Asia sits at the centre of the world’s energy transition challenge. Demand is rising faster here than in any other region, yet the imperative to decarbonise is urgent. According to the International Energy Agency (IEA), global energy investment is projected to reach $3.3 trillion in 2025, of which $2.2 trillion will go to clean energy technologies and systems. To stay on track with net-zero goals, Asia will need to mobilise around $1.2 trillion annually between 2024 and 2030. Sustainable debt markets are also deepening. By the end of 2024, cumulative issuance of green, social, sustainability and sustainability-linked (GSS+) bonds had reached $5.7 trillion globally, with issuance volumes accelerating again during the year. Asia is becoming an increasingly important contributor, with sovereigns, corporates, and financial institutions issuing labelled debt to fund the transition. Yet large parts of the market — especially small and medium-sized enterprises (SMEs) and emerging economies — remain underserved. For Cathay United Bank (CUB), headquartered in Taiwan, this unevenness represents both an opportunity and a responsibility. The bank has repositioned one of its corporate banking strategies to focus on sustainable finance, expanding its portfolio towards green loans, sustainability-linked loans, and piloting innovative non-loan products that support both large corporates and SMEs. Its expansion across Asia is designed to take these approaches regional, with hubs in Greater China, Southeast Asia, and soon Tokyo. Michael Wen, executive vice president of CUB, outlines how the bank is addressing client demand, balancing commercial returns with impact, and embedding sustainability across its group operations. From green finance to diverse solutions The evolution of CUB’s sustainable finance mirrors broader market trends in Asia. Wen recalls that when clients first engaged with the bank on sustainable financing, the product types were very limited: green bonds or loans earmarked for projects such as energy efficiency or renewable energy. These products supported borrowers to increase environmental investment but were not yet tied to measurable sustainability outcomes. Over time, demand shifted towards sustainability-linked loans (SLLs) or bonds, though green financing instruments are still important. These facilities link sustainability performance targets (SPTs) based on sustainable key performance indicators (KPIs) such as carbon emissions intensity, electricity and water consumption, or waste reduction to economic incentives. Corporates across various countries and regions have increasingly embraced this model, seeing it as both a financing tool and a reputational signal to global investors. Moreover, both loan structures are applicable for supporting low-carbon transition, where the focus is not only on green projects but also on supporting industries in reducing their overall carbon emissions. Shipping companies are one example, seeking financing for vessels and equipment that cut fuel use and emissions. Besides financing these upgrades as green loans, banks like CUB try to arrange these facilities as SLLs with carbon reduction targets This progression from green to sustainability-linked illustrates how corporate needs are evolving. What began as a designation of a single facility or fund is becoming a core part of business strategy, with financing terms directly linked to environmental, social and governance (ESG) performance. For CUB, this transformation represents a fast-growing demand segment, with new opportunities emerging each year. The shift also reflects regulatory developments. Financial authorities across Asia are tightening disclosure rules and setting expectations for banks to avoid greenwashing. CUB has responded by embedding internal processes that align with global standards while remaining practical for clients at different stages of their sustainability journey. Supporting SMEs with practical tools While much of the sustainable finance market has centred on large corporates, CUB has made notable progress in enabling SMEs to participate. Taiwan’s economy is dominated by SMEs, which account for around 98% of enterprises and nearly 80% of employment. Yet these firms often lack either the resources to hire third-party verifiers, or specific green spending plans, leaving them excluded from conventional sustainable financing products. CUB identified this gap through conversations with clients who were eager to participate in sustainable finance but in particular, unable to justify the cost of external certification. In response, the bank designed a simple, transparent mechanism: adopting electricity and water intensity as KPIs while electricity and water bills issued by government-owned providers serve as the verification tool. Because these bills are trusted and universally issued, they provide a credible proxy for measuring sustainability improvements. Under this programme, SMEs that demonstrate reductions in their utility consumption per unit of sales revenue over a billing cycle qualify for lower interest rates in the following year. The scheme has already attracted nearly 1,800 applications year-to-date and continues to grow. On August 31, 2025, more than 800 active SME SLL borrowers accounted for 91% of CUB’s SLL borrowers with 41% of CUB’s SLL outstanding amounts. By lowering the barriers to entry, CUB has created a model that rewards tangible impact without imposing excessive costs on smaller firms. The design of the programme has wider implications. It demonstrates how financial institutions can adapt sustainable financing structures to the realities of different client segments, rather than applying a one-size-fits-all model. For SMEs, the