The second version of the ASEAN Taxonomy for Sustainable Finance has included a
framework for phasing out coal in the region.

A report by Sustainable Fitch says that the inclusion of a coal phase out should promote more regional ESG debt issuances and support the funding of energy transition. Coal currently accounts for about half of southeast Asia’s energy production.

The updated taxonomy allows coal phase-out activities to be classified under either green or amber categories. The taxonomy states that coal plants are eligible for green financing as long as they adhere to a timeline for early retirement, capped at a maximum of 35 years.

The added guidance will also address greenwashing issues by encouraging issuers who seek to voluntarily align with the taxonomy to demonstrate that their projects meet the criteria set out before seeking investment. Fitch says this should encourage more transition financing via a combination of green, sustainability and sustainability-linked bonds and loans in the short to medium term

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