Yay or Neigh? 5 Trends of the (Fire) Horse

Yay or Neigh? 5 Trends of the (Fire) Horse

By Debra Tan, Dharisha Mirando, Ziyang Cai, Jamie Chan 23 February, 2026

The Fire Horse pushes water systems to the brink. Either ride its fast-paced momentum in adaptation to see effortless success, or get caught in its blazing path. Make sure it's ride not die with our 5 trends of the year

Whether we like it or not, things will change; and fast. That’s the nature of the Fire Horse. The Horse evokes images of free-spirited horses running wild across the plains and in Chinese culture, the arrival of the Horse brings success and good fortune “马到成功” . But this year, the horse, already inherently fiery & energetic, has been given a double boost by the element of the year, fire.

This means we are in for sweeping changes – of the systemic kind – and all around the world, rapid developments & innovations will sprout up. January’s rollercoaster events from Venezuela to Greenland and Davos are but a taste of what’s to come for the rest of the year.

Those who can ride the Fire Horse’s fast-paced momentum will see effortless & rapid success, whereas those who resist change will struggle; worse still, those caught in the middle of the Fire Horse’s blazing path will be trampled on, going down in flames.

So, make sure it’s yay not neigh as you harness the Fire Horse with our five trends for the year. But before we do that, let’s see how we fared with our predictions for the Year of the Snake … did we “hiss or miss”?

What we said in the Year of the Snake …

We said last year that “many of our planet’s climate systems… are now reaching their tipping points” .

Unfortunately, this became reality in October 2025 when the planet’s first tipping point was crossed with coral reefs now facing widespread dieback due to ocean warming & acidification. Our “Planetary Health Check 2025”, shows that 7 out of 9 planetary boundaries have now been exceeded.

Last year, oceans warming was equiv to 200x the world’s total electricity generation in 2024

Indeed, ocean temperatures continued their 3-year streak of extraordinary warming in 2025 with the upper 2,000m of our oceans warming by ∼23 Zettajoules. No idea how much this is? This amount of energy is around 200 times the world’s total electricity generation in 2024 – shocking!

But what’s more shocking is the impact of hotter oceans on Antarctica. Hotter oceans are eating away at sea ice which protect ice sheets from being eroded. As a result, rapid ocean warming have pervaded ice sheets resulting in accelerating rates of Antarctica ice sheet melt & sea level rise (SLR). If Antarctica continues to melt at an accelerated rate, we could see 1m of SLR around 2060-2070, giving us less time to build coastal defences. It’s not better in the Arctic either where a new diminished sea ice state is triggering a slowdown and eventual breakdown in the Atlantic Current. Hint – the physical climate landscape is not looking good for the Fire Horse – more on this in Trend #1.

As chronic climate risks balloon, we predicted that “the great game of snakes and ladders”  would start – either you “ladder up” by building adaptation or risk sliding back to zero. Certainly in 2025, we saw the conversation on adaptation action as well as financing really take off – a major step forward to “adapt, adapt, adapt like crazy”.

From GIC to Standard Chartered…

Everyone was making “inevitable” adaptation investment business cases

Everyone was furiously making “inevitable” adaptation investment business cases. For example, GIC sized the inevitable adaptation investment opportunity across public and private debt and equity to rise from US$2trn to US$9trn by 2050, with US$3trn of incremental growth attributable to global warming. Banks like Standard Chartered are also finding that every $1 spent on adaptation this decade can generate $12 in economic benefits. It’s clear that there is immense reward for first-movers.

Even far away, high up in the Himalaya Hindu Kush, deadly disasters have kickstarted serious conversations on melting mountains and the need to rethink infrastructure resilience, and prompted ADB to launch a US$3.6bn Glaciers to Farm project to help Central & West Asia to adapt to their disappearing glaciers, an important water source. We were also very privileged & fortunate to have spoken to Dr. Kongjian Yu, the “father of sponge cities”, on blending old school nature-led techniques with modern tech before his untimely passing.

