from high-level ESG rhetoric to pragmatic business applications focused on capital expenditure. Melissa Moi, head of sustainable business at UOB, states that the sector is moving away from chasing lofty targets toward supporting immediate energy efficiency, resource security, and industry-specific transitions like electric vehicle adoption.
How is the approach to sustainable finance changing in Asia?
The era of setting massive, symbolic sustainable finance goals is ending. Instead, financial institutions are focusing on where large-scale capital expenditure is actually required to facilitate a green transition.
According to Melissa Moi, head of sustainable business at UOB, the period between 2021 and 2022 was characterized by a push for “lofty” numbers. Today, the focus has shifted toward practical mitigation and adaptation. This means integrating sustainability into core business functions, such as managing rising electricity costs, addressing water scarcity for data centers, and ensuring energy security.
While some Western financial institutions have faced public backlash regarding ESG, many Asian banks are maintaining their decarbonization commitments. UOB, for instance, pledged to reach net zero emissions by 2050 and became the first major Asian bank to exit oil and gas financing in 2022.
“It’s less about hitting targets and more about which industries and sectors we can have the most impact in.” — Melissa Moi, UOB
What industries will drive the next wave of green investment?
Investment is moving toward sectors where economic shifts align with environmental needs. Rather than treating “green” as a separate category, banks are increasingly treating it as a fundamental part of conventional finance.
Moi identified the power and automotive sectors as primary areas for impact. The transition requires significant investment in the energy grid. There is renewed momentum regarding the ASEAN power grid, a concept discussed for decades that has recently seen increased interest as a way to decouple economic growth from emissions.
The rise of green supply chain financing
A significant growth area is the financing of supply chains, specifically through “queen bee” clients. These are large, anchor companies that influence their entire network of suppliers.
As large corporations face increasing requirements to report Scope 3 emissions—those produced indirectly in a company’s value chain—they must find ways to help their suppliers decarbonize. Banks are stepping in to provide the knowledge, capability, and financing necessary for these smaller players to meet new standards.
How do reporting requirements influence climate action?
Sustainability reporting is becoming standard across Asia, though timelines vary by country. While Singapore has seen delays in mandatory disclosure timelines, Malaysia has maintained its schedule, and China has introduced its own specific climate disclosure standards.
Moi notes that reporting should not be viewed as a “box-ticking exercise.” Instead, it serves as a tool for companies to benchmark themselves against industry peers and align their business strategies with long-term climate outcomes.
However, meeting a reporting requirement does not automatically grant access to sustainability-linked financing. To access these specialized financial products, companies must demonstrate ambition through science-based targets and prove they are making measurable progress compared to their competitors.
What challenges hinder the scaling of sustainable finance?
Despite the momentum, several structural hurdles remain. One of the primary challenges is the need for government-to-government coordination, particularly regarding the upgrading of electricity grids across borders.
There is also the issue of “bankability.” Many technologies required to decarbonize “hard-to-abate” sectors are still scaling. Financial institutions must determine how to partner with the private sector to test these technologies and move them toward commercial viability.
While structures like blended finance exist to support these emerging technologies, deployment remains a challenge. The industry continues to search for the right combination of partners and investment models to provide these solutions with the time and space needed to scale.
Frequently Asked Questions
What is the difference between mitigation and adaptation in finance?
Mitigation focuses on reducing or preventing the emission of greenhouse gases (e.g., investing in renewables). Adaptation focuses on adjusting to the current and future effects of climate change to build resilience (e.g., managing water scarcity or rising sea levels).
What are Scope 3 emissions?
Scope 3 emissions are indirect emissions that occur in a company’s value chain, including both upstream activities (like supplier production) and downstream activities (like product use and disposal).
Why is the ASEAN power grid important?
The ASEAN power grid is essential for regional energy security. It allows for the sharing of renewable energy resources across Southeast Asian borders, helping the region decouple economic growth from carbon emissions.
What do you think is the biggest hurdle to a green transition in your industry? Let us know in the comments below, or subscribe to our newsletter for more deep dives into sustainable finance.
