Asean’s Covid-19 fiscal policy lacks climate-aligned measures

The pandemic has given Asean a window to build back safer, better and greener


THE CIMB Asean Research Institute (CARI) has revealed that climate-aligned measures were found to be lacking in various Asean’s fiscal policy responses to the Covid-19 pandemic, which includes stimulus spending, national budgets and taxation policies.

CARI ED Jukhee Hong said the emphasis on the fiscal policy of many Asean countries was more directed towards saving lives and livelihoods.

She highlighted that climate aligned and sustainability measures should be included in future state budgets while tax relief in the form of tax credits should be given to companies involved in climate change mitigation, green building practices and green technologies in the short-term.

“In the medium- and long-term, Asean should study the feasibility of carbon and environmental taxes, reform fossil fuel subsidy schemes and work towards a common minimum tax standard for corporate income tax in the region to increase fiscal space needed for the climate agenda.

“The pandemic has given Asean a window to build back safer, better and greener as Asean economies strive to boost economic growth once the pandemic is under control,” she said in a webinar titled “Greening Asean: Towards Green Recovery in Asean Post-pandemic” organised by CARI yesterday.

Hong said Asean countries signalled a willingness to address climate change and embrace sustainability, however strong determination is needed to transition from fossil-fuel economy.

Asean, she said, should also take advantage of the Regional Comprehensive Economic Partnership to establish greener and sustainable supply chains, which has been projected to boost investment in sustainable post-pandemic recovery.

Commenting further, CARI chairman Tan Sri Dr Munir Majid (picture) stressed that Asean countries must be serious about greening and sustainable development — and not just pay lip service to it.

He also called for development in ways that protect people and the environment, as climate change is a real threat to the global.

Munir also acknowledged that there are some “green shoots” of recognition of the need for green recovery and development in the South-East Asia region, with Singapore leading the way with many sustainable approaches, and Malaysia through the central bank has come out with a guidance document Climate Change and Principle-based Taxonomy.

“There are good indicators. They have to be built upon and the green objectives have to be fully realised,” he said.

“Advanced countries ahead of the curve can, through regional thought intermediaries such as CARI, introduce ways and means towards green recovery, to those below it.

“The best recommendation is to show how those advanced countries have benefitted their economies and peoples through green development and mindset,” he added.

On another note, corporate bonds and green finance specialist Cedric Rimaud remarked that climate change impact cannot be reversed overnight and the next decade is critical in changing in terms of the direction of governments’ injection of large capital in response to the Covid-19 pandemic.

He said it is imperative that these capitals are invested appropriately to take account of the shifting risks happening in the region.

“There is ample capital available to be invested into projects towards climate resilience and since the Paris Agreement signed in 2015 has identified financial flows to redirect capital towards climate-resilient projects, an explosive growth of thematic finance,” he added.

The current outstanding bond market is valued at US$130 trillion (RM53.9 trillion), of which the size of the green bond market is estimated at US$1 trillion, as of the end of 2020 while issued social and sustainability bonds added another US$700 million to that value and growing.

To date, the amount of green-, social and sustainability-bonds that have been issued in more advanced Asean markets amounted to US$29 billion, with 73% of issuers being from the corporate sector.