NEW REPORT: “Winds of Change: Low carbon investing in Asia”
Beijing, Monday December 2nd, 2019.
By the Asia Investor Group on Climate Change
Asian investor survey: appetite for low carbon investment is strong and company engagement on climate risks is increasing.
As the 25th annual UNFCCC Conference of the Parties (COP25) gets underway in Madrid,
investor appetite for climate investment opportunities in Asia is strong and engaging with companies on the transition to low carbon is accelerating as Asia feels the sting of increasing physical climate impacts – according to a new survey of institutional investors released today by the Asia Investor Group on Climate Change (AIGCC).
Outlined in a new report – Winds of Change: Low Carbon Investing in Asia – institutional investors have provided direct insights into how they are approaching low carbon and green investment opportunities and where they are active by market and asset class. The survey was undertaken over the July to August period in 2019, with investors managing more than US$1.9 trillion in assets responding to questions on their approach to climate investment.
“The survey finds that investor appetite for climate aligned investment is increasing, with huge potential to grow and activity is accelerating,” said Rebecca Mikula-Wright, Director of AIGCC. “This is happening in parallel to increasing coordination by regional financial regulators on alignment to the Taskforce on Climate-related Financial Disclosures (TCFD).”
“Investors in Asia are becoming increasingly sophisticated in their approach to portfolio-wide implementation of climate considerations, with some ambitious net-zero targets and innovative TCFD-aligned reporting methods being used”.
“As an investor, partnering with our investee companies in the region on engagement is a vital tool to meet the challenges of climate change for each company”, said Sophia Cheng, CIO Cathay Financial Holdings and Chair of AIGCC. “We are all working this out together and learning from each other. Just like climate change, we can’t solve this on our own.”
Key findings from the survey include:
- 95% of the investors surveyed are implementing low carbon strategies
- 66-75% of investors surveyed are planning to increase their low carbon investment across all asset classes
- 45% investors have climate-aligned targets across their equities and infrastructure asset classes, with over 35% for other asset classes.
- 62-77% of investors are either already or actively considering assessing their portfolios for physical risks and planning to increase resilience within those asset classes
- 40% of investors already assess their real estate portfolios for physical risk
- 63% of investors consider the social dimension in their low carbon investment strategies
The report includes a number of recent examples of institutional investors from across Asia which are setting targets, developing products and reporting on the outcomes of their climate change investment strategies.
The emergence of a number of Sustainable Finance initiatives in the region, will likely accelerate this trend of mainstreaming climate change into investor practice.
“AIGCC will continue to support growing appetite among Asian investors for climate aligned investments, and to work with our members and stakeholders in the region to develop investable solutions to facilitate the transition to a resilient, net zero emissions economies,” Mikula-Wright said.
AIGCC and CDPQ announce partnership to develop capacity-building training for investors in Asian marketsDownload
Montréal, Singapore. September 18, 2019: The Asia Investor Group on Climate Change (AIGCC), a network of Asian asset owners and financial institutions, and the Caisse de dépôt et placement du Québec (CDPQ), a long-term institutional investor, today announced a new partnership to develop capacity-building training for investment teams in Asian markets. The announcement coincides with the third annual AIGCC CEO/CIO Asset Owner roundtable in Singapore, with participants from over 25 funds in 9 markets representing over USD5trn in assets under management.
“AIGCC is delighted to welcome CDPQ as a new member”, said Rebecca Mikula-Wright, Director AIGCC. “We look forward to partnering with CDPQ to develop pan-regional and innovative climate-specific training for investors. As Asia is set to experience the highest losses, yet benefit the most from the opportunities from the rapidly changing climate, capacity building in the region is needed to scale up the response of investors.”
In joining AIGCC, CDPQ is teaming up with major financial institutions and network organisations that demonstrate strong leadership in sustainable investment and who identify climate change as a risk, but for whom also presents opportunities for their portfolios. This new partnership will make it possible, to develop training for investors on the Asian continent on the risks and opportunities associated with climate change. The training will be based on shared expertise and best practices as well as on TCFD guidelines, and will enable investors to make concrete advancements in their actions as part of the transition.
“The development of investor training will help accelerate their work and integration of climate change consideration into portfolios”, said Sophia Cheng, AIGCC Chair and CIO of Cathay Financial Holdings. “Ultimately, this will help increase investment into the transition to net-zero carbon economies that the IPCC says is needed by 2050.”
