Climate Change Can Take Big Toll on Asian Economies, Inaction Could Cost More, ADB Report Says

Countries in Asia-Pacific will need to spend big to adapt to climate change. But the cost of inaction could be higher, according to a new report by the Asian Development Bank.

Left unchecked, climate change could punch a 17%-sized hole in the region’s economic growth over the next decades, the Manila-based bank said Thursday.

“The window to stay within the 1.5°C target of the Paris Agreement is rapidly closing,” the ADB said.

The international treaty aims to limit the average rise in global temperatures to that threshold, beyond which experts expect climate change to have increasingly disastrous consequences. In the nine years since the agreement was adopted, inaction has put that goal nearly out of reach, the multilateral bank said.

With greenhouse-gas emissions reaching record highs, nations need to dramatically increase—and immediately start delivering—efforts to get on track for 1.5°C, a United Nations Environment Programme report said last week. Failure to do so will lead to debilitating impacts to economies, the report said.

Asia-Pacific’s position in the climate crisis is a tricky one: it’s both home to some of the most vulnerable economies and a major polluter, contributing over 50% of global GHG emissions.

If emissions breach critical levels, ADB estimates climate change could reduce Asia-Pacific’s gross domestic product by 17% in 2070. Rising sea levels threaten coastal assets and populations, while heat waves would sap labor supply and productivity, and climate-dependent sectors like agriculture, forestry, and fisheries face shocks that will stifle output.

Estimates from the Deloitte Economics Institute calculate that about 75% of Asia-Pacific’s GDP is at high risk of climate disruption. This stands to affect at least half of the world’s labor force, which is in the region and in vulnerable industries. Climate inaction could lead to regional economic losses of about $96 trillion by 2070, the institute said in a report.

Asian countries have made strides toward decarbonising, but just maintaining policies implemented so far will lead to dangerous levels of global warming, the ADB said.

Taking the right type of action won’t come cheap. Estimates for Asia vary widely, in part due to different geographical definitions, but consensus is that funding is well below where it needs to be.

The ADB report estimates Asia-Pacific needs to invest anywhere from $102 billion to $431 billion annually to adapt to climate change. That far exceeds the $34 billion committed over 2021-2022.

Globally, the U.N. calculates the net-zero transition needs $0.9 trillion to $2.1 trillion a year between 2021 and 2050. That “is substantial but manageable in the broader context of the close-to-US$110 trillion global economy and financial markets.”

It remains technically possible to get on a 1.5°C pathway, as solutions like solar and wind power hold promise for fast, sweeping emissions cuts, the U.N. report said.

Getting back on track could be a big boost for Asia-Pacific economies.

The region is well-placed to benefit from the energy transition, the ADB said. It has massive potential for renewable-energy generation and can produce some of the world’s cheapest renewable electricity, it said. Advantages like fast-growing economies, a large workforce and strong manufacturing base equip Asia to develop the technologies needed for global decarbonisation.

That presents a wealth of opportunities for investors.

If governments formulate consistent policies and build climate-oriented financial systems, that can draw the private capital that’s key to plugging the funding gap, ADB said.

Policy uncertainty over could deter investment, particularly in the case of a change of political administrations. Investors hold more sustainable assets when countries adopt climate laws, and misaligned policies reduce incentives for private investors, ADB said.

That is particularly relevant in a year that has seen elections across Asia, including in India, Indonesia and Japan. The upcoming presidential election in the U.S. is in especially sharp focus as the outcome has implications for climate-change efforts.

That’s because of the U.S.’s role as a key player in green innovation and international cooperation on climate commitments and financing, as well as a major trading partner, said ADB principal economist Shu Tian.

Policy uncertainty from a key player can significantly affect the international climate agenda, she said.

“The U.S.’s stance on climate action influences the low-carbon transition through market mechanisms, affecting consumers, suppliers, and investors,” she said. “This, in turn, could impact climate investments across the [APAC] region.”

From the latest issue of Kanebridge Quarterly magazine. Order your copy here.

For many, working from home is the new normal. The transition from being based in the office to working off-site has been a fundamental one, and almost four in 10 Australians worked from home at least once a week throughout 2023.

