How Asia can help Joe Biden in the fight against climate change, starting with financial markets

Establishing a global standard for companies to describe how their business is affected by climate change would allow investors to allocate their capital more efficiently. Asian regulators have already taken steps towards this

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Joe Biden, then US presidential candidate, walks past solar panels while touring the Plymouth Area Renewable Energy Initiative in Plymouth, New Hampshire, on June 4, 2019. Photo: Reuters

Published: 3:15pm, 14 Feb 2021Updated: 7:31pm, 14 Feb 2021

US President Joe Biden’s decision to make climate change a top priority opens wide the door to developing international standards for how climate issues will be addressed in trade and finance. To carry out this agenda, the United States will be looking for strong partners in Asia, making the region’s policymakers highly influential in determining how these standards are developed.

Asian leaders, working with the US, can help ensure the global climate effort allows markets to allocate capital efficiently – and avoid a quagmire of conflicting, ineffectual regulation. Conversely, failing to act would slow the fight against climate change and harm Asian companies and investors, who, once again, face regulatory fragmentation.

Asia and the US should start where there is common ground: corporate disclosure of climate risk. Establishing a global standard for companies to describe how their business is affected by climate change would allow investors to allocate their capital more efficiently, to the benefit of financial markets and regional economies as policymakers work toward a greener financial system.

Asia should help drive the US, as well as Europe, to work on a global climate disclosure standard. And it can do so from a position of strength and authority, given how much work its policymakers have already done.

Here in Hong Kong, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority have robust climate policy workstreams under way that can help serve as a foundation for a global consensus. The Monetary Authority of Singapore has also been very focused on this issue and would be a strong partner to help guide future international deliberations.

Importantly, regulators in Asia understand the importance of making sure that any global disclosure standard is market-based, is designed to give investors accurate, timely and comparable information on how companies assess – and act on – climate-related risks, and is not based on prescriptive, top-down requirements imposed by regulators.

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