Although more corporates say they are adapting, what they are really doing is wide-ranging. While there are certainly innovation leaders, there are also laggards. Take the real estate sector – while LINK Asset Management, AXA & Marsh got together to innovate sustainability linked insurance with premium cuts of up to 19.2%, we found HK’s Top 4 real estate developers to have “no sense climate strategies”.

How can they when adaptation plans disclosed do not even address the respective risks identified by the companies, let alone our stress test results which reveal that 37-56% of their properties could be at risk from “unlucky” storm tides today.

But this will change in 2026 – with fire at their tails, they’ll make a mad dash to get ahead – see Trend #2.

Cryosphere risks still flew under the radar…

…so check out our “dummies guide” to the latest polar science

Evidently, decisive action still lags and procrastination only means an ever-widening risk gap. To slow down the risks & close this gap, we advised “snake smart” action to “rethink energy security & development to preserve ice melt”. Yet, risks related to our cryosphere (despite being more pervasive, complex, inter-linked, compounding and ever-accelerating) still flew under the radar. So, to better understand the fast-evolving changes in the cryosphere and what this means for Asia, finance as well as other sectors, we collaborated with top scientific institutes to publish a “dummies guide” to the latest polar science.

This “13-factsheet guide to Stop the Melt” is a MUST READ. If you haven’t read them, do it NOW as the risk landscape is shifting fast – when we published our factsheets in March, scientific consensus was that “2°C is too hot for ice”.

Three months later, in May 2025, leading ice scientists sounded an alarming update – ice is a lot more sensitive to warming than we thought – even 1.5°C is already too hot – the safe threshold for ice is closer to 1°C!

Wake up!!! Ice does not respond to decadal temperature averages; it responds to temperatures today. We breached 1.5°C in 2024 when annual warming came in at 1.55°C and despite La Nina, warming in 2025 remained high at 1.44-1.47°C. It’s worth noting that warming only dropped below 1.5°C in Dec 2025; it was 1.54°C for 12 months til November.

Time to rethink energy security!

26 of the world’s 30 largest oil ports are incredibly vulnerable to 1m of SLR

At this rate, relying on oil for energy security may be a relic of the past – our 2025 Crude Awakening 2 report found 26 of the world’s 30 largest oil ports serving the Top 5 oil producing & consuming as well as exporting & importing nations to be incredibly vulnerable to 1m of SLR. No wonder we saw moves to rethink energy security & development – many Asian countries stepped up transition even as the US pulled out of the Paris Agreement. While transition will continue at a fiery pace in 2026 (see Trend #4), all signs point to sweeping changes of the systemic kind for global shipping (see Trend #5).

Sadly, in addition to rapid SLR, an increasingly erratic water cycle is affecting the flow of water in rivers. Rethinking development was thus prioritised. Asia is especially vulnerable as rising risks in our “mother rivers” (from the Yangtze & Ganges to the Mekong & Amu Darya) threaten half the GDP of 16 Asian countries including China & India plus 4 other South Asian countries as well as 5 ASEAN & 5 Central Asian countries.

Pressure on our “mother” rivers has increased in less than a decade: 1 in 2 Asians now live in these basins as a population of around half the USA (196mn) have moved there. Basin GDP has more than doubled to US$10.3trn – now accounting for half the total GDP of the 16 countries, up from a third; for 8 countries, economic river reliance is over 80%! (see our report with CAS-IGSNRR).

All this plus an ever-erratic water cycle means the case for waternomics – planning economic growth with water use in mind – just got stronger. As does the case for energy transition – more in Trends #3, #4 and #5.

Drilling down, we also said there will be some “shedding of skins” with new emerging green finance sectors, building makeovers + positive water strategies. Building makeovers didn’t happen in a major way, but we did see greening moves from the ICT sector with the AI revolution underway. In Hong Kong, our financial regulators are moving to develop transition finance sectoral principles with ICT as the pilot sector.

