APAC Investors Embrace Sustainability and Private Assets Amid Energy

In the Asia-Pacific region, investors are increasingly embracing sustainability and private assets as they navigate the evolving energy landscape.

FREMONT, CA: Over half of APAC investors are concerned over geopolitical uncertainties and inflation, pushing them to invest in localised supply chains. In the next two years, 35 per cent plan to increase allocations to private assets, viewing them as ideal for accessing key trends like the energy transition and diversification. About half of infrastructure and renewables for capturing energy transition opportunities. While sustainability and impact strategies align with long-term financial goals, institutional investors seek more support from external managers, particularly in impact measurement.

Shift in Allocations Amid Lingering Inflation and Geopolitical Concerns

Investors in the Asia-Pacific region are actively seeking investment opportunities within the energy transition, particularly through an expanded focus on private assets. More than half of investors expect these factors to impact portfolio performance in the next year significantly. In response to the trend of deglobalisation, over half of APAC businesses anticipate increased investment in companies with localised supply chains, with a particular focus on developed market equities (35 per cent) and private equity (28 per cent). Furthermore, a majority of APAC investors (82 per cent) see private assets as providing valuable diversification over the next two years, leading to a third of respondents considering increased allocations to these asset classes.

Accessing Investment Opportunities in the Energy Transition

In the study, institutional investors are increasingly inclined towards thematic and impact-focused investments within the diverse landscape of sustainable investment. Most view sustainability and impact strategies as essential for long-term financial returns and as a sound business practice. Specifically, 35 per cent of APAC investors prioritise making a positive impact on people and the planet. They consider infrastructure (35 per cent) and natural capital & biodiversity (49 per cent) within private assets as optimal for sustainability goals.

Key Approaches to Sustainable Investing

Investors adopt diverse, sustainable investment approaches aligned with their values and goals, with a growing emphasis on thematic and impact investing among institutional investors. Most see sustainability and impact strategies as integral to long-term financial success, with 35 per cent of APAC investors prioritising positive societal and environmental impacts. Infrastructure and, natural capital & biodiversity are favoured private asset classes for sustainability goals, yet support is crucial for impact investing, notably in measurement. Over half of APAC investors highlight the importance of easily measurable impact, while the need for standardisation is a significant obstacle to sustainable private asset strategies.

Greater Support is Needed to reach Net Zero Targets

Half of global respondents have committed to achieving net-zero portfolios, but approximately 24 per cent of APAC respondents have yet to make such plans. EMEA-based investors are leading in their commitment to reaching net zero by or before 2050 with interim targets (39 per cent), while most without commitments are in the US (39 per cent). Across markets, there's a growing need for support in measuring and tracking net-zero progress, with 51 per cent of global respondents seeking it. Additionally, 58 per cent of APAC investors stress the importance of consensus on measurement frameworks, compared to 49 per cent globally.

Investors are increasingly directing their funds towards sustainable and renewable energy projects, as well as private assets that align with their environmental and social goals. This trend signifies a pivotal moment in the region's investment landscape, where the focus on sustainability and private assets is reshaping the energy sector and fostering a more environmentally conscious approach to financial investments.