This partnership is in line with CDPQ’s desire to collaborate with innovative organizations to share best practices in the area of low-carbon investing and engagement with companies. By rolling out its strategy, CDPQ has already reduced the carbon intensity of its overall portfolio by 10% while increasing its low-carbon investments by more than $10 billion over the past two years. These results show the importance CDPQ places on climate change and the sustainability of its portfolio.
“We are delighted to establish this partnership with AIGCC, with whom we share common values in the area of low carbon investing and climate change consideration. By developing practical tools and sharing best practices, together we will constructively stimulate the commitment of Asian investors towards a sustainable environment,” added Wai Leng Leong, Managing Director, Strategic Partnerships, Asia, at the Caisse de dépôt et placement du Québec.
AIGCC and CDPQ will work on developing a number of innovative training modules, in collaboration with investors in the region for launch during 2020.
AIGCC represents the Asian investor perspective in the global discussions on climate change and creates awareness about the transition to a greener economy. The organization provides capacity for investors to share best practices and to collaborate, in particular, on investment activity, credit analysis and risk management. With a strong international profile, this network depends on the engagement of pension and sovereign wealth funds, insurance companies, fund managers, family offices and endowments. For more information, visit www.aigcc.net.
ABOUT CAISSE DE DÉPÔT ET PLACEMENT DU QUÉBEC
Caisse de dépôt et placement du Québec (CDPQ) is a long-term institutional investor that manages funds primarily for public and parapublic pension and insurance plans. As at June 30, 2019, it held CA326.7 billion in net assets. As one of Canada’s leading institutional fund managers, CDPQ invests globally in major financial markets, private equity, infrastructure, real estate and private debt. For more information, visit cdpq.com, follow us on Twitter @LaCDPQ or consult our Facebook or LinkedIn pages.
Climate change is multiplying risks for investors in Asia, and unless unprecedented actions are taken we are on track to a 3°C world, with serious, severe impacts on water resources. Investment portfolios of Asian asset owners are uniquely exposed, putting the continent’s savings at risk, says the new report.
The report highlights that Asian pension funds already face shortfalls due to an ageing population, and that this could be exacerbated by water and climate risks to their investments.
“Asia’s water resources face a triple threat – not enough water to develop; climate change exacerbating water scarcity and our assets and populations are clustered along vulnerable rivers” warned Debra Tan, who heads China Water Risk (CWR), a leading think tank on water security. “If these threats are not factored in, Asian banks and insurers may well inherit the water and climate risks of their clients” she added. CWR’s research shows that over US$4trn of GDP and almost half of Asia’s population is housed in the basins of just 10 rivers; four of which are projected to see shrinkage in the next 50 years. Yet, 92% of climate finance does not protect assets globally, leaving people and businesses vulnerable to climate impacts already baked into the system.
“Asian asset owners are uniquely exposed to climate and water risks as a large share of their investment portfolios tend to be concentrated in their domestic markets, which will bear the brunt of global climate change losses” said Emily Chew, the global head of ESG Research and Integration at Manulife Asset Management. The report highlighted that available data for the asset allocations of 30 large public pension funds, sovereign wealth funds, and central banks from 12 Asian markets—including Japan, South Korea, China, Hong Kong, Singapore and India—shows high allocations to their respective domestic markets; in some cases as high as 80-100%. Chew added, “Asian asset owners may not be able to diversify geographically due to economic, political and regulatory reasons. This leaves them no choice but to face the new normal and systematically price climate into their portfolio returns”.
In addition, some governments are already regulating for a future with limited water, such as China. If the economy runs on water, less water points to a new development model. Such water transition risks are imminent, and they are material as they will disrupt global trade and multiple supply chains.
Investors in Asian assets may not be fully aware of such inter-linked risks. To better navigate the new risk landscape, the report identifies five key water and climate risks to illustrate how the portfolios of Asian asset owners might be affected. These include the impact on logistics from rising sea levels and storm surges; increasing risks from extreme weather events affecting dense areas and regulatory risk triggered by water-nomic policies.
According to the report, the Nikkei 225 and KOSPI are particularly vulnerable to logistics and supply chain disruptions, whilst the Hang Seng Index and Straits Times Index are skewed towards financial institutions, which are prone to systemic shocks from clustered risks arising from lending to multiple sectors in concentrated locations.