2/3 of new data centres built since 2022 are in high water stress areas

The aggressive expansion of thirsty data centres also further spotlighted their impacts on already scarce water supply. We were one of the first to report this for China in 2024; by 2025, Bloomberg was reporting that around two-thirds of new data centres built/in development since 2022 are in areas “already gripped by high levels of water stress”.

Most of the big players are responding with water positive/neutral strategies for water stressed areas – Amazon is apparently leading the way – they are halfway to achieving their 2030 water positive targets. But they can definitely do more – see Trend #2.

Last but not least, we also expected “poisonous geopolitics” to seep in and indeed, it did sink its fangs into multilateralism. The US’s exit from the Paris Agreement alone pushed warming up by 0.1°C and updated NDCs were far from enough, bringing us to 2.3-2.5°C by 2100. As expected, collectively solving climate challenges took a backseat as the whole world was distracted by global tariffs and challenges to global order (or rather disorder).

China emerged as an unwilling hero adding 540TWh of renewable energy in 2025

However, we did expect G77+China to lead in adaptation and transition, and on these fronts they did not disappoint – China emerged as an unwilling hero adding 540TWh of renewable energy in 2025 (this is more than enough to power the whole of Germany for a year). And for the first time ever … drumroll … China’s total wind & solar capacity (1.84TW) exceeded that of fossil fuel fired power plants (1.54TW) by the end of 2025. Plus, we also saw the G77 just get on with it, highlighting the need for US$1.3trn of climate financing at COP30 in Brazil.

Fire Horse takes over from the Water Snake ….

While the Water Snake slithered chess pieces into place last year, the Fire Horse will gallop them to great success. But great wins for some will be great losses for others. So, make sure you are on the right side!

This is doubly important this year as the element of fire adds a further boost to the horse’s energetic nature. This means that things will change, and fast – and because of the Fire Horse’s nature, the changes will likely be of a transformative kind disrupting systems – giving us less time to respond.

We will experience rapid developments, innovations & disruptions everywhere of every kind (political, tech, science, climate) all at once. For an idea of what the Fire Horse portends, look no further than the last time the Fire Horse happened 60 years ago … back in 1966, the US doubled down on the Vietnam War while on the other side of the world, China’s Cultural Revolution kicked off. In the meantime, the USSR landed a vehicle on the moon and the first ATM was introduced as were Miranda rights in the US.

Systems will be tested so be ready. In the eyes of some, it will feel like chaos is reigning and in times like these it’s important to decipher the underlying trends to see the horse’s true path. Water – the fundamental building block of all our systems from manufacturing to finance – is changing so unless you know what’s shifting, you’ll just be building on/investing in a house of cards. So, make sure it’s not “neigh” but “yay” in 2026 – ride our 5 trends to harness the Fire Horse’s fast paced momentum to effortless & rapid wins …

1. Fire Horse pushes our water systems to the brink into an era of “Water B” & water bankruptcy

Like it or not changes are afoot and by the end of the year, the Fire Horse would have made its mark with changes seared in. We are not just talking about global politics but our global climate and water systems. As we are nearing and even passing planetary tipping points, we have triggered changes in our weather/ ocean/ atmospheric circulation & cooling systems.

At 1.44-1.47°C of warming today, we are well above the ~1°C safe limit for our cryosphere

At 1.44-1.47°C of warming today, we are well above the safe limit for our cryosphere which scientists now say is likely closer to 1°C. This means that the extreme weather we are seeing is set to become the norm AND sea level rise will accelerate thanks to rapid ice melt.

We have always taken water in all its forms (ice, snow, rivers, aquifers, clouds to oceans to name a few) for granted. But shifting paradigms in our cryosphere, rapid ocean warming & breakdown in ocean circulation has disrupted our water cycle, making it ever more erratic.

