A review of innovative bond instruments for sustainable development in Asia

Abstract

Purpose Advancing the economies in Asia toward meeting sustainable development goals (SDGs) needs an unprecedented investment in people, processes and the planet. The participation of the private sector is necessary to bridge the financing gap to attain this objective. Engaging the private sector can contribute significantly to attaining the 2030 agenda for SD. However, the financial markets in Asian economies are yet to realize this potential. In this context, this paper aims to discuss the state of finance for SD in Asia and identifies innovative financial instruments for attracting private investments for SDs in these economies. Design/methodology/approach This study relies on published articles, reports and policy documents on financing mechanisms for SD. The literature review covered journal data sources, reports from global institutions such as the UN, World Bank, International Monetary Fund and think-tanks operating in the field of climate change policies. Though the topic was specific to financial market instruments, a broader search was conducted to understand the different sources of sustainable finance available, particularly in Asia. Findings The investments that are required for meeting the SDGs remain underfunded. Though interest in sustainability is growing in the Asian economies, the financial markets are yet to transition to tap the growing interest in sustainable investing among global investors. This paper concludes that to raise capital from private investors the Asian economies should ensure information availability, reduce distortions and unblock regulatory obstacles. It would also need designing policies and introducing blended financing instruments combining private and public funds. Research limitations/implications Though the study has grouped Asian economies, the financing strategy for SDGs should be developed at the country-level considering the domestic financial markets, local developmental stage, fiscal capacity and nationally determined contributions. Further research can focus on developing country-specific strategies for using innovative financial instruments. Originality/value Mobilizing funds for implementing the 2030 Agenda for SD is a major challenge for Asian economies. The paper is addressed to national policymakers in Asian economies for developing strategies to raise capital for SD through private participation. It provides opportunities for revisiting national approaches to sustainable finance in these economies.

Analyzing Trends in Green Financial Instrument Issuance for Climate Finance in Capital Markets

“…Further evaluation of the effect of the green issuances on 'corporate performance' is still minimal. Other articles under the green cluster included (Prakash and Sethi 2022;Rao et al 2022a;Elsayed et al 2022).…”

Exploring constraining factors for use of private sector finance in delivery of public sector infrastructure in Tanzania: A qualitative study

“…Irrespective of the different funding mechanisms by the private sector for infrastructure projects, such as the build-operate-transfer (BOT) model (Cheung and Chan, 2009); taxpayer approach (de Vries, 2007); project bonds (Hutchison et al, 2016); project financing structures (Annamalai and Jain, 2013); PSF Initiative (PFI) (Wang, 2014); PPP mode (Chotia and Rao, 2018); innovative bond instruments (Prakash and Sethi, 2021); municipal banks and bond banks (Dollery et al, 2021); they are all facing implementation challenges. For instance, the dependence on uninnovetive (public) financing has led to low-income urban housing in Kenya being underdeveloped due to inadequate financing from the public sector, hence high housing supply backlogs, leading to the growth of slums and informal settlements (Giti et al, 2020).…”

“…Such limited participation continues to affect the economic growth of developing countries like Tanzania. Moreover, Prakash and Sethi (2021) emphasized that the participation of the private sector is indispensable to bridging the financing gap. Engaging the private sector can contribute significantly to attaining the 2030 agenda.…”

Guest editorial: Advancing theory on innovating in Asia from multiple perspectives

“…The 13th paper authored by Prakash and Sethi (2021) is "A review of innovative bond instruments for sustainable development in Asia", which indicates that the transition in financial markets has to take place to attract global investors for sustainable investing. Asian economies should centre on ordering the playing field, lessen difficulties in uses and ease the regulatory measures to increase capital.…”