While the US withdrawal from the Paris agreement introduces uncertainties for sustainable development and investments globally, in Asia it opens massive opportunities for investors to participate in the region’s sustainable development.

First, a distinction must be made between the US federal government’s ( aka Trump administration ) support for – or absence of support for – sustainable development and investment, and the US corporate and state sectors’ support for sustainability. For the purpose of this discussion “US engagement” and “US withdrawal” would refer to the US federal government.

While it remains to be seen how much the withdrawal from the Paris agreement will impact the US corporate sector, there is mounting evidence that the US corporate sector is not solidly behind the withdrawal, and many US corporates will likely find a way to stick to their sustainability commitments in order to remain competitive.

The position of the US states on sustainability or environmental, social and governance ( ESG ) issues is also divergent. As of 2023, 20 US states have reportedly issued anti-ESG regulations, eight have issued pro-ESG regulations, while the remaining ones 22 have not issued any.

Withdrawal’s effect

First, the US withdrawal from the Paris agreement will definitely reduce funding for climate adaptation and mitigation in developing nations under the Green Climate Fund ( GCF ). As of the end of 2023, the GCF had a portfolio of US$13.5 billion, with 243 projects in 129 developing countries.

The US initially pledged US$3 billion under the Obama administration in 2014 and contributed US$1 billion before Trump halted payments during his first term. In April 2023, the Biden administration announced a US$1 billion contribution to the GCF as part of efforts to renew its commitment to climate change, bringing the total US contribution to US$2 billion.

In December 2023, US vice-president Kamala Harris announced an additional pledge of US$3 billion, but this still requires congressional approval. In short, the GCF has theoretically lost US$4 billion from the US withdrawal.

Second, the US withdrawal substantially weakens the global momentum towards reducing greenhouse gas ( GHG ) emissions since the US is one of the largest GHG emitters in the world. It is doubtful whether the 2030 targets can now be met.

Third, the US withdrawal provides an opportunity for China and Europe to step into the leadership vacuum that has been created. Although the US withdrawal will not impact the structural leadership of the Paris agreement, China, in particular, will be in a stronger position to influence global GHG policies, frameworks and funding.

Apart from China taking a more central role and effectively taking over leadership of Paris agreement-related action, there are already a number of Asian regional initiatives in place that stand to benefit from the US withdrawal.

Singapore opportunity

In any case, when US federal support for climate initiatives diminishes, US private corporations and states committed to carbon neutrality are expected to seek alternative avenues, including those in Asia, to offset emissions.

For example, Singapore’s GenZero, a well-established carbon credit trading platform, could attract US entities looking for high-quality, verifiable carbon credits. While China’s carbon trading market is also recognized globally, its effectiveness, credibility and international reputation has been questioned with critics batting for improvements in its transparency, carbon pricing mechanism and more stringent emissions caps.

In fact, in the wake of reduced US engagement, GenZero provides Singapore with the opportunity to position itself as the global leader in carbon markets with its reputation for transparency, reliability and effectiveness in carbon credit trading.

In particular, the reduced US engagement from the Paris agreement may jump-start closer regional partnerships between Asean countries – some of whom have been slow to adopt carbon trading – and GenZero to create more integrated carbon markets.

In terms of technology and innovation, the US withdrawal from the Paris agreement could fast-track innovation in alternative carbon markets, with Singapore filling a leadership gap and GenZero spearheading development of technology for monitoring, reporting and verifying carbon credits, which are crucial for market credibility.

In addition, reduced US engagement in global carbon markets is expected to generate increased demand from other markets, including Europe and Asia, which provides an opportunity for GenZero to diversify its client base.

ADB initiatives

The US withdrawal from the Paris agreement, as well, could benefit the Asian Development Bank ( ADB )’s financing initiatives – particularly its US$7.2 billion earmarked for climate projects – depending on how well the bank can navigate its strategic alignment with regional partners and its ability to innovate its financing models.

In any case, when the US reduces its sustainable financing for developing countries under the Paris agreement, these countries are likely to turn to the ADB, and similar institutions, for debt relief, thus positioning the bank as a trusted partner for funding climate-related infrastructure, adaptation and mitigation in debt-stressed nations.

In fact, reduced US engagement in such debt relief arrangements provides opportunities for Japan and China, to align the ADB’s strategies more closely with regional priorities – particularly funding for green energy, climate adaptation and nature-based solutions – to ensure sustainable economic growth.

In particular, the absence of US participation in traditional financial frameworks could encourage private investors and non-traditional donors to step into the void. For example, the ADB could leverage this to increase public-private partnerships for climate financing, using its US$7.2 billion as a catalyst to attract private sector investment.

Private partnerships

Although the private sector in Asia has been a key participant in sustainability investments, its participation has mostly been as a stakeholder and not really a driver of sustainable development.

The US withdrawal is expected to create stronger pressure on Asia’s private sector to play a more active role in sustainability investments.

For example, the recent partnership between Japan’s Mizuho Financial Group and Pollination Group – which involved the Japanese bank investing US$20 million for a minority stake in the UK-based firm that specializes in climate change and sustainability – demonstrates the private sector’s evolving and growing role in driving sustainability.

This partnership, announced on November 4 2024, underscores a shift in which the private sector is no longer just a stakeholder but a driver of sustainable development, aligning profitability with environmental and social impact.

In a broader sense, such partnerships may push for the development of global standards for measuring and reporting sustainability impacts and could lead to a more vibrant green finance market, driving innovation and making sustainable investments more accessible to a broader audience.

This is where US corporates and its other entities that continue to be committed to sustainability can play a bigger role in terms of financing sustainability development despite the Trump administration’s withdrawal from the Paris agreement.

To conclude, while the US withdrawal from the Paris agreement presents big challenges towards achieving sustainability, it also presents opportunities for Asia, which can, at the very least, mitigate any adverse impact it may have and, at most, benefit the region in terms of fast-tracking its sustainable development. But, of course, it is up to Asian institutions, corporates and other stakeholders to see to it that they can use these opportunities to their advantage.