In a way, we are exiting an era of “Water A” and entering into the era of “Water B”. The problem is that most of our cities as well as hard & soft systems (hard – sewers, water pipes, electricity transmission lines, ports, airports / soft – credit, insurance, emergency response) were built for Water A. We’ve started to “adapt” our systems but only to cope with deviations of Water A but when Water B blazes in (and it will), we will all be caught unawares.

In Jan 2026, the UN declared “global water bankruptcy”…

We’re entering into an era of “Water B”

But no more, 2026 is when we finally wake up to this fact. The fiery characteristics of the year signal that freshwater stress is going to hit us even harder, making the systemic change to Water B harder to ignore.

Already in January, the UN has sounded the alarm, declaring “global water bankruptcy”. Yet this critical news flew under the radar as it was made on the same day as Mark Carney’s “middle countries” speech.

Basically, we’ve irreversibly exhausted many critical water systems to the point that they’ll never be replenished to historic baselines. Not only have we overspent our annual renewable water “income” from rivers, soil, and snowpack, but we have also depleted long-term “savings” in aquifers, glaciers, wetlands, and other natural reservoirs.

75% of the world’s population live with insecure / critically insecure freshwater supplies

It’s bad. Today, 75% of the world’s population or over 6bn people live in countries where freshwater supplies are insecure or critically insecure; 4bn of these will face severe water scarcity for at least a month per year. Liquidity is tight and getting tighter as global water demand is still rising while the natural supply of water is now less predictable. If we are still tweaking to cope with risks under Water A instead of switching gears to manage water well in an era of Water B, Day Zero could happen a lot sooner than we think.

We face systemic failure in our water systems. We must dare to change. Luckily, the Fire Horse is here to inspire us to be way more imaginative and way more daring with adaptation so that it can cope with Water B. The word the IPCC used back in 2021 to describe this was “transformative”. The time to be transformative is now, not tomorrow.

Physical changes to our planet are happening fast. Who knew that in just 5 years, the cryosphere would deteriorated so much and that physical risks would accelerate and escalate so much that we would have to have plans for 2-3m of SLR by 2100. Even we thought these levels were far-fetched in 2020 when we wrote our first comprehensive reports on coastal threats. Now, 2-3m of SLR really “cannot be ruled out”.

Imminent water bankruptcy is the only liquidity crisis you should focus on in 2026

It’s easy in 2026 to be distracted by politics, warmongering and economic instability but we must remember that water is the fundamental building block of our economy. It fuels industrial processes, generates power and provides food – it is also the only resource we cannot live without daily. As it’s getting more and more scarce, imminent water bankruptcy is the only liquidity crisis you should be focusing on in 2026.

Remember, water in eastern cultures is synonymous with wealth. Without water, there is no growth, no prosperity – so for the year of the Fire Horse as we enter the new era of Water B on the brink of “global water bankruptcy”, it’s time to saddle up to dare to transform. Put blinkers on if you have to avoid distractions and focus on water – pushed to the brink, our water systems are ripe for disruptions, and game changers will be abound across all water intensive industries (including powergen) and even in the water sector itself.

China’s certainly doing this and has charted a path to avoid water bankruptcy – see how it’s galloping ahead to ensuring water security in its new 15^th Five Year Plan (15FYP) which kicks off in 2026 – see Trend #3 below for more. Investors and corporates are also waking up and moving to adapt as they realise they either ride or die with the Fire Horse …

2. Ride or die! Fear & greed drives corporates, investors & banks to place big bets on adaptation…

Horses have been linked with racing and betting for centuries; some even say racing is the foundation of modern gambling. So, since it is the Year of the Horse, it’s time to bet and as it’s the “Fire” Horse, the odds favour BIG BETS of the strategic kind. One sure bet is backing the inevitable rise of a trillion-dollar adaptation industry.

Adaptation as an investment thematic will certainly emerge in 2026

This year, we foresee corporates & investors elbowing into an area that is traditionally dominated by the public sector to place their bets on adaptation. It’s early days yet and there will be much jockeying for an advantageous position at the starting line and before long they will be chomping at the bits. Adaptation as an investment thematic will certainly emerge from the flames created by the Horse’s blazing path in 2026.

