In 2024, the world has witnessed unprecedented climate events that underscore the urgency of addressing global warming. This year has been particularly pivotal for the Asia-Pacific (APAC) region, where significant strides have been made in sustainable finance, despite ongoing challenges. The convergence around new international sustainability standards has catalyzed innovative financial solutions aimed at mitigating climate impacts.
The International Sustainability Standards Board (ISSB), established to create a global baseline for sustainability disclosures, has played a crucial role in shaping this progress. While Europe has taken the lead in sustainability innovation and regulation, and the US has faced some resistance, the APAC region has found itself positioned between these two extremes. Governments in the region are increasingly driving initiatives, albeit with fragmented regulations across countries. For instance, Singapore Exchange Regulation (SGX RegCo) plans to integrate ISSB climate-related requirements into its sustainability reporting framework, mandating greenhouse gas emissions reporting from 2025. Similarly, Australia's Treasury has introduced a roadmap for sustainable finance, aligning with ISSB standards starting in 2025.
New Zealand has emerged as a frontrunner in climate change reporting, being the first country to legally mandate such disclosures for financial institutions. The External Reporting Board (XRB) has implemented climate-related disclosure standards, with ongoing reviews to ensure alignment with evolving requirements. In November 2024, the XRB extended deadlines for certain disclosures due to data challenges but maintained strong user demand for transition planning information. BNP Paribas' Securities Services has supported firms in New Zealand by providing essential data and reporting services, reinforcing their commitment to positive global impact through ESG integration.
The issuance of the world’s first sovereign climate transition bonds by Japan in February 2024 marked a landmark moment in transition finance. With an estimated $3 trillion annually required by 2030 to support the global transition to a net-zero economy, more than half of this investment is needed in APAC, especially in emerging markets. Despite these advancements, the region faces significant data challenges, particularly concerning energy transition metrics. Countries like Indonesia, India, and Thailand must develop robust ecosystems to gather and standardize transition data.
To address these challenges, institutional investors are leveraging multiple data sources and conducting independent research methodologies. BNP Paribas' Manaos platform offers a centralized solution for storing fund data, enabling comprehensive and transparent views of investments and ESG footprints. Additionally, BNP Paribas launched an ESG investment compliance monitoring service in Australia and New Zealand, ensuring funds meet their ESG commitments through automated assessments.
As we move forward, distinguishing between green finance and transition finance, as well as between climate mitigation and adaptation, becomes increasingly important. Focusing solely on green assets overlooks the broader need for economic transitions, while concentrating only on mitigation neglects the necessity of adapting to physical climate risks. The establishment of the Taskforce for Nature-Related Financial Disclosures (TNFD) and the Taskforce on Inequalities and Social (TISFD) further underscores the holistic approach required for sustainable development.
This journey toward full adoption and implementation of sustainability standards will require collaboration among governments, businesses, and financial institutions. For APAC, embracing these standards not only aligns with global trends but also positions the region to lead in sustainable innovation and resilient growth. By fostering a collaborative environment, the region can drive meaningful change, ensuring a brighter and more sustainable future for all.