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Rising temperatures, extreme weather events and rising sea levels are impacting communities and economies around the world. Asian countries are particularly vulnerable to these climate change impacts due to their location and dependence on certain industries. hence, the energy transition is crucial for Asia.
HSBC Asset Management in a recent market analysis discusses the impact of climate change and the energy transition efforts on overall economic growth and investment in Asia. According to the asset manager, Asia, as the fastest-growing economic region, faces the twin challenge of decarbonising while balancing its major development needs.
“Asia itself must play a primary role in reducing future climate change impacts. Rapid industrialisation, urbanisation and population growth have propelled an increase in the region’s contribution to global greenhouse gas emissions from half in 2010 to 60% just over a decade later,” says HSBC AM. “China and India, the world’s most populous countries, now account for roughly 40% of global greenhouse gas emissions from fuel combustion.”
HSBC AM believes that Asia’s energy transition could prove to be a major growth driver for the region. The scale of transformation that Asia requires for its net-zero transition is likely to spur massive opportunities for job creation, innovation, and investment.
As an example, HSBC points out that there were 13.7 million jobs in the renewable energy sector in 2022, with two-thirds located in Asia.
The asset manager further cites a study by the Global Financial Markets Association that predicts that more than half of global investment in climate solutions will be needed in Asia. “The region’s ascendancy in the green bond markets reflects the growing scale of investment proceeding,” as per HSBC AM.
“This potentially provides a compelling opportunity for investors, with private capital set to play a significant role in facilitating change. Conversely, it may pose a competitive risk for those companies that fail to adapt,” the asset manager contends.
