Fullerton Fund Management: PE needed for Asia’s net zero

Fullerton Fund Management: PE needed for Asia’s net zero

11 december 2023

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Private equity is the key finance Asia’s road to net zero and its prospect to play an active role in global decarbonisation.

‘As global attention remains on COP28 for its final days, a crucial conversation is taking place on the role of private investment in decarbonising Asia as it transitions to a net zero economy,’ says Fullerton Fund Management today. ‘The COP-28 conference is undoubtedly the largest and most significant international gathering on climate change. Whilst we will wait for the conference to conclude to distil the main takeaways and their implications for the global community, it is clear that Asia's path to net zero emissions is critical for global climate goals.

The region accounts for over a third of global carbon emissions. China alone is responsible for 26%, and other major contributors, including Japan, India, and Indonesia, are all among the top 10 emitting countries. Reaching net zero across Asia would significantly advance worldwide efforts to curb emissions and is seen by some as vital for the achievement of global climate targets.’

Vast investment gap

‘Asia has a long way to go to achieve net zero. There is a vast investment gap, with some estimates stating that China alone needs $6.5 trillion in green investment to transform its economy. This is where private equity has a vital role to play. Private capital can provide the financing needed to help bridge this gap and bring expertise to high-potential areas like renewables, electric vehicles, and greening carbon-intensive sectors. As asset owners with closer management proximity, private equity firms can also actively engage with portfolio companies to raise decarbonisation standards.

The landscape across the continent is rich with opportunities, from increased renewable energy to facilitating decarbonisation of heavy industry, while falling technology costs and supportive regulations are accelerating growth. For example, electric vehicle sales in Asia could expand by over 40% annually through 2028, while some experts think 30% of the world's sustainable aviation fuel will be produced in Asia by 2050.

All these industries have one thing in common: a lack of financing along with the prospect to play an active role in global decarbonisation, and the journey to net zero over the long term. Private equity is the key to unlocking this current roadblock.

Through the correct policy signals, innovative finance structures, and risk mitigation via public-private partnerships, private equity and institutional investors can tap into Asia's decarbonisation imperative, turning the dial in the global pursuit of a sustainable future.’

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