Anuj Awasthi, CGIF's vice president of operations tells Environmental Finance how the fund deepening local bond markets and mobilising vital funds towards impact.
Across the ASEAN+3 region (Southeast Asian Nations and China, Japan, and South Korea), governments and businesses are increasingly recognising the pivotal role of sustainable finance in transitioning towards a low-carbon and resilient future.
The Climate Policy Initiative estimates that global climate finance must increase to $9 trillion by 2030, and in Asia and the Pacific an estimated $2 trillion annually is needed to meet targets under nationally determined contributions (NDCs) of the Paris Agreement, according to a 2024 report by the Asian Development Bank.
However, unlocking the full potential of this transition requires robust and accessible capital markets, particularly in emerging and frontier markets. This is where the Credit Guarantee and Investment Facility (CGIF), a trust fund of the Asian Development Bank (ADB), plays a crucial catalytic role.
By providing irrevocable and unconditional credit guarantees, CGIF can actively reduce investor credit risk when investing in sustainable bonds, thereby deepening local currency bond markets and mobilising vital funds towards impactful environmental social and governance (ESG) projects across this region.
The ASEAN+3 region presents both immense opportunities and significant challenges in the pursuit of its climate and sustainability goals. The growing economies and populations in the region necessitate substantial investments in infrastructure, energy, and other sectors to support the transition to a low-carbon economy and enhance resilience to adapt to the impacts of climate change such as extreme weather events.
Renewable energy sources, from solar, wind, and geothermal, hold the key to decarbonszing energy systems. Similarly, projects with strong environmental and social components are beneficial for building resilient and liveable cities and communities in sectors such as sustainable water distribution, green buildings, microfinance, healthcare, and education.
However, mobilising the required capital often faces hurdles. Investors, both domestic and international, can be hesitant to invest in emerging markets or complex projects due to actual and perceived risks, including credit risk, regulatory uncertainty, and a lack of an established track record.
This is where CGIF's guarantee mechanism proves invaluable. By providing credit enhancement to eligible sustainable bonds issued by companies and projects in the region, CGIF effectively mitigates these risks in event of default scenarios, making bond investment opportunities more attractive to a wider range of investors, both to local and foreign investors.
De-risking sustainable investments: CGIF's guarantee in action
CGIF's guarantee acts as a bridge for issuers of sustainable bonds and potential investors. The guarantee, covering the principal and coupon (or scheduled interest) payments, reduces the credit risk associated with the bond issuance. This, in turn, can lead to several positive outcomes:
- Enhanced creditworthiness: With a AA international rating from S&P, CGIF's guarantee elevates the credit rating of the guaranteed bonds to investment grade levels. This opens the investor base to include more risk-averse local and foreign institutional investors such as pension funds, insurance companies, and sovereign wealth funds, who may have mandates restricting them to investment-grade assets.
- Increased investor confidence: CGIF's involvement signals a rigorous due diligence process and a commitment to supporting credible sustainability initiatives. This instils greater confidence in investors, encouraging them to allocate capital to ESG and renewable energy projects.
- Market development: By guaranteeing early-stage sustainable bonds, CGIF helps build a track record for these asset classes within local currency bond markets. This demonstration effect encourages more issuers to tap into these markets and more investors to participate, leading to the deepening and diversification of sustainable financial ecosystems across the ASEAN+3 region.
Powering a sustainable financial future
CGIF's impact in promoting ESG sectors is tangible across the ASEAN+3 region. In March 2025, CGIF supported the longest and first-ever green and partially guaranteed project bonds in Cambodia, issued by power firm SchneiTec Dynamic to fund a solar power project.
Both local and foreign investors participated in this bond, stimulating investments in a frontier bond market. This project is expected to not only contribute to cleaner energy generation and reduced carbon emissions but also create jobs and stimulate the local economy.
In January 2025, CGIF supported the issuance of its first-ever blue bond, issued by China Water Affairs, to finance clean and sustainable water management systems.
In 2024, CGIF promoted three sustainability-linked bonds (SLB). CGIF guaranteed its first-ever SLB issued by Sabana Industrial Real Estate Investment Trust in Singapore; its first Indonesian Rupiah SLB issued by PT Steel Pipe Industry of Indonesia; and its first SLB in the shipping industry issued by Precious Shipping Public Company in Thailand.
CGIF ensures that all bonds it supports are subject to environmental and social standards aligned with international best practices. While not all bonds carry a specific thematic label, they contribute significantly to the broader ESG landscape, showcasing how CGIF's guarantee mechanism is instrumental in fostering comprehensive sustainable development.
Fostering collaboration and setting standards
CGIF's role extends beyond simply providing guarantees. It actively fosters collaboration among stakeholders, including issuers, investors, regulators, and other institutions. For example, CGIF is a member of the Cambodian Sustainable Bond Accelerator Program, which includes the United Nations Economic and Social Commission for Asia and the Pacific, the Global Green Growth Institute, and the Securities and Exchange Regulator of Cambodia and GuarantCo.
The programme promotes the adoption of international environmental and sustainable bond standards. CGIF continues to contribute to the development of robust and transparent sustainability finance frameworks within the ASEAN+3 region. This is crucial for ensuring the credibility of sustainable local currency bonds and for attracting both domestic and international capital.
Looking ahead: scaling up sustainable finance in ASEAN+3
The journey towards a sustainable future requires a significant scaling up of environmental and social finance. CGIF remains committed to playing a pivotal role in this endeavour. By continuously innovating its guarantee products, forging strategic partnerships, and promoting knowledge sharing, CGIF aims to further unlock the potential of local currency bond markets to finance transformative ESG and renewable energy projects across the ASEAN+3 region.
The need for climate action and sustainable development is not just an environmental imperative; it is an economic opportunity. By de-risking investments and fostering vibrant environmental, social and sustainable bond markets, CGIF is not only contributing to a more sustainable planet but also to the long-term economic prosperity and resilience of the ASEAN+3 region. The catalytic power of credit guarantees is proving to be a vital ingredient in unlocking the debt capital needed to build a truly sustainable future.
CGIF will be speaking at Environmental Finance's Sustainable Debt Asia 2025 being held at the Singapore Exchange on 26 June. For more details, click here.