Some areas will move faster than others … here are 3 we see corporates, investors & banks canter into in 2026:

a) Galloping ahead with trillion $$$ worth of climate-resilient infrastructure investment including coastal defences

According to MSCI Institute’s 2025 Corporate Resilience Survey over 80% of the 550 companies surveyed in 15 countries say operations have been disrupted due to some type of extreme weather events – severe storms (62%), dangerous heat (49%) and flooding/rising sea levels (47%). Interestingly more experienced these than natural disasters like earthquakes (33%). 

The risks ahead are real – nearly all say they are assessing climate risks with three-quarters of companies implementing adaptation frameworks. Indeed, almost two-thirds say that climate-induced physical risks are already “currently having a “significant impact on the global economy”, while 36% expect this at some point in the future.

So, expect corporates to allocate more capital to protect operations in 2026 plus this opens up new revenue streams for other sectors … a double win! Remember, GIC’s base case analysis of just 21 adaptation solutions shows revenue growth from US$1trn today to US$4trn by 2050.

AND… these 21 solutions don’t even include coastal defences for sea level rise!

Coastal defence spending will be big…

Taking the lead are Singapore (SGD100bn) & the Netherlands (EUR650bn)

Spending to defend against rapid SLR will be even bigger. Singapore said it’ll spend at least SGD100bn by 2100 on coastal protection against rising seas, whereas the Netherlands have EUR650bn in investments (planned & prepped) between now and 2050 for areas vulnerable to SLR.

Think of all the coastlines in the APAC region … kerching!

b) Freshwater infrastructure alone will require a further EUR6.5trn of investments

Increased drought, rivers running dry and rising water scarcity all mean that private investment in water tech – from efficiency, recycling to desalination – is only set to grow. According to the World Economic Forum, EUR11.4trn in investment will be needed by 2040 to ensure equitable access, climate-resilient infrastructure and accelerated uptake of circular and digital water solutions. But we are far from funding this – the current global investment gap is EUR6.5trn – equivalent to about EUR435bn per year. Check out their playbook to bridge this gap.

The “No.1 global adaptation financing hub” title is still up for grabs…

…we’re rooting for our homebase HK!

That’s a lot of capital to raise and with the “No.1 global adaptation financing hub” title still up for grabs, it’s off to the races. We expect to see finance capitals from New York to London and Hong Kong to Singapore vie for pole position. Of course, we are rooting for our homebase, Hong Kong to race ahead to become THE global adaptation financing hub. Check out our views on this in the HKGFA seminar to unlock adaptation financing, HK Green Week fireside chats & the Standard Chartered Business Summit.

If EUR11.4trn to build freshwater resilience seems fantastical and you’re not convinced, just look at China … its spend on water conversancy alone per year is north of CNY$1trn since 2022; that’s around EUR120-155bn per year. Didn’t know this? Check out Trend #3 to see how China is harnessing the Fire Horse to usher in an era of “water stability” in the 15FYP.

c) As ‘ride or die’ reality hits, insurance have started to incentivise adaptation

According to Munich Re, damages from natural disasters amounted to US$224bn in 2025, of which insurers covered US$108bn – weather disasters accounted for 92% of all losses and for 97% of insured losses. With yet another year of insured losses exceeding the US$100bn mark, you bet insurers are feeling the pain. To lower losses, insurers have pulled back from high-risk locations or increased premiums by 50-100% in some areas. But this is untenable and could end the insurance industry as we know it – the signs are clear in the January 2026 tea leaves.

Jan’s bushfires & floods led Australia to declare an “Insurance Catastrophe”

Just in January, bushfires & floods (yes, at the same time) in Victoria led the Insurance Council of Australia (ICA) to declare an “Insurance Catastrophe” and forced the Australian government to set aside AUD329mn for recovery. Meanwhile, the US suffered Arctic storms as a polar vortex drove temperatures down to -30°C; it was even -5°C as far south as Florida. With over a million customers losing power across 8 Southern states, you bet insurers are feeling the heat.

