ASEAN Banks Make Climate Strides, But Fossil Fuel Financing Remains a Drag: ARE

SINGAPORE, October 1, 2025 – Southeast Asia’s banking sector is inching forward on climate action, but much of the progress remains uneven, inconsistent, and heavily shaped by national policies, according to new research from Asia Research & Engagement (ARE).

The report, Bridging the Gap: Have ASEAN Banks Caught Up on Climate Action?, assessed 14 major lenders in Indonesia, Malaysia, Thailand, and the Philippines across four areas – governance, policy, risk management, and sustainable finance opportunities – to measure how far the region’s financial institutions have come since 2022.

While the findings reveal “steady progress” in board-level oversight, climate disclosures, and sustainable finance targets, ARE warns that coal phase-outs, gas restrictions, and sectoral decarbonisation pathways remain far too weak.

Regional Progress: From Compliance to Leadership?

The study finds that most ASEAN banks now recognise climate risk as a material issue:

Governance: 11 banks have dedicated sustainability committees, and nearly all have aligned disclosures with the Task Force on Climate-Related Financial Disclosures (TCFD). CIMB, Maybank, and Kasikornbank (KBank) were among those cited for robust oversight.

Policy: 11 banks have set net-zero financed emissions goals, up from just three in 2022. Yet only five have credible 2050 targets, while others remain aligned to slower national timelines.

Risk Management: 10 banks disclose their exposure to high-carbon sectors, and nine have adopted the Partnership for Carbon Accounting Financials (PCAF) methodology. However, only three – KBank, Mandiri, and BRI – are using climate scenario analysis to shape lending.

Opportunity: Eight banks now have time-bound sustainable finance commitments, though ARE notes a “lack of standardisation” in how banks define and report green financing.

As ARE stressed: “The advantages of leadership are clear: greater financing opportunities in new and transition industries, lower risks associated with high-carbon sectors, increased exposure to sustainability-related supply chains, higher reputational trust, and enhanced regulatory preparedness.”

Country Highlights

Malaysia: Net-Zero by 2050, but Sectoral Gaps
Malaysia’s three largest lenders – Maybank, CIMB, and Hong Leong Bank – are the only ASEAN banks all committed to net-zero financed emissions by 2050, in line with the country’s national target. Maybank has tied 30% of its senior management long-term incentives to ESG and climate metrics, while CIMB has enhanced board oversight of sustainability.

Both CIMB and Maybank have joined the Net Zero Banking Alliance. Yet despite progress, ARE found inconsistent restrictions on high-carbon sectors like palm oil and upstream oil & gas, exposing gaps in sectoral pathways.

Indonesia: First-Mover Commitments Amid Coal Reliance
Indonesia’s Bank Rakyat Indonesia (BRI) has emerged as a regional frontrunner by setting sectoral decarbonisation targets aligned with the Science-Based Targets initiative, including a 40% emissions reduction in pulp & paper and real estate by 2030.

Bank Mandiri has integrated physical climate risks into credit assessments, modelling collateral value declines from floods and wildfires, while BNI has begun disclosing financed emissions under PCAF.

Yet coal remains entrenched. BRI and Mandiri have set coal phase-out timelines (2050) but, unlike peers in Malaysia and Thailand, still lack “no new coal” policies.

Thailand: Coal Exit Gains Momentum, Gas Still Untouched
Thai lenders Kasikornbank (KBank) and Siam Commercial Bank (SCB) have adopted “no new coal” policies, while SCB and Krung Thai Bank have also set coal phase-out targets. SCB has gone further, committing to net-zero by 2050 – 15 years ahead of the national deadline.

KBank is the only ASEAN bank to restrict financing for new gas-fired power plants lacking low-carbon technology. However, most Thai banks remain tethered to the country’s official net-zero goal of 2065, underscoring the role of national policy in shaping banking commitments.

Philippines: Stuck at the Starting Line
The Philippines is the region’s weakest performer. None of its three leading banks – BDO Unibank, Bank of the Philippine Islands (BPI), and Metrobank – have set net-zero financed emissions goals, reflecting the absence of a national target.

BDO and BPI have stopped financing new coal projects, but only at the project finance level, leaving corporate lending untouched. BDO has pledged to halve coal exposure by 2033, but without a full exit plan. Metrobank trails even further, with limited climate disclosures and no financed emissions reporting.

To close the gap, ARE urges ASEAN banks to:

Embed climate expertise in board nominations.

Apply climate-related KPIs to executive pay.

Extend “no new coal” policies to cover corporate financing and bond underwriting.

Develop sectoral decarbonisation pathways for oil & gas, palm oil, transport, and real estate.

Standardise sustainable finance definitions across the region.

As the report concludes: “Banks can and should use climate policies to advance climate action, to assess and prepare for risks, and capture emerging opportunities that enhance their positions as growth-facilitators as the energy transition accelerates.”

ASEAN’s banks are no longer ignoring climate action. Malaysia’s lenders are aligning with 2050, Indonesia’s banks are experimenting with sectoral targets, Thai banks are advancing coal restrictions, and the Philippines is cautiously beginning to limit coal exposure.

Yet with fossil fuels still dominating portfolios and sectoral strategies lacking, the region’s financial institutions remain at a crossroads: either lead the low-carbon transition or risk being left behind as capital markets pivot to sustainability.