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Investors in Asia are continuing the trend set by their counterparts in the USA

Investor interest in climate solutions from Asia is escalating, coinciding with the American administration stepping back from global climate leadership roles

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Investors in Asia are taking up the opportunities left by their American counterparts
Investors in Asia are taking up the opportunities left by their American counterparts

Investors in Asia are continuing the trend set by their counterparts in the USA

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In a significant stride towards addressing climate change, Asian investors are making progress in considering financially material climate-related factors, according to Charles Nguyen, managing director and head of ESG Asia at Neuberger Berman.

The Asia Investor Group on Climate Change (AIGCC) has published a report on the region's largest investors, which reveals that Asian investors are increasingly looking to take a leadership position in the climate transition. This shift is largely driven by the US political environment and ESG headwinds, the report suggests.

One of the investors committed to climate solutions is AIA Group, one of Asia's largest insurance players. The report is based on a review of 230 of the region's largest investors, including 113 asset owners across 19 Asian economies.

The report finds evidence of Asia's investors remaining committed to global climate alliances, which have come under pressure from Republican lawmakers in recent months. Despite this, the number of investors committed to global climate alliances in Asia is rising, with asset managers leading the charge.

Key trends and commitments highlighted in the report include:

  1. Growing climate risk recognition and disclosure: A significant proportion of investors across Asia now recognize the financial materiality of climate change. Disclosure of physical climate risks is improving, though adaptation actions are still early-stage.
  2. Integration of climate considerations into investment policies: Approximately two-thirds of investors have integrated climate factors into their investment policies, reflecting progress towards mainstreaming climate in portfolio decisions.
  3. Active stewardship and engagement programs: AIGCC promotes stewardship initiatives that engage major Asian emitters in alignment with the 1.5°C target. Programs like Climate Action 100+ and the Asia Utilities Engagement Program focus on key sectors such as energy utilities to drive decarbonization.
  4. Focus on energy transition and coal phase-out: Investors recognize that decarbonizing Asia’s energy systems represents a significant opportunity and risk. Financial institutions are developing and applying "just transition" guidelines to ensure that energy transition plans incorporate social equity elements and minimize reputational risks.
  5. Collaborations to enhance climate finance and transition governance: Institutions such as Climate Finance Asia cooperate closely with AIGCC and other alliances like the Glasgow Financial Alliance for Net Zero (GFANZ) and the Monetary Authority of Singapore, fostering climate finance engagement and advancing energy transition frameworks.

However, despite progress, Asian investors remain highly exposed to climate impacts, with researchers highlighting the urgent need for more decisive action to mitigate risks and drive global decarbonization aligned with investors’ financial interests.

One of the challenges faced by investors in Asia is the adoption of fossil fuel exclusions or a financing phase down. This is exemplified by the legal complaints filed against BlackRock, State Street, and Vanguard, which are part of the Climate Action 100+ initiative, by the Texas Attorney General Ken Paxton.

Despite more to be done on fossil fuel financing, the AIGCC report suggests that the region's asset owners will not shy away from accepting the invitation to lead. The report underscores the need for continued collaboration and commitment from all stakeholders to achieve a net zero transition in the region.

[1] AIGCC (2022). 2022 Progress Report: Asia's Investors in Action on Climate Change. Retrieved from https://www.aigcc.org/ [2] AIGCC (2021). Asia's Investors in Action on Climate Change: 2021 Progress Report. Retrieved from https://www.aigcc.org/ [3] Neuberger Berman (2022). Charles Nguyen on the Evolving ESG Landscape in Asia. Retrieved from https://www.nb.com/ [4] AIGCC (2021). Policy Brief: Fossil Fuel Policies in Asia. Retrieved from https://www.aigcc.org/ [5] AIGCC (2020). Asia's Investors in Action on Climate Change: 2020 Progress Report. Retrieved from https://www.aigcc.org/

  1. In light of the improvements in climate-related considerations in finance, environmental science may become increasingly relevant for businesses seeking to align with Asian investors' focus on climate change.
  2. The commitment of Asian investors to the energy transition and coal phase-out, as seen in the Asia Utilities Engagement Program, could lead to significant developments in the financial sector, specifically in the context of business and investment strategies aimed at environmental sustainability.

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