Sustainability-linked finance: bridging nature disclosure gaps in Southeast Asia

This paper examines Southeast Asia’s sustainability-linked finance (SLF) market—an emerging class of instruments that tie borrowing costs to sustainability outcomes—and its treatment of risks such as deforestation and biodiversity loss. Using market analysis and a retrieval-augmented generation approach to extract corporate-report data, we assess the alignment between Sustainability Performance Targets (SPTs), firms’ disclosed KPIs and the TNFD’s global guidance across 2017-2024, covering over 200 deals worth nearly USD 20 billion. Companies frequently report performance that exceeds their SPTs; although this appears positive, the excess metrics are not subject to SPT-level verification, weakening accountability and increasing greenwashing risk. We find that over 60% of nature-related KPIs—especially water and waste—are omitted from SPTs, exposing inconsistencies between what firms monitor and what their financiers reward. Sustainability-linked loans dominate activity, led by Singapore, Thailand and Indonesia, while other SLF instruments lag behind. We recommend aligning disclosures with SLF SPTs using emerging standards, accrediting financial institutions that act as sustainability coordinators to vet SPTs in the SLF deals, and introducing fiscal incentives like tax exemptions and credit guarantees to mobilise investment and reduce greenwashing risks.