From risk to resilience Sustainable investing trends among APAC-based insurers
In August and September 2025, State Street Investment Management, in partnership with FT Longitude, surveyed a broad range of Asia Pacific-based asset owners “(APAC-based asset owners”) on their approach to sustainable investing. This article examines how the insurance companies we surveyed (“APAC-based insurers” or “insurance respondents”) are approaching the challenges and opportunities of integrating climate, nature and biodiversity objectives into their investment portfolios. We also include findings from an in-depth interview with Mark Konyn, Group CIO AIA Group, and appreciate the valuable insights shared.
For many APAC-based insurers, climate is playing an important role in investment portfolios. Half of the insurance respondents are applying climate-related objectives to more than 30% of their assets under management (AUM), and over three-quarters expect this share to increase over the next two years. While nature-related investment is still at an earlier stage, more than half of insurance respondents are applying nature and biodiversity objectives to more than 5% of their AUM, and 56% expect that to increase.
In addition to potentially affecting investment performance, climate change and biodiversity loss could increase the cost of liabilities, as more frequent and severe events such as floods and typhoons drive higher claims and reinsurance costs.1 At the same time, select regulations and targeted policies are encouraging APAC-based asset owners including insurers to consider climate, nature and biodiversity in their investment decisions.2
How can APAC insurers who seek to capture sustainable investing opportunities do so while managing financial and regulatory risks?
Climate, nature and biodiversity related investments are primarily driven by risk mitigation
Climate and biodiversity challenges can be costly for investors. “Climate risk and related policies are impacting the way assets are valued,” says Mark Konyn, chief investment officer at AIA. “We have to account for the prospect that we could encounter a stranded asset because something happens that disturbs the business model of the underlying credit or company we’re invested in.”
While nature-related policies are less developed than they are for climate, physical risks such as ecosystem degradation pose a growing threat to some asset valuations and productivity.3
Our survey indicates that these challenges are prompting the investment activity of many insurance respondents. For APAC-based insurers, mitigating long-term investment risk is the top driver of nature and biodiversity investment, with 53% ranking it within their top three motivations, and 47% say the same when it comes to climate investment.
Our survey also finds that regulation and policy are having a similar effect. When it comes to climate investment, which is currently governed by more mature regulatory guidelines, complying with evolving requirements is the top driver for APAC-based insurers: over half (53%) of insurance respondents say it factors into their decisions. And with biodiversity frameworks maturing, it’s a top investment consideration for 47% of insurance respondents.
Figure 1: What are the main reasons your organization incorporates (or plans to incorporate over the next 12 months) climate and nature/biodiversity objectives in its portfolio? (Top three, ranked 1-3)
Source: State Street Investment Management/FT Longitude APAC sustainable investing survey 2025. Data from insurance respondents only (n=30).
There has been considerable regulatory development affecting APAC insurers in the past few years. For example, in 2020, the Monetary Authority of Singapore introduced Guidelines on Environmental Risk Management for insurers, which requires insurers to embed climate and biodiversity risks in both underwriting and investment decision-making. And in 2025, Japan’s Financial Services Agency published its Second Scenario Analysis – developed in collaboration with non-life insurers and the General Insurance Rating Organization of Japan – which focuses on acute physical risks and their implications for the insurance sector.1
Example Climate and Biodiversity Guidance and Regulations for Insurers in APAC
- Australia (APRA): Insurance Climate Vulnerability Assessment, July 2023
- Hong Kong (Insurance Authority): during Green Week focused on insurance’s role in building climate resilience, September 2025
- Japan (FSA): Building on “Supervisory Guidance on Climate-related Risk Management and Client Engagement” with reference to natural catastrophes, June 2025
- Singapore (MAS): Guidelines on Environmental Risk Management for Insurers, 2020
Some APAC-based insurers are struggling with regulatory uncertainty and other challenges
Despite recent developments, regulatory and policy uncertainty is the joint most important challenge when it comes to nature and biodiversity for many insurance respondents: 47% rank it within their top three concerns alongside limited investable opportunities, and 37% say the same when it comes to climate investments. Challenges with measuring or verifying real-world impact present similar concerns: for insurance respondents it is the most commonly cited top-three challenge for climate (40%) and ranks third for biodiversity (43%).
Investment incentives may be clear, but some APAC-based insurers are concerned that incentives may not deliver financial gains. For many insurance respondents, climate-related investments raise questions about potentially lower or more volatile returns (37%) as well as a lack of internal expertise or capacity to manage climate-related issues (37%). When it comes to biodiversity, meanwhile, almost half of APAC-based insurers (47%) cite a limited availability of scalable, investable opportunities.
