Asian business models to undergo seismic transformation

Dr Celine Herweijer, Group Chief Sustainability Officer, HSBC, said this transformation is happening in two directions– away from activities challenged by environmental and social issues, and towards activities that promote positive environmental and social outcomes.

On the first, some 76% and 84% of Asian issuers say they expect noticeable or substantial change to their models and capital allocation over the next two and five years – the highest percentages of any region.

On the second direction – towards activities that promote better outcomes – Asian issuers expect just as much change. In fact, some 78% say noticeable or substantial change is likely to happen in the next two years, while 75% say they expect the same in the next five years.

There is greater alignment with other regions on this area, such as with Europe over a five year period. But it is striking the extent to which Asian issuers expect such a huge transformation in their business models and capital allocation.

One key contributor to this is the increasing pressure on companies to cut emissions. Committing to achieving carbon neutrality or net zero by a certain date, such as 2050, is a new imperative for governments, companies and investors the world over. For their part, Asian issuers are making progress on setting targets – some 15% of them have already made commitments, just behind issuers in the Americas (17%) and Europe (24%). Progress is also being made by Asian investors –some 11% say they have made a commitment, which is similar to their Americas peers but far behind European investors (39%).

Reducing emissions is paramount to slowing global warming and better managing climate change, which for 43% of Asian issuers and investors, is the most urgent threat to humanity and biggest challenge of our times.

Asian companies are acutely aware of this; some 64% of issuers say climate change is already affecting their business or activities – the second highest regional percentage after issuers in the Americas (66%). By country, more Singapore issuers (68%) say they are being affected than any other country in Asia.

Asked what they are doing to prepare for or lessen the impact of climate change, most (74%) issuers said they are being proactive and seeing an opportunity to increase some business activities or start new ones that could benefit from the economic changes climate change will bring about.

By comparison, only 30% of issuers said they would reduce or get out of some businesses vulnerable to climate change, which may suggest they have already made substantial re-adjustments to their asset portfolios.