Reducing the Cost of Funding for Banks’ Green Assets

This document is a technical report that discusses the challenges and potential solutions for reducing the cost of funding for banks' green assets, particularly in the ASEAN region. It outlines the significant underdevelopment of sustainable finance in ASEAN, where an estimated US$1 trillion is needed for sustainable investment by 2030, yet the current market stands at only $36 billion. The report identifies that green finance is not cheaper for banks compared to general-purpose finance, limiting their ability to incentivize companies to pursue green projects. It presents five strategies to lower the cost of funding for green assets, including green guarantee schemes, green covered bonds, and green deposits. The report emphasizes the need for collaboration between banks, regulators, and governments to effectively implement these strategies and make green finance more accessible and affordable. The document aims to provide a framework for addressing the financial barriers to sustainable investment in the region.