As extreme weather plus chronic risks will only render more and more locations uninsurable, it’s literally time to ride or die … so we see insurers stepping up to “save themselves” by using its premiums to incentivise adaptation.

We’re betting that they will follow the path of sustainable-linked insurance paved by AXA & Marsh to keep the industry alive.

Other sectors jumping the gun are those which are water intensive like data centres, agriculture/F&B and textiles/fashion. Here, we expect agri-tech, water neutrality/positive strategies, waterless cooling/dying and circular industrial water to be all the rage. Some of these will rely on blended finance to make the numbers work but many already make business sense, so don’t get left behind, start horse trading on adaptation now.

Bankers will be busy innovating adaptation financing products. Here, we recommend to lean into the Fire Horse and start thinking BIG on coastal adaptation as this will have significant impact on loanbooks.

The risks & opportunities are HUGE – note that the above costs for SLR defence for the Netherlands DO NOT account for rapid ice. Sadly, the rapid state of melt in the Antarctica & Greenland mean that we can no longer ignore the “cannot be ruled out scenario” of 2-3m SLR by 2100 – we need to start thinking about an “Ice Plan B”.

There is no better time than now … the Fire Horse will blaze a trail of destruction & disruptions with compounding and escalating physical risks that will force us to react. Sweeping changes of the systemic kind are coming … make sure you are positioned to ride the Fire Horse, adapt now … or get burnt in its wake.

3. China gallops ahead with a new 15FYP to shore up water security & resilience risks in Water B…

The first rule to building resilience is to know the extent of the risk ahead. Know what will kill you and then figure out how to survive. China’s figured it out and is galloping to shore up resilience on all fronts in 2026.

China’s 2025 losses from natural disasters totalled CNY242bn

Why? Because 2025 floods, droughts and other water-related disasters caused direct economic losses of CNY 175bn with further losses of CNY42bn from typhoons, low temperatures plus snow/ hail/ sand storms. According to the Ministry of Emergency Management, 2025 losses from natural disasters totalled CNY242bn. The numbers for 2024 were even higher at CNY401bn. With these numbers, you bet China is motivated to reduce risks with vigour & robust energy, channelling “龙马精神”, the “spirit of a dragon-horse”.

You don’t have to look far to know that China understands the risks ahead – they are clearly stated in various provincial 2035 adaptation action plans. Take Shanghai for example, its adaptation plan identifies the city to be located in an area that is “a sensitive and vulnerable area for climate change” where “heat waves, super typhoons, and heavy rainfall, are generally on the rise, with a significant increase in temperature” at a rate of 0.18°C per decade for the last 150 years. As a result “The systemic risks and challenges posed by frequent extreme weather and climate events are particularly complex and severe”.

They certainly do not shy away from describing potential risks brought by the triple/quadruple whammy hits of typhoon, rainstorm, high tides and floods along the Huangpu impacting water resource security. Rising seas eroding coastlines, saltwater intrusion and marine ecosystems impacts as well as impacts on the dense urban population and critical infrastructure from energy to transport are all also highlighted.

By now, all provinces have completed Adaptation Action Plans…

Shanghai, Shenzhen & Chengdu have city-specific plans too…

By now, all other provinces, municipalities & autonomous regions have completed their risk assessments and submitted their Adaptation Action Plans; the due date for these was February 2025. It’s worth noting that large cities like Shenzhen and Chengdu also have their own action plans. Water features heavily in all these plans – ranging from a supply perspective considering an increasingly erratic water cycle to inland, river & coastal flood resilience.

As a result, we expect to see spirited & vigorous efforts on water resilience in the incoming 15FYP (2026-2030). As the kick off year for the 15FYP, expect a key theme for 2026 to be water savings & conservation to ensure water security as China continues to squeeze more $$$ out of every drop. How far has China come? Has it decoupled water use & economic growth? We will cover these plus more in depth next month after China’s “Two Sessions” meetings … so sign up now for our newsletter, if not already.

