Asia Pacific’s (APAC) economies are particularly vulnerable to nature-related risks, including biodiversity loss, pollution and fresh water availability, according to data released today by the Asia Investor Group on Climate Change (AIGCC) and PwC.
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53%, or US$18 trillion, of APAC’s Gross Value Add (GVA) is in economic sectors that are moderately or highly directly dependent on nature.
This includes reliance on fertile soils, clean water, pollination, and climate stability, all of which are in serious decline in many parts of the region.
- 20%, or US$7 trillion, of APAC’s GVA is in sectors with higher direct exposure: including agriculture, construction, fishery and aquaculture, food systems, and forestry.
- This is higher than the global figure of 16%.
- 33%, or US$11 trillion, is in sectors with moderate direct exposure, including energy, manufacturing, and services.
- The remaining 47% is in sectors including Real Estate, Healthcare, IT, and Retail, where the nature risk exposure is more likely to be indirect.
Public equities are even more exposed, with 58% of regional market capitalisation being moderately or highly directly dependent on nature.
- 11 out of the 14 APAC stock exchanges have more than 50% of market capitalisation with higher or moderate direct dependency on nature.
- The Taiwan Stock Exchange (TWSE) (44%), New Zealand Stock Exchange (NZSE) (42%), and Shanghai Stock Exchange (SHSE) (37%) stock exchanges had the highest proportion of market capitalisation with higher direct nature dependence.
Guidance to manage nature-related risks
AIGCC and PwC have developed a checklist as general guidance for investors to identify and manage nature-related risks.
- Understand expectations and identify relevant information required to assess nature-related risks in their portfolio.
- Gain top management and board commitment on nature.
- Confirm priorities for action through the assessment of assets and portfolio exposure, taking into account sectors and geographical locations to develop investor’s approach or policy on nature.
- Identify relevant industry and market-related initiatives that can be leveraged
- Regularly engage with priority sectors and the key companies that are represented in specific supply chains within investment portfolios.
- Adopt the most relevant framework for nature-related reporting and target setting for your investments. AIGCC recommends The Taskforce on Nature-related Financial Disclosures (TNFD) recommendations and the Science- based Targets Network’s (SBTN) science-based targets for nature.
The forthcoming report, substantiated by case studies from corporates and investors, demonstrates how to effectively manage nature-related risks.
AIGCC Director of Investor Practice, Monica Bae said: “Global economies are heavily reliant on healthy ecosystems and the APAC region is no exception. Nature-related risk is a risk that can’t be ignored. The Nature at a Tipping Point report will help as a crucial first step for investors to understand how nature loss can impact their portfolios.
“A nature-positive future unlocks significant new opportunities. By acting now and integrating nature-related risks into their investment strategies, APAC investors can ensure they’re positioned to benefit from a sustainable and resilient future. AIGCC is committed to supporting investors on this journey.”
AIGCC Forest and Land Use Working Group Investor Co-Chair* Jane Karen Ho said: “Biodiversity loss and ecosystem degradation can disrupt supply chains, erode asset values, and ultimately impact returns. As an institutional investor with a long-term perspective, nature-related risks present significant concern. This new guidance from AIGCC and PwC is useful for steering our investment decisions towards a sustainable future.”
PwC Malaysia, Asia Pacific Sustainability, Biodiversity, Director, Perpetua George, said: “Crisis in our natural ecosystems is not only an environmental concern but also a major economic threat for the Asia Pacific region. The loss of nature presents huge risks to our people, communities and businesses. Of all 20 industries analysed by PwC, 100% have exposures to nature risk in their value chains. Asia Pacific businesses such as the agriculture sector, already have familiarity with biodiversity concerns, so now is the time for us to take the next bold step, leverage on sustainability, and safeguard the valuable ecosystems that support us all.
“Together, AIGCC and PwC will use our combined knowledge and resources to identify practical solutions that allow us to understand the problems threatening our environment and safeguard our natural ecosystem that we all rely on.”
Notes for editors
The preliminary findings and case studies are from a forthcoming report Nature at a Tipping Point by AIGCC and PwC which will help investors in the region prepare to manage these nature-related risks. The research covers 14 APAC territories –
- Australia,
- China,
- Hong Kong,
- India,
- Indonesia,
- Japan,
- Malaysia,
- New Zealand,
- Philippines,
- Singapore,
- South Korea,
- Thailand,
- Taiwan, and
- Vietnam
PwC’s analysis draws on data from the ENCORE database designed for financial institutions to assess their exposure to natural capital risks according to economic sector and geographical location.
AIGCC and PwC previewed the Nature at a Tipping Point report today at a webinar where Emily McKenzie, Technical Director of TNFD, delivered the keynote speech. This was followed by a panel discussion, moderated by Perpetua George, Asia Pacific Sustainability, Biodiversity, Director, PwC Malaysia, featuring Daphne Hameeteman, General Manager – Sustainability, External Engagement, Wilmar International; Monica Bae, Director of Investor Practice, AIGCC; and Yuki Ikehata, General Manager of Active Ownership Team, Research & Engagement Group, Asset Management One (AM-One).
*AIGCC’s Forest and Land Use working group is led by co-chairs: Jane Karen Ho, Head of Stewardship for Asia Pacific, BNP Paribas Asset Management and Seiji Kawazoe, Global Initiatives Fellow, Sumitomo Mitsui Trust Asset Management.