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Asia, The $7.7 Trillion Low Carbon Opportunity

Singapore's innovative Gardens by the Bay park. Photo: joyfull / Shutterstock.com
Singapore's innovative Gardens by the Bay park. Photo: joyfull / Shutterstock.com

If the world is to meet the targets of the Paris Agreement on climate change, trillions will need to be shifted to low carbon projects in countries across Asia.

A new report, launched in Singapore last week (6 September), concludes $7.7 trillion will need to be invested until 2035 in energy efficiency initiatives and renewable energy projects to support the low carbon transition in China, India, Japan and South East Asia.

Announced as the most comprehensive analysis to date of the climate finance situation in Asia, the Investing for the climate in Asia report is based on the disclosure of leading banks, investors and insurers across the region.

The findings highlight the need to ramp up the investment in clean energy globally said Mindy Lubber, director of North America’s Investor Network on Climate Risk (INCR), “particularly in countries like India.”

Lubber said investors around the world will need to shift trillions of dollars to clean energy. “It is a tremendous challenge and will only be achievable if we work together,” she warned.

Global Collaboration

“Investors in all regions are now working collaboratively to mitigate carbon risks and grow new low carbon investments,” said Stephanie Pfeifer, CEO of Europe’s Institutional Investors Group on Climate Change (IIGCC).

The report on the state of play of climate finance in Asia was announced as part of the re-launch of the Asia Investor Group on Climate Change (AIGCC). The AIGCC hopes to play a key role, along with investor groups in other parts of the world, in accelerating climate change related finance and investment opportunities.

“The Paris Agreement clearly signaled to investors that the transition to a sustainable low carbon economy is underway and accelerating,” Pfeifer said.

Gearing up Fast

Emma Herd, CEO of the Australia and New Zealand focused Investor Group on Climate Change (IGCC), said the finance sector has recognised the opportunities of investing in the low carbon transition and is “gearing up fast.”

“While it’s clear that progress is uneven and gaps remain (…), progress over the past two to three years has been remarkable. There’s no doubt that a great transition is on,” Herd said.

Although the report concludes that climate risk and responsible investment are increasingly becoming part of core business activities across Asia, it urges financial regulators to take steps to boost the shift to low carbon investment and improve competitiveness in the market.

China Leads

Of the institutions included in the analysis, almost a third have factored climate change risks into their financing operations. Over a quarter of banks referred to climate change factors as a reason to limit financing and more than 80 per cent disclosed their policy on responsible lending.

The pace of change in Asia is well illustrated by China, according to the report. China’s banks have led in taking steps to restrict finance to industries with high energy consumption and high pollution.

But in terms of regulatory approaches, the picture is mixed. Five of the countries included in the report have banking initiatives, four have sustainability codes and five include sustainability disclosure as a requirement to get listed on their stock exchange.

The report was produced by Asia Research and Engagement (ARE) with the support of the Australia and New Zealand Banking Group (ANZ).

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