Asian investors slowly finding a voice on climate change
Asia may represent an increasingly large chunk of global economic activity and greenhouse gas emissions but the institutional infrastructure for Asian investors to weigh in on the issue of climate change is still in its infancy.
That is not to say there is nothing happening. In the months since the foundation of the Asia Investor Group on Climate Change (AIGCC) was announced, a large number of baby steps have been taken according to Alexandra Tracy, chairman of the Association for Sustianaiable and Responsible Investment in Asia, which provides AIGCC's secretariat.
In the first quarter of this year the AIGCC ran a roadshow in Singapore, Bangkok, Beijing, Jakarta, Kuala Lumpur, Hong Kong and Manila and also held in a launch event in Singapore last month. Tracy herself reckon she's visited more than 75 investors and fund managers.
The organization has also received strong backing from major international investors and fund managers, with Australia's Cbus and VicSuper, the UK's Universities Superannuation Scheme and Hermes Fund Managers, Standard Chartered Bank and Chubb Insurance all listed as Founding Supporters.
While this support is welcome the intention is for the AIGCC to be for, and made up of, Asia's local and regional investors and fund managers. Securing their participation, is however, something of a corporate cultural challenge.
"They're not really used to working in a collaborative way, so our approach is to 'gentle' them along," said Tracy. "The aim is to build a network of interest before morphing into formal membership mode by the end of the year."
Interest has, in fact, has not been too hard to find with AIGCC being generally well received, particularly in Korea, Thailand, Singapore and Malaysia, according to Tracy.
"One or two fund managers did express the reservation that being involved with AIGCC may signal a compromise on returns. But then that's an opportunity to open a discussion on risk management as it relates to energy security, resource depletion, subsidies for fossil fuels and so on. As a group, however, the fund managers are obviously looking for direction on climate change from their institutional clients," she said.
Another challenge is the prominent role of state-owned financial institutions, particularly in China where independent fund management is relatively under-developed.
"China's interesting because climate change is high on the government agenda but this hasn't fully percolated through to the financial sector. It is essential that we engage with the big state-owend banks there because they have such an important role in directing domestic investment," said Tracy.
Going forward the AIGCC has an ambitious work-plan to be executed over the next year or so, including:
- A training program for fund managers covering climate change risks and opportunities
- Case studies and investor round-tables on corporate climate change policies
- Case studies and investor round-tables on low-carbon financing structures
- A proprietary research report on the impact of potential carbon taxes on listed companies in selected countries e.g. China.
- Proprietary research on adaptation risk in selected cities e.g. Singapore, Bangkok and Jakarta
- Development of policy engagement strategy for selected countries
- On-going engagement and collaboration projects with members and global investor networks
The is also is a major regional AIGCC event being planned for September with the support from a large pension fund. So stay tuned for more details.