The unregulated product is increasingly offered by ESG raters to gauge how “green” a bond or loan is. But “overly positive” reviews challenge their ability to bring credibility to the trillion-dollar sustainable debt market, experts say.
Parametric insurance helps minimise losses from climate-related disasters, to which Asia is particularly vulnerable. In Southeast Asia, this has been used to insure against typhoons, earthquakes, and crop losses.
The novel mechanisms promise to mobilise more private financing for conservation, but risk distracting developing countries from addressing underlying debt issues and could ultimately be exploitative, say experts.
While the EU Taxonomy is the "gold standard" for green finance, an equivalent for transition finance is notably absent. Market participants have welcomed the new guide from Singapore's central bank, but whether it emerges as a widely used standard remains to be seen.