Asian countries need better climate adaptation plans to attract private investment: report | News | Eco-Business

However, the biggest Asian markets still have significant gaps in their adaptation planning, especially when it comes to meeting investor expectations, a new report by Asia Investor Group on Climate Change (AIGCC) showed.

AIGCC, which counts Asian institutional investors as members in its network, identified national adaptation plans (NAPs) as being a crucial building block for countries to channel private capital towards adaptation projects. The NAP process, introduced under the United Nations Framework Convention on Climate Change (UNFCCC) helps countries identify and address their medium- and long-term priorities for adapting to climate change.

But across nine major Asian markets studied by AIGCC – China, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore, South Korea, and Thailand – only Thailand has submitted its NAP to UNFCCC in April 2024. Malaysia is currently developing one for submission in 2026.

Some of the other countries have outlined adaptation strategies and priority areas within their government plans, said AIGCC, citing domestic climate change adaptation plans and strategies adopted in China, Japan and South Korea.

However, the perspectives of investors and financial institutions are often missing from the national adaptation planning process. 

“Although Asian policymakers increasingly act on science and economic realities, and investors have already put billions into renewable energy, green transport and other promising decarbonisation solutions, investments in adaptation and resilience are severely lacking,” said Rebecca Mikula-Wright, chief executive officer of AIGCC.

The world faces a gap of up to US$359 billion annually needed to finance climate adaptation and resilience, according to the United Nations Environment Programme.

A major barrier investors face is a lack of accessible information about physical climate risks, and insufficient data on risks at a sectoral or provincial level, the report found. There is also insufficient information, consultations with investors and the private sector, as well as unclear adaptation project pipelines or financing pathways to mobilise private capital.

Investors want to invest in these projects but require sound adaptation strategies at the national level, said Manulife Investment Management’s head of sustainable investing for Asia, Eric Nietsch. NAPs can bridge this gap, he added. 

“To significantly boost adaptation finance in Asia, we need clear risk assessments, project opportunities, and defined roles for private capital,” said Nietsch, who is also the co-chair of AIGCC’s working group on physical risk and resilience.

The report built on AIGCC’s 2022 study of investor expectations of NAPs in Asia, which listed seven overarching asks that investors have for governments when it comes to adaptation planning. This included outlining a consistent, national view of physical climate risks, ensuring corporate disclosures of physical risks and engaging with the private sector and financial institutions.

Results were mixed across different Asian markets. “Several markets have implemented promising examples of best practices, especially in collaborative initiatives,” the report said, highlighting for instance Japan’s Climate Risk Industry-Government-Academia Collaboration Network and localised climate finance pilots in China.

However, none of the markets could clearly show sufficient national coordination for adaptation planning, and although four had platforms for data on physical hazards, access to these platforms was largely restricted to a limited audience, such as local governments or banks.

Most markets also lack detailed numbers on how extreme weather events such as floods would affect their economies. Hong Kong and Singapore especially have yet to quantify and communicate climate impacts or vulnerabilities across specific sectors, the report highlighted. Meanwhile, four markets – China, India, Japan and South Korea – had defined climate-vulnerable groups and communities and communicated specific plans to protect them, such as early warning systems for heat exposure targeted at the elderly.

On the corporate front, all countries require corporate disclosures of physical risks using international standards, but Indonesia and Thailand are still not aligned on this rule. “This may omit decision-useful information on physical risk exposures,” the report said.

The report recommended that governments improve the accessiblity and clarity of their adaptation planning processes, engaging investors early on so that they can be included in the development and implementation of NAPs. 

In the meantime, asset managers and financiers can advocate for stronger regulatory frameworks to enable investment in climate resilience, such as mandatory corporate disclosures and clear financing policies. They can also build capacity within their own organisations to assess their exposure to phsyical climate risks and quantify the benefits of adaptation measures, suggested the report. 

“Concerted and collaborative efforts by policymakers and investors, alongside innovations within financial markets and public policy, are key to unlocking the financing required for adaptation and resilience projects,” said AIGCC.

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