The Asian Infrastructure Investment Bank (AAIB) and Amundi will launch an investment framework aimed at informing "targeted sustainable and responsible financing."
The AIIB-Amundi Climate Change Investment Framework "translates?key objectives of the Paris Agreement into fundamental metrics to assess an investment's level of alignment with climate change mitigation, adaptation and low-carbon?and climate resilient?development objective."
AAIB and Amundi say there is a climate finance investment gap that is limiting the integration of climate change by companies and the financial sector across Asia, which jeopardises the success of green finance globally.
"This?is an important wake-up call?to the industry," said Stefen Shin, AIIB?principal investment officer, capital markets?and?structured products. "For climate-aligned finance?to become mainstream, Asia must?now come?fully on board.?To mobilize action,?asset managers and owners?must be equipped with the tools and be incentivized to invest.?Alongside?our partners?Amundi, AIIB will soon announce a Climate Change Investment Framework?designed to help?investors holistically assess climate change risk and transition opportunities at the issuer-level for the?first time."?
More than a quarter of the world's heaviest-emitting firms are located in Asia, but the region represents a mere 5% of the signatories of Climate Action 100+, Amundi and the AAIB note. Climate Action 100+ is one of the world's most prominent institutional investor initiatives using shareholder engagement to pursue climate goals, representing US$40 trillion in assets under management. Australian superannuation funds and fund managers are signatories to Climate Action 100+.
The institutions identify areas where climate change investment risks and opportunities are already manifested - physical risks to Asia include "severe vulnerability to sea level rise," in major cities and parts of China, Vietnam, Thailand, Indonesia?and Bangladesh. There is also the risk of increased typhoons and extreme precipitation leading to floods?present a significant threat to Asia?and?disruption of?its commercial activities.?
"There is a?vital need for investors to commit in climate-aligned ways to avoid losses from the materialization of both physical and transition risks," said Jean-Jacques Barberis, head of institutional and corporate clients division and ESG, Amundi. "Strong performance in environmental, social, governance?(ESG)?and climate impact are increasingly considered alongside traditional performance metrics. Climate concerns should be treated as a priority as we emerge from the pandemic crisis."
Compounding transition?risks?and?a?lack of regional climate finance leadership?is?in part due to a "regulatory environment where there are no mandatory requirements for financial firms to provide climate reporting and less incentives to demonstrate climate commitments," Amundi and AAIB said.
AAIB is a multilateral development bank with a mission to improve social and economic outcomes in Asia. It is headquartered in Beijing and began operations in January 2016.
Amundi is a European asset manager and currently manages nearly €1.6 trillion of asset, with six international investment hubs, financial and extra-financial research capabilities and a long-standing commitment to responsible investment.
Amundi is currently working with other multilateral finance institutions around climate-related financing. Last year, Amundi announced the launch of an investment program aimed at developing the green private credit market in Europe, with a focus on small-scale projects.
Amundi is partnering with the European Investment Bank (EIB) to launch the Green Credit Continuum investment program. The program will support the creation of several funds that will invest in green high yield corporate bonds, green private debt and green securitised debt. The EIB has made an initial commitment of EUR 60 million.