Asia in driver’s seat to lead transition finance, AllianzGI says

Asia has potential to become a global leader in transition finance, driven by the region’s demand for decarbonising its high-pollution economic sectors, according to money manager Allianz Global Investors (AllianzGI).

Transition finance allocates capital to companies and activities that are reaching for environmentally friendly or sustainability standards, unlike “green finance” which focuses exclusively on assets that have fully achieved that status.

While Europe had prioritised establishing the green investing market, Asia was making headway in the transition finance market, according to Matt Christensen, global head of sustainable and impact investing at AllianzGI, a unit of German insurer Allianz Group.

“This belief suggests that Asia can not only generate substantial profits but also establish a leadership position that enables its markets to catch up to and possibly surpass those in Europe and the US,” he said last week.

With standards for green finance becoming more stringent, transition finance offered an opportunity for developing countries reliant on heavy industries to decarbonise their economy. These include high-polluting and hard-to-abate sectors such as steel, aviation and shipping.

AllianzGI managed €560 billion (US$596 billion) of assets on September 30. The firm, which screens sustainability risks in all its investments, allocated 37 per cent of its assets in sustainable product categories and 16 per cent in assets focused on environment, social and governance (ESG) risks, according to its website.