Asia’s Sustainability Opportunity
Asia is behind on its sustainable push compared to other parts of the world.
The top ten countries with the highest sustainable development score are in Europe and the only ones in Asia within the top 30 are Japan and South Korea, according to the United Nations Sustainable Development Solutions Network.1
Encouraging Science
While it does mean that Asia has a way to go, the region has the potential for a sustainable leapfrog, according to a report entitled “Climate Risk and Response in Asia” by McKinsey. 2
Asia is well positioned to address sustainability challenges, capture the opportunities that come from managing climate risk effectively and lead global mitigation efforts, reads the research.
One of the biggest arguments behind Asia’s sustainability opportunity is that infrastructure and urban areas are still being built out in many parts of the region.
“A significant opportunity lies in infrastructure development,” continues the report. Furthermore, “Asia is home to some of the world’s largest and most innovative companies, and almost half of all R&D investments globally take place in Asia.”
“A lot of people often think that Asia is a long way behind in terms of focus on sustainability but this is not what we are seeing on the ground,” said Daniel Hanna, Standard Chartered’s Global Head of Sustainable Finance during the Standard Chartered ASEAN Business Forum. “If you look at what has driven the falling cost of renewables, China can take a lot of the credit for that, while India is the world’s largest auction market for renewables. What we now need to do is catalyse efforts towards decarbonisation and transitioning business models.”
The size and scale of the opportunities that come from managing climate risk effectively within the region are staggering. The greatest investment opportunities globally with regards to clean water and sanitation can be found in China at USD26.1 billion and India at USD19.2 billion, according to the Standard Chartered Opportunity 2030 report.3
Indonesia, the largest economy in Southeast Asia, has the fourth largest population in the world and holds massive opportunities for SDG financing – one of the largest being in power. Ensuring universal access to electricity by 2030 will require an estimated investment of USD327.8 billion, with a potential private-sector investment opportunity of USD147.5 billion.
“There is a false dichotomy in the world that in order to attack climate change we have to compromise profits or we incur disproportionate costs,” states Paul Polman, Co-founder and Chairman of IMAGINE and former Chief Executive Officer of Unilever during the panel. “We are now at a point where we cannot achieve economic growth without tackling climate change.”
Meatless burger-maker Impossible Foods is one example of how this dichotomy is being challenged as the company was specifically set up to make the food system sustainable.
“The only reason we exist is to make the planet a better place,” said Nick Halla, Senior Vice President for International at Impossible Foods. “What we’re trying to do is mobilise the billions of people to have a direct impact on the future of our world.”
Aside from the growth of companies where the central tenet is saving the earth, it is encouraging that interest in sustainable investing is growing.
Some 42% of private investors in Asia are considering investing between 5 to 15% of their funds in sustainable investing over the next three years, according to the Standard Chartered Sustainable Investing Review 2020.4
“Funding a solar project in India has seven times more impact than funding a similar-sized one in France in terms of reducing CO2 emissions,” says Hanna. “Mobilising capital to move Asia onto a low carbon pathway is really important in ensuring that the world meet the Paris Climate Agreement targets.”5
Disproportionately Affected
Lorena Paglia, Worldwide Sustainability Chapter Co-Lead for Asia at Microsoft also highlighted that the impetus to address climate change is especially pressing within the region because it is disproportionately affected by climate change.
The International Union for Conservation Nature agrees and goes on to say that low lying and crowded coastal cities in many South and Southeast Asia countries are most at risk.6
While the devastating effects of climate change on livelihoods is well understood, many small to medium enterprises may not be considering how their businesses will be affected.
Setting a clear example for companies both big and small, Microsoft pledged earlier this year to be carbon negative by 2030 and to remove all the carbon the company has emitted by 2050.
This is definitely one of the most audacious sustainability goals and a wise one considering that 215 of the world’s 500 biggest companies could lose an estimated USD1 trillion due to climate change, beginning within five years, according to the Carbon Disclosure Project.7
Going beyond how climate change may cause companies’ costs to spiral, Standard Chartered’s Hanna actually highlights that a sustainability focus goes even further and benefits a company’s bottom line.
“Evidence shows that companies with a strong focus on ESG demonstrate a 210 basis point improvement on return on equity and a 110 basis point improvement on return on assets compared to those that don’t 8,” says Hanna. “This shouldn’t be surprising as companies that invest in monitoring and managing ESG issues tend to be well managed.”
Asia’s stage of growth and the fact that it houses some of the world’s most innovative companies means it is in a good position to do a sustainability leapfrog. And now is not the time for any procrastination. As Polman rightly says, “Ultimately, it’s the actions of all of us added up that is going to make the difference.”
1 https://dashboards.sdgindex.org/rankings
3 https://av.sc.com/corp-en/content/docs/Standard-Chartered-Opportunity-2030.pdf
4 https://av.sc.com/corp-en/content/docs/Sustainable-Investing-Review-2020.pdf
5 https://unfccc.int/sites/default/files/resource/Harmonized_Grid_Emission_factor_data_set.pdf
6 https://www.iucn.org/regions/asia/our-work/climate-change-asia