As the world grapples with environmental and social issues, the spotlight has slowly been brought to the Asia-Pacific. In APAC, structural reforms, stringent regulations, and oversight from policymakers have helped drive the transition towards a more sustainable economy.
However, has this wave of sustainable finance maintained its momentum? Or, have financial institutions and investors started to doubt the effectiveness of sustainable investments?
Disclosing on climate
When questioned on the current state of the sustainable finance market in the region, Jules Bottlaender, Head of Sustainable Finance APAC, for Securities Services at BNP Paribas, maintains a more than positive outlook. In his eyes, “APAC is truly on the right track” in terms of progression.
The region has done this by taking on a ‘smart approach’, he says, where countries in the Asia-Pacific have been able to monitor the implementation of sustainability regulations around the world and learn from their failures and achievements. “Although Europe has been leading in sustainable finance, particularly in product innovation and regulations, APAC has been closely following.”
Regulations that have followed this route, namely the application of broader international frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD) and International Sustainability Standards Board (ISSB), have proven to be a success across the region. Behind what could appear as a fragmented region at first glance, we observe a high degree of harmonisation in the standards applied across jurisdictions.
And it’s not just regulations. “If you look at ESG integration, it has become a mainstream practice in APAC. Financial institutions recognise it’s a sound investment practice, because environmental, social, and governance factors are truly material to the risk-return of a portfolio.”
“At a country level, Japan, for instance, is by far the country with the most TFND [Taskforce for Financial-related Disclosure] adopters,” Bottlaender notes, eliciting a touch of surprise. Really? “Yes, it’s actually quite interesting. Whether it’s corporations or financial institutions, the majority are coming from Japan, while you would have expected it to come from Europe or elsewhere.” And indeed, 81 Japanese institutions have already pledged to adopt TFND-aligned recommendations to integrate nature in their corporate reporting, vastly outnumbering the 18 in the UK and just 3 from North America that have committed to do the same.
New Zealand and Singapore have also proved to be sustainable leaders on a global level, with the former being the first country in the world to legally require climate-related disclosures in 2021. While “Singapore has been swiftly implementing new and advanced standards, often adding an innovative spin. Building on the learnings from the EU for instance, they introduced a visual traffic light system to the green taxonomy to classify economic activities based on how well they align with the sustainability objectives,” Bottlaender says.
Succumbing to the hype?
But have the investors themselves become less receptive to the idea of sustainable investments?
For Bottlaender, it is important to note two things. On the one hand, he believes that investors now are going beyond simply buying securities. “They are using their ownership rights to influence the behavior and activities of companies they invest in through company engagement and proxy voting.”
Yet, “interest from investors follows this hype cycle,” he muses, using the analogy of Gartner’s Hype Cycle model to describe a waxing and waning appetite towards ESG investments. He explains, “A few years ago, everyone wanted to invest sustainably, resulting in huge inflows into ESG funds.” However, following this ‘initial euphoria’, as he characterises it, “now we can’t deny that there’s been a slowdown.”
The reasons behind this are plentiful. With the definition of sustainability continually evolving across jurisdictions, funds that were once labelled as ‘green’ no longer fit the criteria of being a sustainable investment. For example, when excluding sectors such as coal or tobacco was once considered responsible investing; now more may be expected to qualify a fund as sustainable. This constantly shifting scope has contributed to confusion amongst investors, where appetites may change as a result of conflicting ideas of what is sustainable and what is not.
Citing figures from BNP Paribas’ 2025 ESG Survey, Bottlaender reassures there is no reason to be disheartened. Of the 420 institutional investors surveyed worldwide, “around 60% of APAC investors intend to increase allocation to energy transition, and 90% say their ESG and sustainability objectives remain the same.”
On the other hand, what has changed is vocality. BNP Paribas’ study found that just under 45% of APAC investors have not changed their targets but rather plan to be less vocal about their sustainability efforts and investments. “A lot of people mistake this for disengagement,” Bottlaender explains, “but it is more about being careful.” As rising greenwashing and liability risks dampen the clamour of sustainability claims, “perhaps what we are entering now is an era of quiet progress.”
Quiet progress it may be, but it is progress nonetheless. All figures point to the fact that sustainability still remains on top of most companies’ and investors’ agendas.
A numbers game
Yet sustainable finance has come with its own set of complexities and challenges for institutions. When looking at the range and variety of topics that sustainability encompasses, it is difficult to get the right data to accurately disclose a true picture.
ESG data, for example, intends to bridge the gap between the quantitative world of finance and the inherently qualitative dimensions of sustainability. But as Bottlaender points out, “not all aspects of sustainability can be quantified in a meaningful or consistent way.”
By this, he explains, “There are significant gaps in the data. For instance, carbon emissions are often the starting point for ESG data collection, yet we are still far from reporting this accurately.” This includes scope 3 emissions, which encompasses all indirect emissions across an organisation’s value chain and represents the largest share of a company’s total emissions. However, Bottlaender says, “These emissions remain largely undisclosed today due to the complexities involved in measuring them precisely,” revealing the difficulties in obtaining the data necessary to show the extent of carbon emissions.
“There is also the conflict between short-term financial performance and long-term sustainability goals,” Bottlaender adds, where asset managers, who are assessed on a yearly basis, may feel inclined to divest or change an investment if they believe it has not been performing well during the year.
“This is clearly an issue. While sustainable initiatives can have substantial impact in the medium long term, they may not yield immediate results within a year. As a result, they can be deprioritised in favour of addressing more urgent short-term needs.” This in particular has been an ongoing challenge since the energy crisis that began in 2022, where oil and gas companies have largely outperformed renewable energies.
A more sustainable future
Taking all this into account, what does the future hold for sustainable finance across APAC?
“Sadly, we are now feeling the effects of climate change at an individual level.” With over 137,000 people displaced due to flooding in Malaysia and Singapore in 2024, 13 million people impacted due to 12 tropical cyclones in only 2 months in the Philippines, while Australia recorded its warmest winter, “we know that our society has no choice but to transition to a sustainable economy.”
And yet, economies in the region have increasingly made this choice. China’s growing investment and development into electric vehicles and solar energy is a positive marker that regional governments are aligning themselves with greener policies. For the APAC region which emits more than half of the world’s emissions and remains one of the most impacted by climate events, there is a huge driver and potential to transition towards a low carbon economy.
As the focus of sustainable investments shifts from climate mitigation to incorporating climate adaptation, the changes in investor sentiment are illustrated by one final statistic from the survey, that 46% of APAC investors feel compelled to consider environmental damage and biodiversity loss when investing.
This clearly shows that there is a regional recognition that nature-related risks are there, and they are becoming more integrated into investment decisions.
“We also understand that there is a need for a just transition,” Bottlaender highlights, bringing to light a topic that tends to be omitted from discussion but remains incredibly important. “Climate change disproportionately impacts low-income communities because they have fewer resources and less capacity to adapt.”
So, with this newfound regional recognition of the harms of climate change, and as policymakers, corporates and investors continue to work together to transition to a more sustainable economy, Bottlaender and industry professionals alike hold out hope that a brighter future is on the horizon.
Jules Bottlaender is the Head of Sustainable Finance Asia Pacific, Securities Services at BNP Paribas