CGM Conversations: Session 2 - Investors’ Evolving Expectations for Increased Climate Action

The second session of Climate Governance Malaysia’s (CGM) Conversations series was held on 16 May 2025 at the Securities Commission Malaysia and featured Mark Mills, Founder of the Asia Investor Group on Climate Change (AIGCC) and Co-Founder of Generation Investment Management. Moderated by Dr. Hezri Adnan, Director of Group Sustainability at Bursa Malaysia and CGM Council Member, the session offered participants an opportunity to engage directly with Mark and pose questions on the evolving landscape of global investments in climate action.

To set the scene, Mark provided an overview of Generation. Established in 2004, Generation’s goal was to integrate sustainability analysis into traditional investment practices, aiming to deliver superior financial returns. Over the past two decades, Generation consistently outperformed benchmarks by 3–4% annually—an important validation that helped attract mainstream capital to sustainable investments. Mark emphasized that proving strong financial performance is critical to mobilizing the capital needed to transform society, especially for fiduciary investors who require a clear return on investment.

Responding to a question from Dr. Hezri on Asia’s growing role in climate action, Mark observed a clear increase in both sophistication and commitment among Asian organizations. He cited the Government Investment Corporation of Singapore as a key example, noting its advanced understanding of sustainability and involvement in transition-oriented investments—including a green steel project. He pointed to this as a case study for the next wave of sustainable investing, particularly under the growing emphasis on “impact.”

Dr. Hezri then invited Mark to highlight key findings from AIGCC’s latest annual State of Investor Climate Transition in Asia report. Now in its sixth edition, the report tracks the climate progress of 230 organizations across Asia, covering areas such as board-level governance, executive compensation linked to climate performance, and investor engagement with companies. Mark stressed that engagement is essential—investors must convey a clear message to the companies they fund: take a long-term view and manage environmental, social, and governance risks to improve long-term shareholder value. This counters the harmful short-termism that has plagued corporate behavior, citing the Volkswagen emissions scandal as a cautionary tale of how chasing immediate gains can destroy long-term value.

He went on to explain that Generation’s founding mission was not only to deliver returns but also to make the broader business case for sustainable investing. This commitment led to their co-founding of the Principles for Responsible Investment (PRI), which has grown from a small group of signatories to over 3,000 today, representing more than US$120 trillion in assets. While acknowledging that sustainable investing has faced occasional setbacks, he believes that its long-term trajectory remains strong and is gaining growing support from investors across Asia.

Building on this reflection, Dr. Hezri asked Mark to respond to concerns about a possible “sustainability recession,” particularly in light of backlash in North America and fears that it might spread globally. Mark acknowledged past downturns, such as during the Global Financial Crisis and following the 2016 U.S. election, but noted that these were followed by strong recoveries. In his view, these were not true recessions, but temporary dips. He pointed to the U.S. Inflation Reduction Act as the most ambitious climate legislation to date, and predicted that the current “ESG backlash” would also be temporary. On the ground, he observed that most companies continue taking climate-positive actions quietly, a phenomenon dubbed the “Green Hush.” They may adjust their language—using terms like “nature” instead of “biodiversity”—to avoid political noise, but their actions remain aligned with sustainability goals. Dr. Hezri concurred, noting that sustainability has become deeply embedded in the logic of global capitalism and, given the complexity of the global political landscape, it cannot be easily reversed.

Opening the session to audience questions, an attendee asked whether Generation had successfully extended client investment horizons beyond the typical short-term review cycle, and whether it had integrated broader performance indicators. Mark explained that for their public equity strategy, Generation requests clients to give them the “luxury of time” through a one-year lock-up period and early redemption penalties. This unorthodox approach conveys to clients that they need to stay for the long-term.

