The next eight years are critical — the world needs to decarbonise rapidly and that cannot happen without Asia. Four of the top 10 emitters are Asian, including China and India.
However, the challenge for Asia is that its economies are growing rapidly — so not only will emissions go up, but per capita emissions will grow too as consumers become more prosperous. How can this challenge be met?
What is encouraging is that the innovative solutions required are also being created in Asia. The world leaders in renewable energy and battery development include Chinese and Korean companies, while the supply chain of the materials needed to build the green energy revolution — the rare earths, lithium, copper, nickel and so on — are all to be found across Asia.
This is part of the reason why Asia is such an exciting region to invest in. Asian firms can play a huge part in climate change solutions and there is great potential for Asia to drive decarbonisation in the 21st century.
It is easy to commit to reaching net zero by 2050, but intentions must be translated into actions on a realistic runway with clear milestones. As investors, it is crucial to actively engage with both the companies we invest in and the banks that provide finance, to drive positive change and keep up the pressure for tangible action. These conversations also create opportunities for new forms of lending and investing, including innovative and popular products like sustainability-linked loans and bonds.
Asia is different on the environmental and economic fronts. There is still much infrastructure to build out. There is still much development ahead, so there is a need to focus on an energy transition that is balanced and fair. Asia needs more electricity, not less, and we think it is possible to square this circle with renewable sources providing an increasing percentage of supply.
See also: A US$12 bil climate fund is readying a rare bond issuance
Coal and gas cannot just be turned off; the transition needs to be planned, with a view to preventing supply shocks. Sustainable change will be driven by transition leaders and innovative climate solutions. Developing those solutions requires investment, so asset managers have a responsibility to engage with investee companies to support ambitious and credible decarbonisation goals.
At the same time, both research and knowledge around sustainable investing need to grow within the investment industry. Our region currently has a shortage of environmental, social and governance (ESG) expertise, so we need to play our part in helping to create APAC-centric solutions and build an APAC-wide sustainability knowledge community within asset management.
Nurturing ESG talents, creating educational initiatives for asset owners and clients, developing APAC-focused sustainability insights and research that are available publicly — these are all ways for us to contribute to the growth of sustainable investment in the region. We also aim to achieve a 50% reduction in our own emissions by 2025.
See also: India aiming to finalise carbon deals with Japan, Singapore
Regulation around net zero and sustainability is important and we welcome rules that are well thought out and workable. We are all concerned by greenwashing, so removing doubt from the mind of the consumer is good for them and good for us.
It’s very positive to see how fast regulators are moving. The work done by The Network of Central Banks and Supervisors for Greening the Financial System (NGFS) and International Organization of Securities Commissions (IOSCO) are strong examples of collaboration that can lead to consistent and harmonised rules.
The NGFS has acknowledged that climate-related risks are a source of financial risk, and it falls within the mandates of central banks and supervisors to ensure the financial system is resilient to these risks and take the necessary measures to foster a greener financial system.
European investors have already increased their emphasis on ESG and we can only achieve a global transition if Asian investors start to apply the same focus. Through investor education and providing sustainable investment opportunities, asset managers like us have an important role to play in supporting this vital transition. Investors too need to play their part and ensure that they are investing in a sustainable future.
The changes we need will only be achieved through a whole-of-society effort, and we’re determined to not just participate, but also lead the progress required.
Rene Buehlmann is CEO Asia Pacific, abrdn
