• 52% of APAC financial institutions have set net-zero targets; only 8% use validated Science-Based Targets.
• Scenario analysis adoption remains limited but is gaining traction with increasing regulatory expectations.
• Nature and biodiversity reporting is emerging, driven by frameworks like TNFD and international standards.

The financial services sector in the Asia Pacific (APAC) region plays a pivotal role in advancing sustainability goals. According to the Sustainability Counts III report, progress in this industry depends heavily on the performance and practices of portfolio companies and borrowers.

Key Observations:

1. Net-Zero Target Setting:
   • 52% of surveyed institutions have set net-zero commitments.
   • Few align with Science-Based Targets initiative (SBTi) standards, with only 8% using validated targets. “The low uptake may reflect the demanding requirements of SBTi standards,” the report notes.
2. Scenario Analysis Adoption:
   • Only 25% of firms engage in both quantitative and qualitative scenario analyses.
   • This number is expected to rise as regulators, such as the Hong Kong Monetary Authority and New Zealand’s Financial Markets Authority, mandate scenario analysis in climate risk management.
3. Biodiversity and Nature Reporting:
   • Nearly 50% of institutions address biodiversity in their sustainability reports.
   • Engagement with the Taskforce on Nature-related Financial Disclosures (TNFD) remains nascent, though initiatives like GFANZ’s nature-related guidelines are expected to drive adoption.

Related Article: OpenText Zeroes-In on Ambitious ESG Targets and Programs

Quotes Supporting Progress:

• On net-zero alignment: “SBTi’s upcoming Financial Institution Net Zero (FINZ) standard could catalyze broader engagement,” notes the study.
• On scenario analysis: “A phased approach starting with qualitative methods can pave the way for rigorous quantitative assessments,” regulators suggest.
• On biodiversity integration: “53% of APAC’s economic value depends on nature, underscoring the urgency of biodiversity action,” highlights a joint report by AIGCC and PwC China.

Key Takeaways:

• Driving Decarbonization: Financial institutions must set ambitious targets to support real-economy decarbonization.
• Scaling Scenario Analysis: Incremental adoption of qualitative and quantitative methods ensures better resilience planning.
• Embracing Biodiversity Standards: Integrating nature-focused metrics into transition plans is a strategic imperative.

As sustainability reporting evolves, forward-thinking institutions are leveraging these practices to align profitability with environmental stewardship, ensuring readiness for future regulatory and market demands.

Read the Full Report Here

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