The development of climate finance in Asia : drivers, processes, outcomes

Between 2017-2018, three Asian financial centres, namely Hong Kong, Kuala Lumpur and Singapore, debuted their first green debt instruments. On the outset, these developments signified that Asian markets had begun to respond to a global trend to mainstream low-carbon and climate-resilient financing since the Paris Agreement. The decarbonisation and resilience-building of Asian economies hold the key to meeting global climate targets, given the high levels of - albeit uneven - carbon emissions and climate vulnerability in the region. At the same time, considering the unique practices and relations in Asian markets, and the weak track records in environmental finance or corporate sustainability more broadly, these developments deserve greater investigation and scrutiny. In this thesis, I draw upon the analytical strengths of neo-Marxian thinking, as well as the literature of market-making and financial centres, to critically evaluate the processes and the actors that have shaped market development and early outcomes across the three financial centres. I integrate these three conceptual pillars using the 'financial ecologies' framework that conceptualises the financial system as 'ecologies' of actors, knowledge and objectives that give rise to variegated market practices, subsequently leading to different outcomes. I deployed a multi-site qualitative analytical methodology involving document analysis, conference observation and semi-structured elite interviews (n=61). This thesis found that in addition to adopting the internationally prominent green bonds, new variations of climate finance instruments, namely green loans, sustainability-linked loans and green sukuk (Islamic bond) were innovated in Hong Kong, Singapore and Malaysia respectively. These instruments better suit the financing preferences and practices of different markets, which in turn makes climate finance more accessible, such as small-to-medium enterprises and Islamic firms that make up a significant proportion of businesses in the region. While these instruments have been adopted by local actors, my findings suggest that the growing climate finance market has not consistently delivered on the promise of low-carbon and climate-resilient assets and corporate performance. The contradictory outcome between market growth and climate action is due to a combination of factors. First, notwithstanding the innovation of new instruments, the three markets adopted similar lenient disclosure-based calculative mechanisms to govern the 'greenness' of these instruments. The lack of investor interest and capacity in scrutinising the information being disclosed has thus led to assets with sub-par environmental credentials and poor disclosure quality being attributed a 'green' label, which in turn harms the transparency and environmental integrity of the markets. Second, investigating further as to why such lenient calculative mechanisms were adopted, I found that a coalition of transnational financial institutions, professional services providers and multilateral development agencies have played central roles in advising and designing climate finance market design in all three markets. While this finding attests to the importance of international knowledge exchange in developing market finance, it also unveils the structural inability of financial actors in adopting stringent standards in regulating their behaviour. Finally, this leads me to turn to the roles of the state, particularly of Asian developmental states, to intervene and regulate the environmental credentials of climate finance. I found that the governments in the three case studies have deployed traditional developmentalist tools to spur the growth of climate finance markets. However, in line with a developmentalist mindset, the governments were primarily driven by the opportunity to use climate finance as means to enhance the competitiveness of these financial centres. As a result, governments readily accepted the lenient but market-friendly calculative instruments and were reluctant to further regulate. This thesis contributes empirically to geographical critique of finance-based climate solutions by offering perspectives from emerging economies in Asia with their distinct priorities and financial practices. I also contribute to our understanding of the Asian developmental state by showcasing how these traditionally interventionist state handle both the opportunities and challenges that climate change pose upon their financial markets. Conceptually, I expanded the analytical scope of the 'financial ecologies' framework in two ways. First, by unearthing the varied processes of incorporating environmental, climate and sustainability values in financial instruments across the three markets, I shed light on the strength of the ecologies framework in analysing the multitude of factors that shape the topological variations in interpreting and expressing non-financial values. Second, by investigating how different markets interpret the risks and opportunities of climate change, I draw an explicit connection between the geographically variegated physical ecological sphere with the metaphorical 'financial ecologies'. I highlight the inter-dependency between the physical environment and financial markets, which is a dimension often overlooked in financial geographical literature. The findings of this thesis bear practical implications for future climate policy-making: by uncovering how the structural contradictions of finance-based climate solutions evolve in different market geographies, I call for more stringent, state-led regulation of the financial system and aggressive engagement to deliver the mindset and behavioural change that is necessary to align financial flows with global climate targets.