Asia’s governments have declared long-term net-zero targets and are introducing regulation to spur action in the short to medium term across the region’s economies.

Asia’s banks have a choice. They can set strategies that anticipate regulatory or market developments and position themselves to mitigate risks to capital and capitalise on multi-trillion-dollar opportunities. Alternatively, they can take a reactive approach only shifting practices and relationships as clients face tighter carbon regulation; disruption from cleaner technologies; and the impacts of the changing climate.

We assess 32 leading banks listed in nine major Asian markets. Our research shows that to date the region’s banks have not kept pace with changing expectations. Asia’s banks are mispricing exposure to carbon-intensive assets that are increasingly difficult to re-finance or transfer. Without urgent course correction, widespread misallocation of capital will continue, leaving the region vulnerable to correction.

This report reviews bank approaches to climate risk management and sets out investor expectations. There are examples of good practices in the region and globally that indicate practical steps banks can take to position themselves for climate leadership within a year.