While figures show a slight decrease on 2021, working from home (WFH, it even has its own acronym) has continued to escalate in white-collar occupations, with 60 percent of managers and professionals eschewing the traditional office set-up. And those who aren’t already doing it wish they were. According to the annual Taking the Pulse of the Nation report, almost all workers (94pc) would like to do at least part of their work hours at home.

“I would say that the days of only full-time in the office for all employees are likely gone for good,” says the author of the report, the Melbourne Institute’s Professor Ragan Petrie.

“The trends in Australia mimic those in other countries where hybrid schedules are quite common.”

But is it all good news? Among the many compelling reasons to ditch the commute — saving time, improved mental health, higher productivity and being able to put the washing on — there are the well-documented shortcomings regarding the isolation, and missing out on the opportunities that those casual catch ups in the stairwell can offer.

Opportunities for casual connections for in-office workers are not enough to entice many. Image: Shutterstock

“Constant drop-bys for chit-chat are not productive, but purposeful conversations are,” counters Petrie. “There might not be shortcomings of working from home per se, but rather not having the right infrastructure and support in place for workers to be productive. It’s important for employers and workers to figure this out.”

For those who are new to the workforce, flexible working arrangements are just the way things are. According to one survey, two out of every three Generation Z workers believe that the option to work from home is a non-negotiable.

Underpinning the normality of remote work are the advancements in automation and technology that make the transition smoother than ever — and perhaps support the use of email and text over the meetings and phone calls that younger generations shy away from.

“People of different ages have differential experience with technology, and there are some ways of communication people may feel more comfortable with than others,” says Petrie. “Certainly, technology plays a large role. Those whose jobs allow them to tap into technology to perform their tasks are well poised to be successful with a hybrid schedule.

“In the end, if worker output is satisfactory, why is it important where it is done?”

At the start of the pandemic as office-goers scrambled for a space to call work, the kitchen table was the go-to location. Now working remotely has become a more permanent arrangement, a purpose-designed study area or hybrid space is as desirable in real estate brochures as a media room or butler’s pantry.

Roger Wardy is a director at Ray White Touma Group in inner city Sydney, where more than 100,000 office employees have left the CBD for the greener pastures of remote work arrangements.

“Most house hunters want to see a home office or office space these days, and in larger homes it’s an expectation,” he says.

“As such, we’d be more likely to market a six-bed home as a five-bed plus office. If a buyer works from home, that will definitely add value.”

But the home office is just the beginning. Having paved the way for more flexible work arrangements, there’s now a growing trend towards co-working environments for companionship, productivity and a delineation of work and home.

High-tech co-working spaces offer several advantages over working from home, making them the preferred choice for many. A professional environment means distractions are minimised, and you’ll have access to state-of-the-art amenities that you probably won’t have at home. And then there are those networking opportunities — co-working spaces attract a diverse group of professionals and who knows what you might find out at the communal coffee bar? It’s something that’s making its way up the agenda for apartment developers, too, with those on the front foot offering co-working spaces along with the pool, gym and rooftop entertaining.

At the luxury new development Paradiso Place in Surfers Paradise (pictured above), the entire 2900sqm 26th floor is dedicated to a state-of-the-art co-working space, maximising 360-degree views of the Gold Coast from the ocean to the hinterland.

“To have the option of working in a space like this with all the facilities of a high-tech office within your own apartment building is an exciting prospect for buyers,” says Total Property Group Managing Director Adrian Parsons. “We have been receiving a great deal of interest in this development from business owners, entrepreneurs and professionals who can see themselves waking up in their luxury apartment with ocean views to go for a walk or run along the beach, use the onsite gym, then conveniently head to work in a state-of-the-art co-working space within their own building.”

The space incorporates a boardroom, private meeting rooms, work pods and multiple hot desks. And it’s not all about focused work; there’s also a spacious balcony event space and a Coffee Emporium complete with baristas.

“With working from home becoming the new normal, we are seeing many Australians choosing to move to quality lifestyle locations like the Gold Coast, and a full-floor co-working space of this standard is attracting a high level of inquiry,” says Parsons.

Climate Change Can Take Big Toll on Asian Economies, Inaction Could Cost More, ADB Report Says

It could reduce Asia-Pacific’s gross domestic product by 17% in 2070, ADB says.

In a post pandemic environment, Australian workers are voting with their feet and skipping the office in favour of other, more appealing environments