Climate action a trillion-dollar opportunity for Asia-based corporates

Contributing to climate action is not just a moral move for corporates in Asia Pacific, according to a new report by the World Economic Forum in collaboration with Boston Consulting Group and SAP, but also a strategic and financial move. The prize: a trillion-dollar opportunity up for the grabs.

Asia holds tremendous potential for global climate action. Not only is the region the driving force behind worldwide economic growth, but it also accounts for the largest portion (51%) of current global emissions.

In their efforts to bring down their footprint, businesses working towards decarbonization can exploit significant possibilities, such as adopting renewable electricity, improving energy efficiency of buildings, fostering more circularity in production, and moving towards greener supply chains.

The shift to greener ways of operating will come with a financial windfall, says the report. With an estimated $4.3 trillion to be unlocked for enterprises in the Asia Pacific region, the opportunity for incremental income is enormous. This amount represents 43% of the entire worldwide opportunity, said the report.

More than half (58%) of the predicted 395 million new jobs needed to support the climate drive are likely to be situated in Asia, which includes sectors such as food, land, and ocean industries, as well as energy and extractives.

“The business case for climate action is clear,” said Paul Marriott, Asia Pacific and Japan President at SAP. “We know that 50% of Asian businesses believe addressing environmental issues will be material to business results within the next five years. Organizations who ignore or hedge their climate strategies gamble their ethics, revenues, and competitive advantage.”

The case for change

The report said that if governments and private sector in Asia fail to drive their climate change agenda, the outcome could be disastrous. Beyond the widespread environmental and individual impact, the report notes extreme climate change (defined as a severe increase of 3.2°C by 2050) is projected to see a reduction in Asia’s GDP by over 26%. Southeast Asia is predicted to experience a GDP reduction of 37% – by far the worst around the globe.

The worrying fact is that, even if the 1.5°C targets set in the Paris Agreement are achieved, Asia will still bear the brunt of more – and more extreme – weather events, as well as a shift in its broader climate.

“At 1.5°C, Asian countries will still have to deal with as many as 60 million people affected by coastal flooding every year, a risk of long-term degradation to 70% of coral reefs through bleaching, around 5% lower crop yields and a 1.8 times increase in heatwaves,” said the report.

“The need for climate action is urgent,” said Neeraj Aggarwal, Asia Pacific Chairman of Boston Consulting Group.

The energy challenge for APAC

One of the key pillars of driving climate action is transitioning to renewable energy, with the fossil fuel industry the largest source of anthropogenic greenhouse gas emissions in the world.

With its expanding economy and facing growing demand for energy, Asia Pacific faces the challenge of having to manage the transition while guaranteeing more as well as safe and cheap energy supply.

Asia is expected to see an increase in energy demand of 18% by 2030 according to the report, with the continent to represent almost two-thirds of projected growth in global energy demand, taking into account India (26%), China (22%) and South-East Asia (12%).

In terms of ambitions, to achieve the Sustainable Development Scenario goals set by the International Energy Agency, global coal emissions must drop by 88% – of which 88% must come from Asia – and oil emissions by 65% –with 20% of the reductions coming from Asia.

“Yet even fully implementing current policies will see an increase of only 5% for renewables’ share of the energy mix, far below the 12% increase required to achieve key development targets,” said Aggarwal.

Gim Huay Neo, Managing Director in the Centre for Nature and Climate at the World Economic Forum, said: “Asia is key on the journey towards net zero. Asia accounts for 51% of annual global greenhouse gas emissions. Business has a strong role in cutting emissions and climate action. To scale, accelerate, and sustain efforts, business needs to collaborate with government and communities, harness innovation, and build partnerships across their value chains.”

Aggarwal concluded: “We live in an age of urgency, and Asia is a region that will decide the success of global climate action efforts. Only by committing to bold and immediate change can Asian businesses and their leaders contribute to a brighter future for our planet and better lives for our people.”