Impact Finance in Asia:  Time to Build

Grow Faster

Impact finance has made great strides in Asia in recent years.  In October, the Global Impact Investing Network (GIIN) reported that impact investment worldwide has grown to US $1.6 trillion, with about a quarter reaching Asia. Green bond issuance in the region is expected to rise to $260 bn in 2024, up threefold from 2019 levels, with South Korea, Japan, and China accounting for the majority. The United Nations Development Programme estimates the assets of Asia-based sustainable funds now stand at $87 billion. Regulators are signaling openness to, and even encouragement for, impact finance initiatives.

It’s not nearly enough.  Systemic challenges are multiplying and worsening in severity.  Richardson et al. (2023) find that six of nine planetary boundaries have now crossed the concern threshold, up from three in 2009, with ocean acidification ‘close to being breached.’ This is before we consider the many social areas where impact finance could be beneficial, e.g., at least seven of the 17 United Nations Sustainable Development Goals focus on social/human capital issues.

The United Nations now estimates that the cost of implementing the Sustainable Development Goals has grown to $4.2 trillion, up from a pre-pandemic level of $2.5 trillion.  Given that Asia accounts for 60% of the world’s population and is expected to bear a disproportionate share of the negative effects of the processes described above, it follows that its need for impact finance is particularly acute.

Even with significant reforms, the scale of the problem is too great for traditional governmental or NGO-based solutions to suffice.  To make genuine progress, Asia will need to attract unprecedented amounts of financial capital from private sources.  Some policymakers already understand this.  In November 2024, Leong Sing Chiong of the Monetary Authority of Singapore noted that:

“Many climate projects in the region are not fully bankable, and public sector funds alone will not be enough to finance the energy and green transition in Asia. We need a concerted movement to crowd in both concessional and commercial capital if we are to succeed in advancing Asia’s energy transition.”