availability of accessible sustainable finance not only improves their environmental performance but also strengthens their competitiveness within global supply chains, where larger buyers increasingly impose ESG requirements. For CUB, this initiative serves multiple strategic purposes. It anchors the bank’s domestic franchise, supports the long tail of Taiwanese businesses that form the backbone of the economy, and creates a replicable model that could be extended to other Asian markets where SMEs face similar challenges. It also signals to clients and investors that sustainability need not be confined to headline-grabbing mega-deals but can be embedded into smaller banking relationships. Building discipline and preventing greenwashing One of the risks in the rapid growth of sustainable finance is greenwashing. CUB has taken steps to mitigate this by embedding both regulatory and internal safeguards into its product structures. Wen stresses that while regulatory requirements vary across countries, the bank has chosen to adopt rigorous standards and practices to ensure credibility. For larger corporates, this means the purpose of a green loan as well as the KPI and SPT of an SLL must be appropriate and clearly defined. In Hong Kong, for example, CUB works with the Hong Kong Quality Assurance Agency (HKQAA). Such professional institution provides opinions that whether the key terms of the facility are in line with international standards, such as the Green Loan Principles or SLL Principles. Internally, CUB has developed clear processes. For example, when arranging an SLL, KPIs and SPTs are negotiated with borrowers at the outset and must be material, relevant and ambitious. The sustainability performance is reviewed at least once a year with external verifications. This contractual discipline ensures that sustainability-linked features are more than symbolic. Wen acknowledges that smaller clients cannot always afford external verification. This is why the bank has developed simplified approaches, such as the utility-bill system for SMEs in Taiwan. By combining robust evaluation and verification for larger corporates with practical solutions for smaller ones, CUB has managed to balance integrity with inclusiveness. This dual approach allows CUB to meet the expectations of regulators, rating agencies and other stakeholders while continuing to expand its sustainable finance portfolio. It also reinforces the bank’s positioning as a credible player in a market where reputational risk can be significant. Expanding project finance and cross-border reach Beyond domestic corporate lending, CUB has built a role in project finance and cross-border deals. One of the most dynamic areas has been data centres, which are highly energy-intensive but critical to Asia’s digital economy. In Malaysia, large-scale syndicated deals have financed multibillion-dollar data centre projects in Johor. While not always named among the lead banks, CUB has been active in this sector, focusing on the financing of operators under pressure to improve energy efficiency and source renewable power. CUB has also supported renewable energy projects across the region. In Taiwan, it has been involved in financing offshore wind farms, a sector that has attracted global sponsors and become a cornerstone of the island’s energy transition. In Vietnam, the bank has engaged in onshore wind projects, including partnering with the Asian Development Bank (ADB) on the financing of the Ninh Thuận onshore wind project. In Singapore, CUB structured a green trade loan to support the procurement of used cooking oil for sustainable aviation fuel production. This demonstrated how sustainable finance can be applied to commodities trading and supply chains. Emerging opportunities include cross-border renewable energy trade. Projects under development aim to generate solar power in Indonesia and transmit it to Singapore via subsea cables. These initiatives could transform regional energy flows and require complex financing structures. CUB’s regional presence and experience with Taiwanese corporates give it an entry point into such deals. CUB, in partnership with ADB, provided project finance for an onshore wind farm in Vietnam with a total facility amount of more than $100 million. The bank’s selective participation in these projects highlights its strategic positioning. Unlike global giants such as HSBC or Citi, CUB does not aim to dominate league tables. Instead, it focuses on nurturing client relationships and deepening its local presence, with a strategic emphasis on niche markets. Developing social finance and inclusion CUB’s sustainability agenda extends beyond environmental projects to include social finance. In Southeast Asia, the bank has developed partnerships with local financial institutions to channel funding to individuals and microenterprises, with a particular emphasis on rural areas and women-led businesses. The bank has also explored opportunities in clean water and sanitation. Access to safe water remains a challenge in many parts of the region, and CUB has participated in deals that support infrastructure for water purification and distribution. By financing these projects, the bank contributes to both public health and environmental resilience. Building on this, CUB extended several green facilities and a sustainability-linked loan to tap water suppliers in Vietnam and the Philippines. In microfinance, it provided social loans to non-bank financial institutions in both countries, earmarked to support individuals, micro, small and medium enterprises in rural areas and women-owned small businesses. Each facility carried an amount equivalent to an eight-digit USD value. These initiatives demonstrate that