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Climate risks and climate opportunities: two extremes in ASEAN

Author: ICAEW Insights

Published: 18 Nov 2021

ICAEW and the British Chamber of Commerce in Singapore have jointly explored the role finance plays in addressing the risks associated with climate change, focusing on the ASEAN (Association of Southeast Asian Nations) region.

“While climate change represents a huge global threat, it is clear that ASEAN countries face specific and often disproportionately challenging issues,” is one of the findings of ‘Green Finance: ASEAN and UK perspectives’. “Southeast Asia is one of the most at-risk regions in the world, with forecasts showing six of the 20 countries most vulnerable to climate change worldwide being Indonesia, Thailand, Myanmar, Malaysia, Vietnam and the Philippines.”

The fact that the region’s population and economic activity are largely concentrated along coastlines only increases the risk from heat, water stress, storms, flooding and landslides. What is more, dependence on agriculture, natural resources and forestry for growth, make the region a climate change hot spot. The challenges are immense.

The report says the situation is now urgent and delivers the following warning: “ASEAN countries, that have the greatest need to scale-up climate resilience investment, are therefore facing a climate change risk premium on their sovereign debt, potentially undermining wider development efforts.”

To deal with the challenge, sustainability experts are required with the necessary deep sustainability knowledge and experience. Current finance and associated professionals, including accountants, can apply existing financial expertise in a sustainability-informed way. The new Green Finance future will require more professionals who have these essential skills.

Further, there is a growing need for standards. Amid a new business landscape, greater clarity and standards around audit and disclosure will be pertinent. Accounting bodies will continue to play a key role in building public trust by ensuring that reliable, standardised data is used to support effective levels of assurance on disclosure.

Interviews conducted by ICAEW and the British Chamber of Commerce in Singapore made it clear that scaled-up climate finance action is imperative and failure to act will result in unimaginable consequences. But, by the same token, the opportunities for the profession and for markets willing to support green finance initiatives are immense. A Singapore Green Finance Industry Taskforce white paper noted that sustainable trade financing along the value chain over the next decade is a potential US$26bn opportunity.

Richard Spencer, Director, Sustainability, ICAEW, explained: “This is a timely and welcome report. The ASEAN region is particularly vulnerable to the impacts of climate change. This report highlights the urgency for action and highlights the challenges and opportunities in the words of leading voices in the finance sector.”

Executive Director of the British Chamber of Commerce Singapore, David Kelly, said of the research findings: “The development of the green finance sector represents a significant opportunity for both the UK and ASEAN. The findings from our expert interviews, conducted across the region and in the UK, illustrate the depth of knowledge within the British Chamber network and the importance of professional bodies such as the ICAEW in developing this area.”

Mark Billington, ICAEW Managing Director, International, added: “The COVID-19 pandemic has presented organisations with a real opportunity to build back a world of stronger and more sustainable economies. We are now at a turning point for positive change – to bring greater urgency to the issue of sustainability at hand.”

He continued: “Individuals, governments, and businesses are all in this together. Professional bodies such as ICAEW can play a key role in the future development of climate finance, not only in developing the skill sets required of our members but also through our support for effective policy and standards as well as promotion of research and cross-sector and cross-region collaboration.”

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