Despite growing climate commitments, the report found that fewer than one-third of Asian investors have established a clear policy or strategy for high-emitting sectors, including fossil fuels. The number of investors publishing detailed climate transition plans also remained unchanged at 22 per cent.
Asia’s largest institutional investors are stepping up pressure on governments to accelerate climate policy reforms, while increasing investments in climate solutions and transition finance, according to a new report from the Asia Investor Group on Climate Change.
The latest State of Investor Climate Transition in Asia report, now in its seventh edition, found that investors managing approximately US$123 trillion have significantly expanded their climate-related activities in 2025, including a sharp rise in direct engagement with policymakers.
The study showed that direct policy engagements by climate-concerned investors have tripled, reflecting growing concern that stronger regulatory frameworks are needed to support low-carbon investment and manage rising climate risks across the region.
At the same time, the report revealed a widening gap between investor ambition and implementation, particularly around fossil fuels and high-emitting industries.
RELEVANT SUSTAINABLE GOALS
Climate Solution Investments Rise Across Asia
According to the report, 30 per cent of 240 surveyed investors increased investments in climate solutions or transition finance in 2025, an increase of 11 percentage points compared with the previous year.
The shift reflects growing recognition that climate-related investment is becoming central not only to sustainability goals, but also to long-term financial performance.
Stephen Dunne, director and investment committee chair of Australia’s Construction and Building Unions Superannuation Fund, said climate policy and investment outcomes are increasingly linked.
“We need to see policy change in order to actually create movement at the corporate level, but also to invest successfully on behalf of our members,” Dunne said during a panel discussion at AIGCC’s inaugural summit on climate investment in Asia.
Dunne warned that if global warming continues on its current trajectory, investment returns for the fund’s more than one million members could be 40 per cent worse than under a portfolio aligned with the 1.5°C climate target.
Investors Push Governments for Clearer Climate Rules
The report found that investor engagement with policymakers is evolving beyond simple emissions targets toward broader concerns including transition planning, technological innovation, physical climate risks and nature-related disclosures.
AIGCC described this phase as a shift toward implementation.
“The findings from this year’s analysis suggest the market is now entering a third phase — an implementation phase — along with creating credible transition plans,” the organisation said.
According to the report, the first phase of investor climate action focused largely on climate disclosures and measurement. The second phase centred on public accountability and scrutiny. The current stage increasingly focuses on executing transition strategies and shaping investable policy environments.
Dunne, who also chairs AIGCC’s parent organisation, the Investor Group on Climate Change, said collective engagement through industry groups has become one of the most effective tools for influencing governments.
Fossil Fuel Strategies Still Missing Across Much of Asia
Despite growing climate commitments, the report found that fewer than one-third of Asian investors have established a clear policy or strategy for high-emitting sectors, including fossil fuels.
The number of investors publishing detailed climate transition plans also remained unchanged at 22 per cent.
Researchers said many investors still provide limited information about how they plan to implement transition strategies, raising concerns about whether portfolios are adequately prepared for climate-related risks and economic disruption.
“With Asia being one of the most vulnerable regions to oil supply shocks and fluctuating prices, investors can do more to derisk their portfolios by investing in an orderly and energy-secure transition,” AIGCC said.
The report comes as geopolitical tensions and volatile energy markets continue to expose Asia’s heavy dependence on imported fossil fuels.
A separate recent study cited in the report also found that many investors are reluctant to reduce fossil fuel exposure because of fears they could miss out on high short-term returns.
Just Transition Strategies Still in Early Stages
The report also examined the concept of a “just transition” for the first time, highlighting another major gap in investor preparedness.
While 29 per cent of AIGCC members reported having a just transition strategy, only 11 per cent of all investors surveyed had formally outlined an approach.
The concept of a just transition generally refers to ensuring that climate action and economic decarbonisation do not disproportionately harm workers, communities or vulnerable populations.
According to the United Nations Development Programme, a just transition involves integrating social justice and equity into climate policy and economic transformation.
AIGCC noted that many Asian governments currently address just transition issues indirectly through social protection measures, reskilling programmes and affordability policies.
“For investors, company engagement is the clearest near-term entry point, with integration into investment research and decision-making as the next step,” the report said.
Asia Emerges as a Critical Frontline for Climate Finance
The findings underscore Asia’s growing importance in the global climate transition.
The region faces some of the world’s highest exposure to climate risks, energy security concerns and rapidly expanding energy demand, while also remaining heavily dependent on fossil fuels.
At the same time, Asia is becoming a major destination for climate finance, renewable energy development and transition-related investment.
The report suggests investors are increasingly aware that climate risk is no longer a peripheral environmental issue, but a central economic and financial challenge that will shape long-term portfolio performance.
Yet the study also makes clear that while climate ambition is rising across Asia’s financial sector, many investors still lack detailed plans for managing the most difficult parts of the transition, particularly around fossil fuels and social equity.
As governments across Asia face mounting pressure to deliver credible climate policies, institutional investors appear increasingly willing to use their financial influence to push for faster action.
