The Association for Sustainable & Responsible Investment in Asia (ASrIA) today launched two reports entitled Unlocking Asia's Potential: Low Carbon Investment in Asia. Additional launches are in Singapore (22 February), Mumbai (1 March) and Shanghai (mid March).

The Climate Change Risks and Opportunities across Six Sectors report examines the implications of climate change on investment and the shift to a low carbon economy in Asia. Climate change risks and opportunities are highlighted for select sectors, namely Information Technology (IT) & Mobile Communications; Transport; Property & Construction; Agribusiness; Energy; and Finance.

The Integrating Climate Change Criteria into Investment Decisions report provides an integrated look at how investment professionals in Asia can consider climate change in their investment process. It also has a framework review for investment professionals to actively encourage greater integration of climate change and low carbon considerations into investment decisions.

Sponsored by the UK Foreign & Commonwealth Office, the Unlocking Asia’s Potential publications are part of the Low Carbon Investment in Asia (LCIA) project. As venue sponsor, Richard Caines of the IFC, the member of the World Bank Group focussed on private sector development in emerging markets, welcomed guests and speakers.

Tessa Tennant, Founding Chair and Director at ASrIA, remarked that the LCIA project is a continuation of earlier work with Asia's asset owners, and the 2009 report The Time to Lead is Now: The Adoption of ESG Analysis by Asian Government Pension Funds. She said: "For the last decade ASrIA has been working with institutional investors in Asia to integrate the long term perspective into investment. Our 10th Anniversary Conference in September this year is an excellent opportunity to showcase what pension funds and others are doing in the region."

Alison McEwen, Vice-Consul, British Consulate-General Hong Kong, noted that the UK government supports ASrIA's work in the LCIA project because of the huge challenges Asia faces as a large carbon emitter. She cautioned: "Asia still lags behind Europe and other parts of the world in channelling investment into a low carbon economy."

Ms McEwen continued: "The time for an investor group in Asia focused on climate change and resource scarcity is now, as other regions have had similar groups for a number of years. Policy makers in Asia would likely take notice if Asian institutional investors made their collective voice heard."

Hendrik Rosenthal, Project Director at ASrIA, stressed that an emphasis on more energy efficient manufacturing plants, property and equipment leads to lower operating costs and growth in new technologies. He said: "Differentiated, low or zero emission products and services will lead consumers towards premium prices and create higher gross margins. Uptake should accelerate once public sentiment towards increasing efficiency and reducing individual carbon footprints solidifies."

Mr Rosenthal added: "The Energy, Property & Construction and Finance sectors are particularly problematic from a carbon perspective, as the majority of the carbon intensity is hidden in downstream products and services, thereby hindering investment professionals to prepare valuations based on associated climate change risks."

Dave Doré, Research Manager at ASrIA, discussed the Integrating Climate Change Criteria into Investment Decisions report. In describing constructive shareowner engagement, he said: "Some companies in Asia may consider engagement in a very negative light, as something very confrontational. So we should really stress that shareowner engagement is a forum for collective risk management and not investors telling company executives how to run the day-to-day operations."

Mr Doré remarked: "Some executives respond positively to investor interest on the shift to a low carbon economy. Australian Ethical Investment's Climate Advocacy Fund launched Australia's first climate change shareholder resolutions last year. One example is Oil Search responding positively to the engagement and is putting the resolution to shareholders at its annual general meeting."

Alexander Ablaza, Sustainability and Climate Finance Specialist at IFC, described how IFC is mainstreaming climate business into its operations. In describing IFC's Climate Business Mandate, Mr Ablaza noted that one of IFC's strategic priorities is to invest in renewable energy and energy efficiency projects to support low carbon economic growth in developing countries. He said: "We want to support new thinking, lead by example and achieve impact at scale. That’s why IFC plans to double its climate-related loan and equity investments to around 20 percent of our overall business by 2013."

Mr Ablaza also described IFC’s recent renewable capacity investments including a US$3.1 million loan to an Indian biomass firm, a US$1.7 equity stake in a Thai solar company and a US$23.2 million loan to a Chinese hydropower company. He highlighted that the IFC has invested US$154 million in climate change funds, with over US$114 million going to funds in Asia including US$25 million in the Clean Resources Asia Growth Fund. IFC's investments that are aimed at shifts toward low-carbon economies are made through strategic clients that include financial institutions, manufacturers, agribusinesses, service providers and infrastructure developers.

