Why Asia's future hinges on a collective approach to sustainable finance

As Asia grapples with the escalating effects of climate change, the region faces a growing health crisis that threatens not only its people’s lives and well-being but also its economic stability.

Sea level rise and flooding, which exacerbate the spread of water- and vector-borne diseases; rising temperatures; worsening air quality; drought; food insecurity and impacts on livelihoods are amplifying health issues, with economic repercussions steadily more apparent.

We are increasingly seeing disrupted productivity, inflating healthcare costs and undermined workforce stability as a consequence, as discussed at the recent Conversation on the Climate and Health Nexus, co-hosted by the Philanthropy Asia Alliance (PAA) and the World Economic Forum's GAEA (Giving to Amplify Earth Action) initiative at the Philanthropy Asia Summit 2024.

Asia, for example, is among the regions with the most high temperature days affecting health and thereby also impeding people’s ability to work: current estimates in the region stand at 25 days per year per worker.

“The rapid acceleration of the climate crisis poses a fundamental threat to human health that impacts billions worldwide,” says Lim Seok Hui, chief executive officer of PAA. “Tackling this systemic problem requires systems-level change to achieve sustainable impact. We must act with appropriate urgency and magnitude and harness the collective power of key actors across the public, private and philanthropic sectors to overcome these critical inter-connected challenges.”

Across the board, climate change is one of the greatest health challenges of our time: it destabilizes health systems and undermines the social, environmental and economic foundations of good health. The Intergovernmental Panel on Climate Change estimates that 3.3 billion people worldwide are highly vulnerable to climate change and face greater health risks as a result.

At the Forum’s Annual Meeting in Davos, Switzerland, earlier this year, we heard further warnings of a potential additional 14.5 million deaths by 2050 and an economic loss of $12.5 trillion due to climate impacts. Healthcare systems alone will sustain extra costs, reaching $1.1 trillion.

As one of the world’s most climate-vulnerable regions, Asia’s economic stability hinges on proactive measures to curb the impacts of climate-related disasters. Swiss Re Institute has predicted that the region’s gross domestic product may decrease by more than 25% in the next 25 years without successful action on climate change.

Amid these daunting prospects, impact investing tools offer hope and are gaining momentum in the region to mitigate the effects of climate change and promote long-term economic resilience. However, to be truly successful at the pace and scale required to avoid catastrophic outcomes, we must pool our collective resources and expertise.

During the COVID-19 pandemic, we saw the powerful response of the private sector and the instrumental role that philanthropic capital played in helping coordinate and de-risk private capital operations, propelling the action of governments and international institutions in turn.

In the face of the climate crisis too, the philanthropy sector has the power to act as a catalytic force, with the unique abilities not found in other financings to be more agile, flexible, risk-tolerant and driven by values and long-term outcomes rather than dictated by quarterly returns.

It can enable the testing of new approaches and utilize successful outcomes to attract then much larger public and private investments to affect systems-level change.

“As demonstrated at the recent inaugural One Earth Summit, we are harnessing every tool at our disposal and pushing through any barrier. This includes breaking down silos to synergistically utilize expertise and resources across all sectors to create the most innovative solutions,” says Poman Lo, founder of the Institute of Sustainability and Technology. “It’s only through this collaborative approach that we’ll achieve the transition to a low-carbon economy rapidly enough to ensure a more sustainable future for Asia and the world.”

The One Earth Summit brought together key players from family offices, businesses, investors, philanthropists, policymakers and academics to move the needle on investing in innovations for sustainability. These global sustainability leaders identified how to mobilize more capital and scale and accelerate the implementation of innovative solutions and systems in Asia, such as green financing, start-ups and cutting-edge technologies.

Another key impact investing tool for the region was spotlighted in a new GAEA white paper, Labelled Bonds for the Net Zero Transition in Southeast Asia: The Way Forward, launched in partnership with ETH Zurich and The Rockefeller Foundation. It outlines the potential of labelled bonds such as green, social, sustainable and transition bonds to create transformational change in the region.

The paper also identifies the central challenges of accelerating this market, including issuer priorities, investor expectations and enabling the market environment, as well as the most effective ways to overcome them. Again, this comes down to engagement across the entire finance ecosystem.

Each country and region has unique needs and opportunities: in Thailand, for example, there is significant green bond potential in clean transport, while the transition to cleaner energy in heavily coal-reliant countries such as Indonesia, the Philippines and Malaysia calls for urgent investment.

The many variables make calculating the potential of the labelled bond market in Association of Southeast Asian Nations difficult but the potential increase in issuances is roughly estimated at around $19 billion without considering growth in the general bond market.

A just transition that doesn’t impede development in Asia, where so many still live without basic services such as electricity, is essential for sustainability as well as equity.

With the region producing half of global greenhouse gas emissions and its energy consumption 80% reliant on fossil fuels – plus the projected doubling of energy demand in the region by 2050 – this is not just an unprecedented opportunity but an urgent call to action for multistakeholder collaboration.

Together with the Institute of Sustainability and Technology, GAEA is designing communities of impact that foster dialogue, partnerships and action to elevate sustainable finance in Asia and globally. By mainstreaming impact investing for climate and nature solutions, the world can accelerate the shift towards sustainable practices to the pace and scale necessary for transformational systems change.