Climate change is not a risk on the horizon. It is happening now, and it is happening to all of us. We live in the age of climate uncertainty, and extreme weather disasters are no longer happening to someone else, somewhere else. While it may seem like climate risk is a concern for countries and their governments near and far, communities and those that live in them, the risk climate change poses to investors and businesses is all too often overlooked – it is not a question of “if,” but a question of “when.’
Climate change has already exposed the fragility of our global supply chains. Take semiconductors, their production requires vast amounts of water, and droughts in Taiwan have already threatened manufacturing, which impacts the electronics industry worldwide. Similar vulnerabilities exist across agriculture, textiles, and logistics, where disruption ripples through entire supply chains. At the same time, our physical assets are losing value as climate risks mount, operating costs are climbing, and investors are demanding far greater resilience. These nature-based challenges are accompanied by risks that impact investment decisions and businesses of all sizes.
In fact, SMEs are likely to be most affected given their prevalence, particularly in Southeast Asia. In Malaysia and Singapore, respectively, SME’s make up 80 and 70 percent of the workforce. They are the backbone of these economies, but they are also the most vulnerable, and they urgently need solutions that fit their budgets, capabilities, and capacities. But before solutions can be implemented, there must be awareness of the issues at hand. A study conducted last year found that only 43 percent of global economic losses were insured. The figure In Asia Pacific historically has been under 6 percent. This signals two major issues: the solutions that SMEs require are not accessible to them, and the awareness of the very real risks they face is not there. For these businesses, nature-based risk is financial risk. Helping SMEs adapt is the single biggest lever we have for building resilient economies.
The awareness gap is also prevalent among stewards of capital. While large asset allocators and institutional investors have made constructive progress in steering away from financing the brown economy (e.g., coal, oil, gas) to focusing on the green and also the emerging blue economy (e.g., oceans, marine life), there is still a need for ongoing education and purposeful integration of these values in their day-to-day investment decisions. Beyond this, investors are also in search of solutions that are capable of unlocking long-term returns as part of their decarbonisation investment strategy.
All of these risks stem from nature itself, and one thing is clear – nature-based risks require nature-based solutions. Investing in nature-based solutions and allocating capital to this asset class are the key to future-proofing our growth, and we must implement these actionable solutions now, as the climate risks we face are already substantial and intensifying year on year.
For businesses, these solutions must be practical, scalable, and affordable. We must consider a variety too, for example, AI-enabled climate risk modelling, innovative insurance products, cand ommunity-focused projects. AI is a double-edged sword – whilst it has great potential to deliver intelligence and advice at scale and at a low price point, AI is not environmentally-friendly, and we must ensure that our use of tools to protect our businesses is balanced with the impact of the tools themselves.
For investors, the growth of nature-based solutions as an asset class warrants a look. There is increasing demand to align investment portfolios and targets with disclosure frameworks, such as the Taskforce on Nature-related Financial Disclosure (TNFD) recommendations. Large asset owners are also keen to increase their stewardship and engagement in this asset class. A third of investors surveyed earlier this year by the Asia Investor Group on Climate Change (AIGCC) have already adopted biodiversity-related disclosures and/or a strategy. The vibrant landscape of climate tech solutions for the blue economy for ocean restoration and preservation of coral reefs among others, is also ka ey financing opportunity for investors to realize long-term value and impact.
Risks are interconnected, and interconnected risk requires an interconnected response. Whatever the solution, we must move beyond risk-mapping and take tangible action to build resilience. After all, awareness of risks does not protect our businesses, our people, and our livelihoods.
Resilience is built upon preparedness. Taking effective actions is a top priority that cannot be emphasised enough. Action relies on the coming together of people and resources. The risks we face cannot be tackled in isolation, after all, they cut across borders, supply chains, and industries. This is why critical platforms like the GreenTech Summit exist – to unite leaders and decision makers, to innovate and drive solutions, and to catalyze deliberate and planned action to the climate challenge we all face.
Nature-based solutions and by extension, climate tech, is not the next frontier; it is the now frontier.
Helene Li is Co-Founder and CEO of GoImpact Capital Partners.
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