Investors are allocating more capital to climate opportunities and financing Asia’s energy transition – while protecting beneficiaries from climate risks: physical damage and disruption, fossil fuel approaches, deforestation, climate solutions, and climate transition planning.
The Asia Investor Group on Climate Change (AIGCC) is a collaboration of institutional investors in 11 Asian markets focused on the impact of climate change on investments. AIGCC was established in 2005 and incorporated in Australia.
On 8 April, AIGCC in collaboration with MSCI (Morgan Stanley Capital International) published the comprehensive State of Net Zero Investment in Asia, drawing on data from more than 200 mainstream asset owners and managers with more than USD $76 trillion assets under management. All are active in Asia, and 186 are headquartered in the region.
AIGCC CEO, Rebecca Mikula-Wright, said: “Institutional investors know that climate risks and opportunities are financial risks and opportunities. Asset owners, as stewards of capital, hold the power to accelerate the energy transition. Now is the time for them to act and lead by example in their respective markets and transition, not only their portfolios but whole economies, to net zero.”
MSCI Head of APAC ESG & Climate and Head of South & Southeast Asia, Chitra Hepburn, said: “It is now clearer than ever that climate change presents both an existential threat and a world-changing opportunity to the global economy. Through our collaboration with AIGCC, asset owners and asset managers can better understand where they stand on climate progress, and more importantly, the challenges ahead to effectively convert climate commitments to action. Clarity, which advances through quality data, tools, indexes and insights, can drive actions and MSCI is committed to enabling clients across the capital ecosystem to get a clear view of the climate transition at different stages of the process.”
Key findings from the comprehensive “State of Net Zero Investment in Asia” report are:
Physical Risks:
The Asia-Pacific is the world’s most disaster-prone region, with 80 disasters linked to climate costing USD36 billion in 2022. This poses significant and, without adaptation, persistent financial risks to investors as well as massive costs to societies, economies and governments in the region.
Fossil fuel approaches:
Asia is still largely reliant on fossil fuels to meet energy needs.
AIGCC’s report found that, overall, few investors in Asia have established strategies or policies regarding fossil fuels phase-down or transition finance: Of the 200+ investors, 24 per cent of asset managers and 19 per cent of asset owners have investment policies on fossil fuels.
Deforestation:
Progress on deforestation across the investment community remains relatively nascent, 19 per cent of asset managers and 3 per cent of asset owners have incorporated deforestation into investment approaches.
Investments in climate solutions:
Asia needs $71 trillion in investments to achieve net zero carbon emissions by 2050. There is strong interest from investors to allocate capital to low-carbon companies and clean energy solutions under the right policy conditions. Only 12 per cent of investors have committed to increasing investments in climate solutions. Likewise, few investors have formalised climate solutions strategies, targets and metrics.
Investor climate transition planning
Investor net zero transition plans are integral to enabling the net zero transition of the financial sector. AIGCC’s report found that 33 per cent of asset managers and 20 per cent of asset owners have some form of climate action plan, With a top-down strategy, leading investors demonstrate how they are addressing systemic climate risks, aligned with their fiduciary duty.
ABOUT:
AIGCC is a member-based NFP, established in 2005 and incorporated in Australia, with their sister network, the Investor Group on Climate Change (IGCC) in Australia/New Zealand, and global investor networks, to understand and respond to the risks and opportunities of climate change.
MSCI is an acronym for Morgan Stanley Capital International. It is an investment research firm that provides stock indexes, portfolio risk and performance analytics, and governance tools to institutional investors and hedge funds. . With over 50 years of expertise in research, data and technology, powering better investment decisions to enable clients to understand and analyze key drivers of risk and return and confidently build more effective portfolios.