However, big risks come with big opportunities. The report’s analysis of 1.5°C, 2°C and 3°C temperature change scenarios shows that while Asia is more exposed than the rest of the world to policy risk, it also has the greatest opportunity to benefit from low-carbon transition technologies. Asian asset owners can lead the way: their actions can be significant as the ratio of asset owners’ domestic investments to country GDP can be as high as 25-45% according to the report. “If Asian pension funds and other asset owners start to act on their water and climate risks, it would lead to improved resilience and better outcomes in their investment portfolios. In addition to strengthening returns, this would also ultimately benefit all communities in the region,” said Rebecca Mikula-Wright, Director of AIGCC.
The report therefore urges investors to map and assess their water and climate risk exposure and price in the prospect of new “water-nomic” regulations. Engagement with investee companies, fund managers and using voting rights are also recommended. Such actions will help asset owners better protect their portfolios and more importantly savings across Asia.
Investors call on world leaders to address climate change ‘ambition gap’
Record breaking number of global investors call on governments to accelerate action on climate change
KATOWICE, POLAND, 10 DECEMBER – Global investors today called on governments around the world to step up action to address climate change. 415 investors, with $32 trillion in assets-under-management, are behind the call-to-action as signatories of the 2018 Global Investor Statement to Governments on Climate Change1.
The ‘Global Investor Statement’ reaches global leaders as the United Nation’s COP24 global climate change conference in Poland enters its second week, and is the single largest policy intervention from investors on climate change. The Statement asks governments to strengthen their Nationally Determined Contributions to meet the goals of the Paris Agreement and to enact policies to facilitate the world’s transition to a low-carbon economy.
Three overarching priorities are highlighted in the Statement for global leaders to address: achieving the Paris Agreement’s goals; accelerating private sector investment into the low carbon transition and committing to improve climate-related financial reporting. Additional detail is provided in an accompanying briefing paper also shared with leaders.
Among specific policies, the investors request governments “phase out thermal coal power”, “put a meaningful price on carbon” and “phase out fossil fuel subsidies.”
Investors highlight the “ambition gap” the U.N. has determined exists between governments’ commitments and what is needed to deliver on the goals of the Paris Agreement – in limiting global warming to well below 2°C – and ensuring the necessary transition to a low-carbon economy. They stress their “great concern” about the gap, noting consequences of an otherwise “unacceptably high temperature increase” and “substantial negative economic impacts.”
Investors release major new guide to climate change reporting in Asia
Today the Asia Investor Group on Climate Change (AIGCC) is releasing a new report ‘Building on the base: TCFD Disclosure in Asia’, the first comprehensive guide developed by investors to look at climate change reporting by publically listed companies in Asia against the Taskforce on Climate-related Financial Disclosure (TCFD).
In developing this report, AIGCC has worked in conjunction with EY and FTSE Russell to look at current levels of reporting by Asian companies in key industry sectors and across major markets in the region. It draws upon previously unpublished data analysis of corporate reporting on climate change and is the first report to benchmark performance against the TCFD for the region.
This guide outlines the expectations that investors have of listed companies on their climate disclosure and is designed to provide a practical tool for investors as they work in partnership with their investee companies in Asia.
“With Asia lashed yet again by increasingly extreme weather events in 2018, the impacts on climate change are really hitting home,” said Rebecca Mikula-Wright, Director of AIGCC.
Asian investors with US$2.3 trillion in assets join Climate Action 100+
World’s largest pension fund GPIF of Japan announced as a Supporter of initiative.
Initiative drives momentum in investor engagement activity across Asia, with upswing in signatories across the region.
22 October 2018: Climate Action 100+ is today announcing strong growth in investor participation across Asia and Japan’s Government Pension Investment Fund (GPIF), as the latest investor to join the initiative. As the world’s largest single pension fund1. GPIF’s decision to join Climate Action 100+ adds further significant momentum in global growth of the investor-led corporate engagement initiative.
“Climate Action 100+ is honoured to welcome GPIF as a Supporter. The risks and the opportunities of climate change call for global partnership and GPIF’s support will be vital to our success,” said Anne Simpson, Investment Director, CalPERS and Climate Action 100+ Steering Committee Chair.
The total number of investors now involved in the initiative has now surpassed 3102, representing over US$32 trillion in assets collectively under management.