Wai-Shin Chan, Director at Environmental Investment Services Asia Limited (EISAL), described three main challenges for investment managers in Asia. He noted that investment managers find it extremely difficult to consider long-term issues such as climate change when asset owners routinely pressure managers for short-term results. He stressed: "Asian asset owners need to give more incentives for long term returns."

Mr Chan also emphasized that risk management at the firm level is another key challenge. He discussed the difficulty calculating the probability of climate change’s impact on a firm's assets. But he stressed managers can use expected credits, including Certified Emission Reductions (CERs), Verified Emission Reductions (VERs), and Renewable Energy Certificates (RECs) in the valuation process. A third challenge was that he was dealing with many under-researched companies. Many of the firms in the low carbon sector have one or two analysts covering them as opposed to the 45 analysts covering Suntech Power, a photovoltaic (PV) producer based in China.

One of the most significant outcomes of the Low Carbon Investment in Asia (LCIA) project has been the understanding that there is a real need for an investor/shareholder collaboration that will focus on climate change in Asia (just as there are similar groups in other parts of the world).

Alexandra Tracy, Chairman of the ASrIA Board, announced that this year ASrIA will take the lead in creating such a forum - Asia Investor Group on Climate Change (AIGCC). She said: "AIGCC brings Asia's institutional investors together to learn from each other and to identify the best ways to use their collective influence in the region to engage in dialogue with companies on climate issues and to interact at the policy level with key decision makers. We will be working with investors to define the most critical issues for Asia and to set the agenda for AIGCC over the next 2-3 years. We see an exciting opportunity now for financial institutions to be involved in supporting the development of AIGCC, and thereby to be recognised in the market as a clear leader in the climate change space in Asia."

To register for Unlocking Asia's Potential report launches in Singapore (22 February), Mumbai (1 March) and Shanghai (mid March), visit: http://portal.asria.org/LCIA/event.html

Editor’s notes

Low Carbon Investment in Asia project portal

For background information about the ASrIA Low Carbon Investment in Asia project, visit: http://portal.asria.org/LCIA/.

Event speakers

About the Association for Sustainable & Responsible Investment in Asia (ASrIA)
The Association for Sustainable & Responsible Investment in Asia (www.asria.org) is a not for profit, membership association dedicated to promoting corporate responsibility and sustainable investment practice in the Asia Pacific region. ASrIA's members include investment institutions managing over US$4 trillion in assets, however membership is open to any organization which has an interest in sustainable investment. ASrIA's goal is to build market capacity for SRI. We provide insightful, up to date and accessible information on the development of SRI in Asia and globally. We have also become the platform for different sectors within the community to exchange information and perspectives on SRI, and to take practice forward. http://www.asria.org/

About the UK Foreign and Commonwealth Office (UK FCO)
The UK Foreign and Commonwealth Office works around the globe to drive forward international action to tackle climate change. Addressing climate change requires a sustained global effort to reduce greenhouse gas emissions. The British Consulate-General in Hong Kong aims to support the Hong Kong government, businesses and investors in developing low carbon strategies, through promoting debate and sharing UK expertise. http://ukinhongkong.fco.gov.uk/en/about-us/working-with-hong-kong/climate-change/

About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in developing countries. We create opportunity for people to escape poverty and improve their lives. We do so by providing financing to help businesses employ more people and supply essential services, by mobilizing capital from others, and by delivering advisory services to ensure sustainable development. In a time of global economic uncertainty, our new investments climbed to a record $18 billion in fiscal 2010. For more information, visit http://www.ifc.org

About Environmental Investment Services Asia Limited (EISAL)
Environmental Investment Services Asia Limited (EISAL) is Asia's premier independent environmental investment management company, specialising in investment in the Asian environmental & low-carbon sector. Leveraging more than 50 years of combined emerging market management experience in Asia and proprietary fundamental in-house research on the Asian green sector. EISAL is a Hong Kong-registered company, licensed by the Securities and Futures Commission (SFC) to carry out Asset Management (Type 9) and Advising on Securities (Type 4) to professional investors. http://www.eisal.com/

Association for Sustainable & Responsible Investment in Asia (ASrIA)

Association for Sustainable & Responsible Investment in Asia (ASrIA)

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