The Asian Development Bank (ADB) said developing countries in Southeast Asia need to explore the possibility of tapping Sustainable Development Goals (SDG) Accelerator Bonds to make their recovering economies more resilient.

In a report Friday, the ADB said such bond issues can broaden financing options for projects aimed at meeting the SDG targets. The new bonds offer reduced issuer risk in projects with no track record of bond funding via exit guarantees alongside other credit enhancement structures combined with incentives.

Southeast Asian economies issued a record $12 billion in green, social, and sustainability bonds in 2020, but the bank said funding needs will continue to rise because of the pandemic.

“The SDG Accelerator Bond builds on global best practices in project finance and aims to standardize the risk–return structure to ensure investor appetite and help local governments and new state-owned entities access funds,” it said.

Ephyro Luis B. Amatong, a commissioner with the Securities Exchange Commission, said the bonds are a “critical” addition to the current pool of financial instruments, saying that they blend “the concessional aspects of limited public funds with the vastly greater amounts of market-rate private investments—and allocating the risks accordingly.”

“(It) will enable ASEAN countries to transition their economies toward a more sustainable, inclusive and, ultimately resilient, future,” he added.

“The pandemic has slowed down the momentum for sustainable and equitable growth in most of developing Asia and many countries are at risk of not meeting their SDG targets in climate resilience, gender equality, and human development,” ADB Vice-President Ahmed M. Saeed said in a statement.

“For countries looking to fund sustainable projects and programs on a large scale, capital markets represent an underused but viable mechanism to bring in SDG investments.”

Among the Philippine companies that issued SDG bonds in the past were the Bank of the Philippine Islands (BPI), the Development Bank of the Philippines, Manila Water Co. Inc., and Rizal Commercial Banking Corp.

The United Nations estimated global investment worth $5 trillion to $7 trillion is required each year to meet the 17 SDGs by 2030.

“Southeast Asia has made significant progress in the recent years toward achieving the SDGs, with increasing access to diverse channels of public and private, domestic and international financial options. This trajectory presents a potential opportunity if the funds can be judiciously raised and directed toward SDG projects,” the ADB said. – Beatrice M. Laforga