Read the full Media Release
Nearly 400 investors with US$32 trillion in assets step up action on climate change
SAN FRANCISCO, 12 SEPTEMBER 2018 – The Investor Agenda launched today in San Francisco will support investors in accelerating and scaling-up the actions that are critical to tackling climate change and achieving the goals of the Paris Agreement. Its launch also demonstrates the significant momentum already evident, with 392 investors with US $32 trillion in assets collectively under management, using The Investor Agenda to highlight climate action they are already taking and making new commitments.
Announced as part of PRI in Person and the Global Climate Action Summit, The Investor Agenda provides a way for investors to directly report actions they are taking, and scale-up their commitment to act, across four key focus areas: Investment, Corporate Engagement, Investor Disclosure, and Policy Advocacy.
Capturing new data, the Investor Agenda seeks over time to reflect the full breadth and scale of global investor-led action on climate change. Bringing together and helping drive participation in a broad range of global investor initiatives, it also supports investors in taking greater action. This offers benefit to investors, in being able to better manage climate risks and capture low-carbon opportunities as a result, while also scaling-up the investor led contribution to achieving the goals of the Paris Agreement. Showcasing investor leadership on climate change will also be used as a way to inspire bolder commitment from investors and their peers, raising the bar and building on existing momentum.
Read the full Media Release
Read the Fact Sheet
Climate Action 100+ investors scale up engagement with greenhouse gas emitters, add more focus companies to drive clean energy transitionDownload
Climate Action 100+ investors scale up engagement with greenhouse gas emitters, add more focus companies to drive clean energy transition
More influential investors including AllianceBernstein, Mitsubishi UFJ Trust and Banking Corporation, USD $43 billion UK pension pool Boarders to Coast Pension Partnership, and USD $64 billion Australian pension fund UniSuper sign on to initiative.
3 July 2018: Investor signatories to Climate Action 100+ have scaled up engagement with systematically important greenhouse gas emitters, while expanding their focus list of companies, adding 61 companies (Known as the + list) that have significant opportunities to drive the clean energy transition and help achieve the goals of the Paris Agreement.
Launched in December 2017 at the One Planet Summit, with 225 investors with $26 trillion in assets under management, Climate Action 100+ is now backed by 289 investors with nearly $30 trillion in assets under management, mobilising across 29 countries. The full list of investor signatories can be found here.
Launch of Japanese translation “Integrating Climate Change into Investment Strategy: A Guide for Investors” 気候変動を 投資戦略に組み入れる: 投資家向けガイドDownload
Launch of Japanese translation “Integrating Climate Change into Investment Strategy: A Guide for Investors” 気候変動を 投資戦略に組み入れる: 投資家向けガイド
April 11, 2018
AIGCC is launching the Japanese translation of the “Integrating Climate Change into Investment Strategy: A Guide for Investors” at RI Asia in Tokyo today.
Asian investors can protect long-term returns by taking greater measures to manage climate risk. This is one of the key messages in a comprehensive climate change investor guide that is being launched in a Japanese translated version today at the RI Asia event in Tokyo by the Asia Investor Group on Climate Change (AIGCC).
‘SumiTrust has been integrating climate change for many years and continues to be actively involved in local and international climate focused initiatives’, said Seiji Kawazoe, Associate General Manager at Sumitomo Mitsui Trust Bank, Ltd and AIGCC member. ‘We are proud to be involved in this guide and look forward to discussing it with our peers in Japan.’
“There is no one-size-fits-all approach to addressing climate change, which the investor guide clearly highlights,” said Arisa Kishigami, Head of ESG, Asia Pacific, FTSE Russell. “As a welcoming additional tool, the report balances common frameworks with a diverse range of specific case studies which investors can learn from and adapt to their individual needs. Arisa is also a working Group member of AIGCC and Management committee member of Japan Sustainable Investment Forum (JSIF).
See full media release.
Global investors launch new initiative to engage largest corporate Greenhouse Gas Emitters at One Planet SummitDownload
Global investors launch new initiative to engage largest corporate Greenhouse Gas Emitters at One Planet Summit
100 investors with more than USD $15 trillion in assets under management have committed to addressing climate change with the companies they invest in
PARIS 12 December 2017 – A new global initiative to harness the power of the world’s most influential institutional investors committed to in-depth engagement with the world’s largest corporate greenhouse gas emitters — Climate Action 100+ — is launched today at the One Planet Summit, hosted by the French Government exactly on the second anniversary of the Paris Agreement.
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