Climate disclosure by Asian investors boomed in 2020, says survey

AIGCC survey also finds dramatic drop in use of third-party ESG data

Asian investors dramatically increased their level of climate change disclosure in 2020, with the use of the Science-Based Targets initiative (SBTi) framework growing from 8% to 47% in just a year, and carbon footprinting for listed equities growing from 19% of investors in 2019 to 79%, according to analysis by the Asia Investor Group on Climate Change (AIGCC). 

Reporting via the Task Force for Climate-Related Financial Disclosures (TCFD) was analysed for the first time in this year’s annual survey by the AIGCC, which found 50% of respondents are disclosing against the framework, with a further 30% actively considering it. 

AIGCC quizzed regional asset owners and managers representing $1.9trn in assets for the second annual Net Zero Investment in Asia survey. It found an upward trend in the use of decarbonisation strategies (adopted by more than 40% of respondents) and portfolio tilting (more than 35% of respondents). 

Asset managers responding to the survey reported a low proportion of clients demanding climate-related investment solutions

The survey also found a significant change in the methodologies used in Asia to define climate-aligned investments. The use of third-party ESG data providers dropped from 40% of investors in 2019 to 20% in 2020. Approaches developed in the EU, such as the EU taxonomy, grew in uptake slightly – from 8% of investors in 2019 to 9% in 2020. Index and ratings grew from 8% of investors in 2019 to 11% in 2020. 

The report says: “What remains clear and consistent across our annual survey is the ongoing importance of using a credible methodology to define net zero or climate-aligned investments. We are also seeing a rapid shift in methodologies being used, as detailed above, and the increasing demand for Asia-relevant climate taxonomies.”

China’s National Development and Reform Commission released its Green Industries Guidance Catalogue last year, which is being used by 4% of investors surveyed. 

Malaysia plans to launch a principles-based green taxonomy this year, based on the EU’s version, while the Taiwan financial regulator will finalise a sustainable finance taxonomy by end of 2021, says AIGCC. Singapore is currently consulting on a green taxonomy, and Japan is working with Switzerland and the EU on harmonising ESG disclosure requirements through taxonomies and other frameworks.  

Asset managers responding to the survey reported a low proportion of clients demanding climate-related investment solutions. Mandates with such obligations – climate investments, exclusions and reporting requirements such as TCFD – primarily fall within 0-25%. 

The report finds that: “Whilst asset owners are gradually raising climate aspirations, more work can be done to leverage this value chain since mandates determine assets under management. Asset owners need to use this mechanism and work with fund managers to support implementation of their climate commitments.”

The survey findings suggest that climate change investments focus heavily on SRI, closely followed by individual asset classes.

Despite this, the survey finds over 70% of asset managers expect to launch new climate-related investment solutions over the next two years and more than 70% are actively considering a 2050 net zero emissions target. 

AIGCC Executive Director, Rebecca Mikula-Wright, said: “It is pleasing to see significant and ongoing TCFD disclosure and the increasing adoption of a range of tools to help Asian investors manage climate risk across their portfolios.

“However, Asian investors need to ensure they are keeping up with international best practice on climate change across all areas, including integrating portfolio-wide decarbonisation goals. 

“Overall, the trends captured in this survey indicate that Asian investors are moving in the right direction on climate change. We know that once Asia gets going it won’t be long until it overtakes the rest of the world.”