sustainability is not confined to climate issues but encompasses broader development goals. By addressing both environmental and social dimensions, CUB aligns its activities with the full spectrum of ESG priorities. From a strategic perspective, these kinds of social finance also allow the bank to deepen its presence in emerging markets and indirectly access more clients who need to be financed. It positions CUB as a partner to governments, non-governmental organisations (NGOs), and local institutions seeking to expand financial inclusion and improve community outcomes. Balancing returns with societal commitment An SLL often carries thinner margins than conventional lending. Borrowers that meet their ESG targets typically enjoy reduced interest rates, which means banks accept slightly lower spreads. Wen concedes that from a purely financial perspective, traditional lending can appear more attractive. However, the difference in returns is often marginal. Interest discounts usually amount to a few basis points, which Wen describes as insignificant to the bank’s bottom line but highly meaningful to clients. Beyond financial cost reduction, they serve as tangible proof of the company’s commitment and implementation of ESG. The strategic rationale is clear: failing to provide sustainable finance would leave CUB at a competitive disadvantage, as corporates increasingly demand such products. The bank therefore views sustainable finance not as a trade-off but as an essential part of its franchise. By embedding ESG features into its lending, CUB strengthens relationships and aligns with long-term market trends. Wen describes this as combining commercial returns with societal commitment, rather than balancing one against the other. This approach reflects a broader shift in the industry. Banks are moving beyond the perception of sustainable finance as a niche product and integrating it into core offerings. For CUB, the expectation is that sustainable lending will continue to grow at double-digit rates annually, providing both financial and reputational benefits. By June 30, 2025, its sustainable loan book had already surpassed $3 billion equivalent, up 23% year-to-date and accounting for 11.5% of its corporate lending portfolio. Leveraging group-wide synergies CUB is part of Cathay Financial Holdings, Taiwan’s largest financial group. The holding company also includes Cathay Life Insurance and Cathay Securities Investment Trust Enterprise (SITE), giving the bank access to a wide range of resources and creating opportunities for cross-business collaboration. Sustainability is coordinated at the group level under the leadership of chairperson CIO Sophia Cheng. Each subsidiary develops its own agenda, but all share a common framework. Cathay Life, for example, integrates ESG into its investment decisions, while Cathay SITE manages funds aligned with sustainability objectives. CUB contributes through lending and other financial products. Rather than creating a centralised sustainability department, CUB has embedded ESG responsibilities across functions. Risk, compliance, treasury and product teams each carry obligations, supported by training and certification programmes. This ensures that sustainability is part of daily operations rather than a specialist silo. The group’s philosophy is captured in a statement by its chairman: “No ESG, no money.” This principle establishes the idea that ESG is a fundamental prerequisite for financial decision-making. For CUB, this integrated model enables a broader group of employees to develop stronger ESG competencies and awareness. Clients engaging with the bank know that ESG principles are aligned across the entire group, from lending to insurance to asset management. It also reinforces CUB’s positioning as a financial institution committed to long-term sustainability rather than short-term gains. Embedding sustainability into corporate DNA CUB’s sustainability strategy reflects the reality faced by many Asian lenders. The region’s financing needs are vast, with trillions of dollars required annually to meet a range of sustainability ambitions, including net zero. No single bank can cover this demand, but each can focus on areas where its strengths are most impactful. For CUB, that role is defined by pragmatism and inclusiveness. Its utility-bill verification model empowers thousands of SMEs to join the transition, while its participation in syndicated loans facilitates the development of renewable energy and other large green projects across Asia. By embedding ESG discipline into its loan arrangement and working with accredited third-party institutions, the bank ensures credibility and avoids the pitfalls of greenwashing. The group structure amplifies this impact. With Cathay Financial Holding integrating sustainability across banking, insurance and asset management, CUB’s activities form part of a broader institutional commitment. The guiding principle — “no ESG, no money” — is not a slogan but a foundation that shapes decision-making across the franchise. Looking ahead, CUB will remain selective, focusing on sectors and geographies where its client relationships and regional presence give it an edge. It is not seeking to match the scale of global banks, but to deepen involvement across its client base. The true measure of success is not the size of a few landmark deals but the breadth of clients engaged in sustainable finance. As Asia’s energy transition accelerates, CUB’s model demonstrates how a focused, mid-sized bank can make a meaningful contribution: narrowing the gap between large corporates and SMEs, aligning financial performance with environmental and social goals, and embedding sustainability at the heart of its business.