We foresee China to continue its sponge city, digital twins, watershed restoration & dam building spree

For the Horse year, we also foresee China to continue its sponge city, digital twins, watershed restoration and dam/ reservoir building spree. To give you an idea of the size of these “vigorous efforts” … a budget of almost CNY600mn was set aside to kick-off a digital twin for the Yangtze River Basin with more to come in the 15FYP while over CNY57bn was further injected into the Three North Project for eco-restoration between June 2023 and October 2025. And let’s not forget that hydropower expansion is slated to be +100GW by 2030 in the coming 15FYP – plus there are new targets for sponge cities also – more on all these next month!

But wait, China is also building dams and dismantling dams for ecological purposes. In Guizhou, in an exercise spanning 2020 to 2024, 342 or over 90% of the 373 dams on the Chishui River were removed to restore the Dabry sturgeon’s migration route.

Whereas over in the Loess Plateau, more than 58,000 silt dams are installed for preventing soil erosion. More of these will be needed and China’s just come up with a way to fund them … see “New Policies to Finance Silt Dams, Protect Soil & Water Plus Cut Emissions” by Dr. Dong Liang Shen – a world first from China.

Efforts will also be holistic from mountains-to-oceans. On this front, it’s worth noting that Sichuan submitted a separate adaptation plan to protect & glaciers & permafrost in it’s part of the Sichuan-Qinghai-Tibetan plateau. These efforts go towards protecting “China’s Water Towers” the source region of 3 of Asia’s great rivers – they Yellow, Yangtze & Mekong. Now all they have to do in 2026 is to execute these plans.

In case there’s still any doubt that water remains a top priority to China in 2026, President Xi’s did iterate in his new year speech that “Clear waters and lush mountains have become a salient feature of our landscape”.

Almost 70% of China’s sea level rise from 1900 has happened in the last 4 decades…

…so we expect China to take a just-in-case approach to coastal adaptation

Coastal defence actions have also started but these are still early days, so expect the conversation on accelerating sea level rise due to rapid ice melt to be an increasingly hot topic for 2026. Given the acceleration in SLR and uncertainty around ice melt dynamics, we expect China to take a just-in-case rather than a just-in-time approach to coastal adaptation. Note that most of SLR in China has happened in the last decade – seas rose 0.19m since 1900 but according to China’s Ministry of Natural Resources, 0.13m of this was since 1980.

Adapting to ensure water security plus defending coastlines will be extremely costly and the Chinese government has already recognised that it will not be able to finance it all. It has started to turn to the private sector for help and this trend will only build in 2026 and the 15FYP. So not only will innovations be tech/physical but also financial. Ideas will flood out of China as it races ahead to safeguard its coastlines and water security – they will be like “万马奔腾” or “Ten thousand horses galloping” bringing on grand sweeping momentum and immense progress.

As China’s international finance hub, Hong Kong must not miss this opportunity presented by the Fire Horse. It must position itself to ride the unstoppable adaptation wave ahead triggered by the incoming 15FYP. Want to brainstorm how this will work? Contact us.

4. Market forces overtake decarbonisation “neigh-sayers” to drive decarb in Asia

It’s the year of the horse so neigh-sayers will be plentiful. They’ll prance around but don’t get distracted, the real game of disruption is afoot – decarbonisation will be more rapid than you think despite Trump’s exit from everything climate. When Trump quit 2 major climate bodies (the IPCC & UNFCC) John Kerry said the move is a “gift to China and a get out of jail free card to countries and polluters who want to avoid responsibility”. 

Sure, the slash in US funding and expertise contributions will be felt but we say the Fire Horse means that market forces will prevail over policy. Decarb could even happen faster than you think as China & India, the #1 and #3 largest carbon emitters, are not going to shirk their responsibility. Indeed, Chinese Vice Premier He Lifeng made this clear in his Davos speech.