Figure 2: What are the main challenges or concerns that your organization encounters when investing in, or making available, climate and biodiversity/nature-related investment strategies? (Top three, ranked 1-3)
Source: State Street Investment Management/FT Longitude APAC sustainable investing survey 2025. Data from insurance respondents only (n=30).
Investment decisions reflect liability concerns
Insurers manage a number of risks when making investment decisions. “We think about our investments in the context of our liabilities, which span decades and generations,” says Konyn. “We need to understand the types of risks we’re introducing into our book and whether those risk exposures can be maintained over the duration of our holding periods.”
The insurance respondents reflect this. Renewable energy generation is the most popular climate-related theme, with 57% of APAC-based insurers saying they focus their investments in this area. In addition to seeking to provide stable returns through long-term contracts such as power purchase agreements, renewable energy investments tend to have clear, measurable outcomes that support disclosure expectations.5
For insurance respondents in our survey, sustainable food and agriculture are at the top of the list for biodiversity investment (50%). Returns from long-term land leases likely align with liability timelines, and revenues are typically linked to food prices, which may offer a hedge against inflation. Meanwhile, disclosure is supported by measurable key performance indicators such as water quality improvement.6
Some insurers in APAC are going further to mitigate the potential impact of sustainability challenges to their businesses. Tokio Marine, for instance, has acquired engineering consultancy Integrated Design & Engineering (ID&E), which specializes in natural disaster mitigation, to both drive profits and reduce customers’ expenses by increasing their resilience.7
Regulatory frameworks could also potentially influence investment decisions for APAC-based insurers. Under the Hong Kong Insurance Authority’s provision on risk-based capital, recognized green bonds receive a 10% discount in credit spread risk capital charge.8 This effectively reduces the capital cost of holding them and incentivizes insurers to consider investing in green bonds.
Fiduciary duty is encouraging action
Over half of insurance respondents (53%) say their fiduciary duty now mandates them to consider biodiversity-related risks and opportunities in investment decisions, and 40% say the same about climate. A similar proportion of insurance respondents report that they are expected to consider biodiversity (53%) and climate (37%) as long-term value drivers.
Stewardship is an important part of these efforts for many APAC-based insurers. When it comes to climate, insurance respondents are more likely to engage with asset managers (50%) than with portfolio companies (43%). Meanwhile, just 20% of APAC-based insurers say they engage with asset managers on biodiversity, while 57% regularly engage with portfolio companies.
While 43% of insurance respondents say their fiduciary duty includes active ownership for climate, less than a third (27%) say so for biodiversity. Instead, the insurance respondents tend to adopt a more formal approach to nature and biodiversity-related issues: half say they exercise voting rights at company AGMs, compared to just 17% when it comes to climate.
These differences may reflect different stages of market maturity. Climate risk is now better defined through established frameworks, which in our view makes it easier to address through managers that can apply consistent criteria across portfolios. Biodiversity risks, on the other hand, are more nuanced and location specific.9 This means they often require greater company-level intervention, such as direct engagement to understand supply chain dependencies or assess site-level impacts.10 As frameworks and standards mature, we believe approaches should evolve to become more structured and scalable across portfolios.
Are APAC insurers considering impact investing?
86% of insurance respondents integrate impact investment principles into their investments to some degree; 80% assess impact by determining whether or not the outcome would have been achieved without the investment, and 67% are interested in analyzing invested assets, including public markets, on their contribution to sustainable outcomes. For APAC-based insurers targeting impact-related investments, real assets are the most popular asset class (67%), followed by fixed income (60%), e.g. Green Social, Sustainability, Sustainability-linked (GSSS) bonds, and listed equites (57%).
The bottom line
For many APAC-based insurers, our survey finds climate investing is important for managing long-term risk; and biodiversity is also moving along the agenda. Regulatory pressures, financial considerations and liability alignment are propelling investment activity for a number of insurance respondents, but they are also creating challenges, ranging from measurability to uncertainty around financial returns.
Despite these obstacles, the direction of travel seems clear. As frameworks mature and markets grow, APAC insurers appear to be moving towards the next phase of sustainable investing across the region.
About the survey
In August and September 2025, State Street Investment Management in partnership with FT Longitude, surveyed over 100 senior decision-makers from asset owners in Asia-Pacific. The respondents represented a range of institutional investors based in Australia, China, Hong Kong, Japan, Malaysia, Singapore, South Korea, Taiwan, and Thailand. The survey explored how these investors are approaching the challenges and opportunities of integrating climate, nature/biodiversity, and impact-related investment objectives into their investment portfolios.