On performance indicators, Mark noted that since launching their private equity arm in 2008, Generation has published annual impact reports to track real-world outcomes. A major internal review five years ago concluded that incremental change was insufficient to meet Net Zero goals. This led to the creation of Just Climate, a subsidiary that starts with an ambitious target—avoiding 240 million tonnes of CO₂ per billion dollars invested, about ten times their previous benchmark. This, he explained, necessitates focusing on hard-to-abate sectors such as steel, with financial returns structured around achieving that goal.

Another audience member asked whether new penalties on high-emitting “sin stocks” could ease pressure on green investments to continually prove their worth. Dr. Hezri responded that Bursa Malaysia is currently focused on establishing a robust disclosure baseline—through the National Sustainability Reporting Framework (NSRF)—to build the necessary infrastructure of trust before exploring more advanced mechanisms. Building on this, Mark emphasized that while he supports free market mechanisms, robust government policy is essential, pointing to continued fossil fuel subsidies as an example of misguided policy. Generation, he explained, avoids investing in companies with significant negative externalities—not only for ethical reasons, but because such firms face long-term financial risks from regulatory or political backlash. He stressed that “we cannot exchange values for value”—meaning that investments must align with both ethical principles and sound financial judgment. Rather than taking a chance on companies unlikely to change, Mark argued, it is better to focus on the growing pool of responsible investment opportunities.

In response to a question about nature-related risk, Mark explained that nature has always been core to Just Climate’s investment thesis, especially due to the outsized emissions and degradation caused by the agricultural sector. Agriculture, he noted, is responsible for about 25% of global emissions and also contributes to soil depletion and biodiversity loss through heavy use of fossil fuel-intensive fertilizers and pesticides. To address these challenges, Just Climate focuses on two areas: industrial climate and natural climate solutions. They have launched a fund aimed at halting deforestation, restoring degraded ecosystems, and supporting regenerative agriculture. The fund has raised US$200 million toward a US$750 million goal, with investments including GreenLight Biosciences, a firm that uses RNA interference (RNAi) to replace toxic pesticides with safer, targeted alternatives. Mark clarified that the strategy emphasizes scalable, growth-stage businesses driving system-level innovation, rather than investing in land ownership or conservation projects per se.

Dr. Hezri next raised the broader question of the role institutional investors can play in financing climate solutions, which was followed by an audience inquiry about how development financial institutions (DFIs) might help de-risk early investments in challenging sectors. In response, Mark emphasized that investors must take an active role in the climate transition. Clear and consistent messaging from institutional investors to companies is critical—especially regarding net zero commitments—to avoid mixed signals that could undermine progress. He also highlighted the importance of building strong alliances, both locally and globally, to amplify the influence of the investment community.

To illustrate, Mark shared the example of a green steel initiative in Brazil, where Just Climate partnered with a local development bank to create a blended finance vehicle aimed at attracting both domestic and international capital. He expressed hope that similar collaborative models could be developed in Southeast Asia to build regional momentum for climate solutions. Ultimately, he argued, a united investor voice is essential to advocate for coherent government policy and counter the influence of entrenched fossil fuel interests.

Mark acknowledged that when Just Climate first set out to raise US$1 billion for investments in hard-to-abate sectors, many were skeptical—particularly due to the lack of a proven track record. However, through detailed discussions with institutional investors, they ultimately raised US$1.5 billion. A key to success was demonstrating that even under conservative “business-as-usual” scenarios—with no carbon pricing or regulatory shifts—investments like green steel could still deliver 20% private equity returns. He noted that many investors no longer believe the status quo will persist over the next decade; they expect stronger climate policies and carbon pricing. As a result, such investments are seen not only as commercially viable but also as valuable for portfolio diversification. 

In closing, Dr. Hezri asked Mark to share his perspective on the next generation of investors. Mark expressed optimism, highlighting the passion and capability of young professionals. He observed a growing trend—particularly among family offices—toward directing capital to projects with meaningful environmental and social outcomes. This generational shift, he concluded, will continue to reshape investor expectations and accelerate the flow of finance toward climate solutions.

Click here for the recording and photos.