Executives in the Asia-Pacific region have proposed that emerging economies must issue climate bonds that are indexed to a basket of currencies.
The initiative will mitigate the risks aligned with foreign exchange fluctuations when raising capital for clean energy transitions.
Members of ABAC, or the Business Advisory Council of Asia-Pacific Economic Cooperation (APEC), are among the group. It must be noted that the advisory council and the ABAC will submit its recommendations at the APEC leaders’ meeting in Lima in November.
One of the recommendations includes urging regional governments to issue 10-year climate bonds with principal and interest payments indexed to a basket of currencies.
The leaders said that the climate bonds will mitigate the risk, and give developing countries hard currency to invest in solar farms and storage facilities.
Asia has many economies that rely on non-renewable fuels or are subject to fluctuations in the currency market, making it one of the most vulnerable regions in the world to climate-related natural disasters. These factors make the region more difficult for the energy shift to occur.
Additionally, the group recommended starting a pilot project to create a regional voluntary carbon market (VCM).
The goal is to create an Asia-Pacific voluntary carbon credit network that is mutually tradeable and interoperable to hasten the region’s shift to a low-carbon society.
The absence of regulatory frameworks and cross-border standards in the Asia-Pacific area hinders the development of a voluntary carbon market, which directs private funding towards climate initiatives.
The proposals highlight Asia’s growing realization that private and public sectors must work together to share the enormous financial burden of the energy transition.
