Banks across the Asia-Pacific (APAC) region are making significant strides in embedding sustainability into their operational frameworks, reflecting the increasing global emphasis on environmental, social, and governance (ESG) standards. A recent PwC report, Sustainability Counts III, highlights both the advancements and challenges faced by financial institutions in aligning their strategies with global sustainability goals.

Key Findings

The report reveals that over half (52%) of surveyed APAC financial institutions have committed to net-zero targets. However, only 8% of these institutions have validated their goals under the Science-Based Targets initiative (SBTi), reflecting the stringent nature of these standards. According to the report, “The low uptake may reflect the demanding requirements of SBTi standards.”

The integration of scenario analysis in climate risk management remains limited, with just 25% of firms employing both qualitative and quantitative methodologies. As regulatory authorities like the Hong Kong Monetary Authority and New Zealand’s Financial Markets Authority mandate scenario analysis, this figure is expected to grow.

On biodiversity, nearly half of the surveyed institutions are addressing nature-focused issues within their sustainability frameworks. Despite this progress, engagement with initiatives like the Taskforce on Nature-related Financial Disclosures (TNFD) remains low. However, frameworks such as Global Financial Alliance for Net Zero (GFANZ)’s nature-related guidelines are expected to drive further adoption.

The Economic Implications

With 53% of APAC’s economic value tied directly to natural resources, the importance of biodiversity-focused action cannot be overstated. A joint report from AIGCC and PwC China emphasizes, “53% of APAC’s economic value depends on nature, underscoring the urgency of biodiversity action.”

The report underscores the need for financial institutions to adopt ambitious decarbonization targets, integrate scenario analysis, and embrace biodiversity metrics. This approach not only ensures resilience against environmental risks but also aligns profitability with sustainability goals.

Moving Forward

APAC financial institutions are at a pivotal moment, balancing regulatory demands and market expectations with their commitment to ESG principles. Initiatives like SBTi’s upcoming Financial Institution Net Zero (FINZ) standard could drive broader participation and rigorous sustainability practices.