Over Half of Asia Pacific’s Economy Directly Dependent on Nature

Asia Pacific’s (APAC) economies are particularly vulnerable to nature-related risks, including biodiversity loss, pollution and fresh water availability, highlighting the need for risk management strategies.

According to new research by the Asia Investor Group on Climate Change (AIGCC) and PwC, 53%, or US$18 trillion, of APAC’s Gross Value Add (GVA) is in economic sectors that are moderately or highly directly dependent on nature.

This includes reliance on fertile soils, clean water, pollination, and climate stability, all of which are in serious decline in many parts of the region.

  • 20%, or US$7 trillion, of APAC’s GVA is in sectors with higher direct exposure: including agriculture, construction, fishery and aquaculture, food systems, and forestry.
  • This is higher than the global figure of 16%.
  • 33%, or US$11 trillion, is in sectors with moderate direct exposure, including energy, manufacturing, and services.
  • The remaining 47% is in sectors including Real Estate, Healthcare, IT, and Retail, where the nature risk exposure is more likely to be indirect.

Public equities are even more exposed, with 58% of regional market capitalisation being moderately or highly directly dependent on nature.

  • 11 out of the 14 APAC stock exchanges have more than 50% of market capitalisation with higher or moderate direct dependency on nature.
  • The Taiwan Stock Exchange (TWSE) (44%), New Zealand Stock Exchange (NZSE) (42%), and Shanghai Stock Exchange (SHSE) (37%) stock exchanges had the highest proportion of market capitalisation with higher direct nature dependence.

Guidance to Manage Nature-Related Risks

AIGCC and PwC have developed a checklist as general guidance for investors to identify and manage nature-related risks.

  1. Understand expectations and identify relevant information required to assess nature-related risks in their portfolio.
  2. Gain top management and board commitment on nature.
  3. Confirm priorities for action through the assessment of assets and portfolio exposure, taking into account sectors and geographical locations to develop investor’s approach or policy on nature.
  4. Identify relevant industry and market-related initiatives that can be leveraged
  5. Regularly engage with priority sectors and the key companies that are represented in specific supply chains within investment portfolios.
  6. Adopt the most relevant framework for nature-related reporting and target setting for your investments. AIGCC recommends The Taskforce on Nature-related Financial Disclosures (TNFD) recommendations and the Science- based Targets Network’s (SBTN) science-based targets for nature.

The forthcoming report, substantiated by case studies from corporates and investors, demonstrates how to effectively manage nature-related risks.

AIGCC Director of Investor Practice, Monica Bae said: “Global economies are heavily reliant on healthy ecosystems and the APAC region is no exception. Nature-related risk is a risk that can’t be ignored. The Nature at a Tipping Point report will help as a crucial first step for investors to understand how nature loss can impact their portfolios.”

“A nature-positive future unlocks significant new opportunities. By acting now and integrating nature-related risks into their investment strategies, APAC investors can ensure they’re positioned to benefit from a sustainable and resilient future. AIGCC is committed to supporting investors on this journey.”

PwC Malaysia, Asia Pacific Sustainability, Biodiversity, Director, Perpetua George added: “Crisis in our natural ecosystems is not only an environmental concern but also a major economic threat for the Asia Pacific region. The loss of nature presents huge risks to our people, communities and businesses. Of all 20 industries analysed by PwC, 100% have exposures to nature risk in their value chains. Asia Pacific businesses such as the agriculture sector, already have familiarity with biodiversity concerns, so now is the time for us to take the next bold step, leverage on sustainability, and safeguard the valuable ecosystems that support us all.”