Navigating the pushback against sustainability investing in the US – exemplified by the coalition of state treasurers and finance officers targeting major global asset managers – introduces significant challenges and opportunities for the Asia-Pacific region.

Markets and regulators in Asia-Pacific seem to be ignoring the continuing pushback against sustainability investing in the US. But the real situation is more nuanced than it seems.

In this discussion, The Asset is taking a deep dive into what this means for sustainability investing in the region and how individual markets can be impacted by this trend. 

For context, on July 29, a coalition of state treasurers and finance officers from about 20 US states mailed letters to the CEOs of major asset managers, including BlackRock, JPMorgan Chase, Goldman Sachs, warning these firms against embedding sustainability and climate considerations – or even the EU’s Corporate Sustainability Reporting Directive ( CSRD ) regulation – in their investment strategies, as well as their engagement and proxy activities.

This is part of the political pushback in the US against environmental, social and governance ( ESG ) investing which has ripple effects in Asia because the targeted firms are all global asset managers and banks with significant Asia-Pacific footprints.

The US-based global asset managers – BlackRock, JPMorgan, Goldman Sachs, Vanguard, State Street and others – collectively account for an estimated 11.5% to 16.7% of the global equity market in 2025, based on their assets under management ( AUM ) and typical equity allocations. The global equity market's capitalization as of mid-2025 is estimated at US$120-130 trillion, near record highs, according to Bloomberg.

If these US-based global asset managers are pressured into reducing their sustainability investments, the impact on Asia-Pacific would be double-sided.

On the one hand, it can provide opportunities for Asian asset managers and sovereign wealth funds, such as Singapore’s Temasek or Japan’s Government Pension Investment Fund ( GPIF ), by attracting capital from global investors seeking ESG-compliant portfolios, positioning Asia as a hub for sustainability-focused finance.

Also, Asian asset managers could position themselves as stable ESG partners, especially in markets like Hong Kong, Singapore, Japan and Australia where ESG and sustainability investing is advancing.

On the other hand, if US-sourced sustainability funds dry up, the size of sustainable financing available for Asian investments may shrink, at least at the initial stages, particularly for large Asia-Pacific infrastructure, renewable energy and transition projects, which often rely on global capital.

This could be eventually offset by Europe- and Asia-based capital given stronger regulatory pushes like the EU’s CSRD and Singapore’s International Sustainability Standards Board-aligned climate reporting. But it may take time for this transition to happen.

In short, while it doesn’t stop sustainability investing in Asia-Pacific, it is expected to force the global asset managers to recalibrate how they will implement and communicate sustainability, resulting in reduced sustainability investments for US-linked funds, more fragmented standards, and a chance for Asia to take the lead in sustainability investing.

In any case, the impact of the reduced sustainability fund flows from the US-based global asset managers to Asia will be different market by market, with the markets that are more advance in terms of sustainability regulations and infrastructure being most impacted.

In Hong Kong, for example, where the US-based global asset managers have a huge presence, the Hong Kong Exchange ( HKEX ) is actively tightening climate/IFRS S2-aligned disclosures. Since this market is sensitive to flows from global index trackers and passive managers, changes in proxy voting or stewardship by US firms can affect governance/engagement dynamics across many HK-listed companies.

These US-based global asset managers have substantial assets in the region, including through passive investment vehicles like index and exchange-traded funds that track benchmarks like the Hang Seng index. Their investment decisions, proxy voting policies and stewardship practices ( for example, engaging with companies on governance or sustainability ) heavily influence Hong Kong-listed companies, as these asset managers often hold significant stakes in them.

Because of this, it is expected that the HKEX may see fewer climate-driven shareholder proposals supported by US-linked index funds and perhaps a shift to materiality-only voting. The HKEX may, however, accelerate disclosure rules to lock in market standards regardless of US politics. This would counter balance any reduction in US investor support by embedding mandatory climate disclosure in HKEX regulations, ensuring that companies comply regardless of investor voting behaviour.

In Singapore, where many of the global managers have their Asia-Pacific headquarters, the Monetary Authority of Singapore has implemented tight sustainable disclosure regulations, together with an anti-greenwashing framework.

This is expected to put pressure on the US-based global asset managers, particularly those who manage cross-border funds across multiple jurisdictions out of their Singapore hub, to scale-back on the ESG messaging or re-label their funds that are domiciled or marketed out of this city.

This could result in the US global asset managers running dual fund products, one set for US-compliant non-ESG funds and another set for Singapore-compliant sustainable funds. In any case, Singapore's strong push on disclosure and anti-green washing will continue to support sustainable investing despite the US pushback. 

In Japan, the GPIF, as well as the Financial Services Authority ( FSA ), has been pushing active stewardship, through the Stewardship Code, a set of guidelines designed to strengthen its focus on sustainability, ESG factors and effective investor engagement.

This means that any pullback by US-based global asset managers on their sustainability investments will attract adverse attention from the GPIF – Japan’s biggest institutional investor, which many of the US-based global investors count as a major client – and the FSA as the regulator.

The US-based asset managers also hold significant stakes in Japanese companies listed on exchanges like the Tokyo Stock Exchange. If these firms recalibrate their proxy voting rationale to focus on narrower financial materiality, such as prioritizing short-term financial metrics over long-term sustainability risks, they may vote against or abstain from supporting ESG-related shareholder resolutions, such as those calling for net-zero commitments or enhanced climate disclosures.

However, Japan’s Stewardship Code and Corporate Governance Code create strong domestic pressure to maintain a focus on sustainability and long-term value, resisting this retreat. This dynamic highlights the tension between US and Japanese priorities, with Japan’s frameworks likely to sustain ESG momentum, supported by domestic and non-US investors.

Japan, like Hong Kong, is sensitive to global investment flows, but its strong domestic frameworks make it more resilient than other Asian markets. While Hong Kong’s market is influenced by US passive managers and global index trackers, Japan’s stewardship and governance reforms provide a counterbalance, ensuring that sustainability remains a priority despite US pressures.

In Australia, large institutional investors and regulators like the Australian Prudential Regulation Authority ( Apra ) treat climate as a prudential risk. Apra’s prudential guidance and climate vulnerability work means there is obvious conflict between domestic prudential expectations and US political pressure on managers.

At the same time, Australian super funds hold large allocations to global managers and equities. This means that in theory, Australian super funds can withdraw investments or mandates from US global asset managers if their strategies conflict with Apra’s prudential guidance on climate risk, as climate is treated as a material financial risk under Australian regulations.

However, practical challenges ( for example, transition costs and manager availability ) and the preference for engagement over divestment make large-scale withdrawals unlikely in the short term.

To conclude, while reduced sustainability fund flows from US-based managers may initially constrain financing for large-scale Asia-Pacific infrastructure and transition projects, markets like Hong Kong, Singapore, Japan and Australia are well-positioned to adapt.

Strong regional regulatory frameworks, such as Hong Kong’s IFRS S2-aligned disclosures, Singapore’s anti-greenwashing measures, Japan’s Stewardship Code and Australia’s prudential treatment of climate risk, provide resilience against US pressures.