In the rapidly evolving landscape of ESG standards, financial institutions across the APAC region are stepping up to integrate sustainability into their operational framework.
According to ESG News, a recent report, ‘Sustainability Counts III’ by PwC, sheds light on the progress and hurdles faced by the financial services sector in advancing global sustainability goals, highlighting a pivotal role played by the practices of portfolio companies and borrowers.
A significant observation from the report reveals that over half (52%) of the surveyed financial institutions have committed to net-zero targets. However, adherence to the rigorous Science-Based Targets initiative (SBTi) is still low, with only 8% of institutions having their targets validated under these standards. This limited alignment may reflect the challenging requirements set by SBTi, and as noted in the report, “The low uptake may reflect the demanding requirements of SBTi standards.”
Additionally, the adoption of scenario analysis in climate risk management is still in its nascent stages, with only 25% of firms engaging in both quantitative and qualitative analyses. This figure is expected to rise as regulatory bodies, such as the Hong Kong Monetary Authority and New Zealand’s Financial Markets Authority, begin mandating comprehensive scenario analyses.
On the front of biodiversity and nature reporting, nearly half of the institutions report addressing biodiversity concerns in their sustainability frameworks. Engagement with the Taskforce on Nature-related Financial Disclosures (TNFD) remains minimal, although it is anticipated that initiatives like the Global Financial Alliance for Net Zero’s (GFANZ) nature-related guidelines will bolster reporting practices.
The report underscores that 53% of APAC’s economic value is directly tied to natural resources, emphasizing the critical need for biodiversity-focused actions, as highlighted by a joint study from AIGCC and PwC China. As the report suggests, integrating nature-focused metrics into transition plans is not only a strategic imperative but essential for the resilience of the financial sector.
Driving ambitious decarbonization targets, scaling up scenario analysis for better resilience planning, and embracing biodiversity standards are key takeaways for financial institutions aiming to align profitability with environmental stewardship. As regulations tighten and market demands evolve, forward-thinking institutions are already leveraging these practices to ensure they are well-prepared for the future challenges.
Quotes from the Report: On net-zero alignment: “SBTi’s upcoming Financial Institution Net Zero (FINZ) standard could catalyze broader engagement,” the study indicates. On scenario analysis: “A phased approach starting with qualitative methods can pave the way for rigorous quantitative assessments,” regulators recommend. On biodiversity integration: “53% of APAC’s economic value depends on nature, underscoring the urgency of biodiversity action,” a joint report by AIGCC and PwC China highlights.
