Takeaways

• Asia-Pacific attracted a 6% rise in global climate fund allocations in the first half of 2025, marking the first significant reallocation toward the region in over seven years.
• South-east Asia is emerging as a high-growth hub for clean energy, mobility, and sustainable finance, supported by strong policy reforms and infrastructure demand.
• The region’s growing green bond market and corporate innovation highlight rising investor confidence, though uneven climate policies remain a challenge.

Global climate fund allocations to the Asia-Pacific region increased by six percentage points in the first half of 2025, according to a joint report by MSCI, the Bank of China’s Hong Kong Financial Research Institute, and the Jockey Club Enterprise Sustainability Global Research Institute at Hong Kong University.

This represented the first major redirection of climate funds to Asia in more than seven years, reflecting increasing investor recognition of the region’s promise.

“Fund managers are increasingly drawn to the region by its pipeline of clean energy and infrastructure projects, favourable demographics, and strengthening policy support for green development,” the report stated. It also identified South-east Asia as a standout sub-region, with opportunities in energy, mobility, water, and urban resilience.

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Rising Clean-Tech Momentum

The report highlighted how Asia-Pacific companies are outpacing their global peers in clean technology growth. Revenue among energy storage providers rose 66% in the region, compared to 39% in Europe, the Middle East and Africa (EMEA), and 22% in the US. Similarly, green mobility firms grew 74% in Asia-Pacific, far ahead of 42% in the US and 14% in EMEA.

South-east Asia is also home to firms developing advanced building materials and cooling systems, key as cities worldwide grapple with rising temperatures and surging energy demand.

While challenges such as policy coordination and project pipeline visibility remain, the report noted that long-term opportunities in the region are compelling for investors seeking real-economy transition drivers.

Growth of Sustainable Finance

Southeast Asia is emerging as a hub for sustainable finance, with cumulative sustainable bond issuance crossing US$100 billion in the past five years. When including the Greater Bay Area, issuance reached over US$300 billion between 2015 and June 2025.

Green bonds account for most of the financing, but transition and sustainability-linked bonds are beginning to gain traction. Among Southeast Asian issuers, 17% of proceeds went to renewable energy projects, 12% to green buildings, and 5% to solar energy. However, the region also recorded a relatively high share of unspecified allocations at 14%, suggesting the need for stronger classification and disclosure standards.

Both Southeast Asia and the Greater Bay Area are working to align with global frameworks. Efforts include regulatory moves on green taxonomies and disclosure standards, which are expected to attract more institutional capital.

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Policy Gaps Remain

Despite progress, climate policies across Asia remain uneven. While China’s dual carbon goals, peaking emissions before 2030 and achieving carbon neutrality by 2060, anchor the Greater Bay Area, national and regional disparities in implementation, disclosure practices, and financing mechanisms continue to pose hurdles.

“Bridging these gaps will be critical to translating policy into credible, investable decarbonization pathways,” the report concluded.

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Source: THE BUSINESS TIMES