APAC executives propose currency-linked climate bonds

The Asia–Pacific (APAC) business executives are urging emerging economies to issue climate bonds indexed to a basket of currencies to mitigate foreign exchange risks in financing the clean energy transition.

This recommendation, made by APEC’s Business Advisory Council (ABAC) during a meeting in Tokyo from August 1–4, also includes launching a pilot programme for a voluntary carbon market (VCM) in the region.

Hiroshi Nakaso, head of ABAC’s finance and investment task force, emphasised the need for a mutually tradeable voluntary carbon credit network to accelerate the transition to a low-carbon society.

The proposed pilot programme aims to facilitate cross-border carbon credit transactions by identifying potential issues and solutions.

ABAC plans to present these recommendations at the APEC leaders’ summit in Lima in November.

They suggest issuing 10-year bonds with payments indexed to a basket of currencies to provide developing nations with hard currency for clean energy projects while mitigating exchange-rate risks for lenders.

The Asia-Pacific region, vulnerable to climate-related natural disasters and reliant on fossil fuels, faces significant challenges in its energy transition, compounded by currency market volatility.

Attribution: Reuters