Investors wanting to better understand deforestation and nature risk in Asia can now take a new online course offered by the Asia Investor Group on Climate Change (AIGCC). It draws on a May study by the AIGCC and PwC, which found an “alarming” degree of nature loss in the region, and considerable shortfall in investment to halt and reverse it. The course – open to all AIGCC members but particularly directed at investment analysts and portfolio managers – includes four modules: introduction to deforestation; deforestation risks and opportunities; integration of deforestation risk and opportunities into investment strategies; and case studies. The latter include Schroders’ work on reducing commodity-driven deforestation, Resona Asset Management’s efforts on managing the nature risks of palm oil, and Sumitomo Mitsui Trust Asset Management’s engagement strategy on nature risks. “Asia’s investors have been clamouring for resources to help them manage nature risks and opportunities,” AIGCC CEO Rebecca Mikula-Wright said. “Despite nature being such a financially significant investment factor, until now there hasn’t been high-quality and reliable training that meets investors’ needs.” The training will give AIGCC’s members a solid foundation in an increasingly important area, Mikula-Wright added.

Global investment firm Blue Earth Capital has highlighted increasing awareness of and interest in impact investing, with investors identifying potential to deliver “real-world” positive impact while maintaining strong financial returns. Responding to the firm’s inaugural ‘Impact 360 Survey’, 83% of investors said the financial returns of their impact investments had either met or exceeded their expectations. Private equity is currently the most popular way for investors to access the impact space (72%), the report noted, while fewer than 8% of those surveyed said they had entered through listed equities. In addition, 62% and 61% of respondents respectively pointed to Africa and Asia as being home to the greatest impact-related investment opportunities. Despite mounting interest, 73% of respondents said it would take up to a decade for impact investing to become a mainstream institutional investment strategy. Seventy percent said impact funds needed to deliver on both financial returns and impact key performance indicators (KPIs) to be considered successful. Specifically, an impact fund would be considered a failure if it outperformed its impact KPI but did not meet financial return expectations. Conversely, 56% of respondents perceived impact funds as unsuccessful if they outperformed financially but did not meet their impact KPI. Despite progress, 32% of respondents said the broader non-impact finance community still has a poor understanding of the market. “This includes a limited appreciation of the key characteristics of impact investing, the investment opportunities, the impact agendas of businesses, and the particular investor skillsets required for the space,” the report mentioned.

Europe is overly dependent on China for the minerals needed for its green transition, according to credit ratings agency Moody’s. In a new report, the data and research provider said a lack of domestic resources means the bloc risks lagging behind other jurisdictions. Critical and strategic raw materials like lithium, nickel, copper, cobalt and rare earths are essential for low-carbon technologies, and their use will quadruple between now and 2040. However, Europe imports the vast majority from other jurisdictions, leaving its companies exposed to supply chain risks and price volatility – and threatening its long-term competitiveness. Some of the most-exposed sectors include defence and aerospace, mobility, electronics and renewable energy, the report noted. “As the pace of the green transition and digital transformation accelerates, Europe risks being left behind because it lacks sources of key raw materials,” Moody’s said. “It is highly reliant on China and emerging and frontier markets, which exposes it to supply-chain and price volatility.” Regulations like the EU’s Critical Raw Materials Act – which attempts to bring processing of certain key materials onshore, limit reliance on supply to single countries, and boost recycling – will help, but need time to take effect. The report also noted that EU plans to invest in clean technology were much weaker than the US Inflation Reduction Act, as they do not “provide mechanisms like tariffs or subsidies that could further incentivise domestic production and reduce dependency on foreign sources”.

The renewable sector has demonstrated strong resilience this year, despite ongoing climate- and social-related impacts. A report published by global advisory firm WTW highlighted profitability as one of the biggest ongoing challenges for the sector, due to variable results within energy classes. In addition, it noted that climate volatility caused by El Niño and La Niña had also challenged the renewables market – with significant natural catastrophe losses and individual weather events exceeding US$1 billion in damages. Ongoing global supply chain instability following the Covid-19 pandemic also impacted lead times for critical items. The renewable energy insurance market currently faces a resource skills gap, WTW said, as it looks to transfer skills from traditional energy sectors to low-carbon infrastructure. Demand for renewables is nonetheless still growing, WTW noted. “Countries in Asia are increasingly embracing renewable energy [and] we anticipate a continued surge in investments in 2024, particularly within the South-East Asia region, with countries setting ambitious targets to meet their net-zero emission goals,” said Sam Lui, WTW’s Asia Head of Renewable Energy. The region will likely witness an increase in cross-border projects to import and export electricity – but challenges remain, such as cross-border regulations and complex transmission facilities including for subsea cables and financing, Liu explained.