Since 2011, China has gone all in on decarb…

Many look to China’s updated 2025 NDCs as a firm commitment to decarbonising. But in fact, China had decided to go all in on decarb way back in 2011 when it released the 12FYP and announced its new Strategic Emerging Industries which included Energy Savings, Environmental Protection, Renewables & EVs.

Why? Because China has a real liquidity constraint and back then, nearly 96% of China’s electric power required water for generation, meaning water scarcity posed a significant threat to energy security – we highlighted this drive for water & energy security back in 2012. And also explained why it doubled down on these sectors in 2015 with its Made in China 2025 plan.

Pushing renewables production, laying UHV lines, setting up green finance…

For the last decade as it pursued a water & energy secure China, utilised feed-in tariffs, subsidies, tax incentives, and countless supporting policies to move multiple chess pieces in place from wind/ solar/ battery/ EV production to laying UHV lines & charging stations as well as setting up green energy certificates, green finance & carbon markets. The deregulation of the energy market last July marked the point of no return and we expect capacity factors for renewables to rise in 2026.

As India faces an even tighter liquidity constraint, we expect India to also “de-water its power supply” (deep dive on why here and here). Indeed, India had a record-breaking 2025 with a 22.6% or 49.12GW increase in renewable capacity to 266.78GW. India can leapfrog! Certainly, its transition is already at a faster pace than China when comparing them at an equivalent income level.

From 2010 to 2023, the cost of energy per kWh has dropped by 90% for solar & 63% for onshore wind…

Aggressive renewables meant that coal power generation fell in both in China and India – the first simultaneous drop in 52 years. And we expect many more years of this trend to come. When these 2 giants move with the Fire Horse, the rest of the world will reap the rewards and prices will remain competitive. Indeed, the levelized cost of energy (LCOE) per kWh has already dropped sharply across the board – solar PV by 90% & wind power by 63% (onshore) from 2010 to 2023, making them cheaper than coal. Meanwhile, battery pack prices fell 92% from 2010 to 2025.

We hear the neigh-sayers say that China’s removing its 9% export tax rebate for PV modules (effective April next year). Fear not, even after these subsidies are removed, prices will remain competitive and faster adoption of renewables across Asia will ensure prices stay competitive. Why will they also fast track transition? Because their major oil and gas suppliers, the Middle East & Russia, are marked by the rumbles of war.

For industrial giants like Japan & South Korea, which have long depended on seaborne energy imports, they also have to worry about shooting themselves in the foot – not weaning off oil faster could sink their oil import ports – see which ones. Given rising physical and geopolitical risks plus increasing water scarcity, the surest path to security is renewables.

Transition is here to stay across Asia, driven by economics and the need for energy security rather than carbon savings. In 2026, transition will only speed up. The abundance of action in China will be infectious.

Virtual Power Plants, Vehicle-to-grid pilots, world’s largest Compressed Air Energy Storage plant – all led by China

Think convergence of IoT and AI used in Virtual Power Plant (VPP) and Vehicle-to-grid pilots; FYI EV owners are already earning a net profit of RMB3.60/ kWh in Shenzhen.

Transformation in energy storage is also on the cards with this year kicking off with the world’s largest Compressed Air Energy Storage (CAES) plant starting full commercial operations in China. Who knew we’d be leveraging vast underground salt caverns to store energy! Oh, and let’s not forget nuclear – the rise of small modular nuclear as well as thorium reactors are also written in the stars.

EVs too will bloom everywhere – how can it not when BYD is offering discounts as steep as 38% to compete with Japanese ICEs in Thailand. No wonder Thailand’s EV sales share shot up from mere 1% in 2019 to over 20% in 2025. Back in China, EV adoption hit 59% for December 2025 (49.4% for the whole year) putting it way ahead of Germany (30%) and France (27%)! Even electric commercial vehicles (buses & trucks) surpassed 30% for four consecutive months. All in all, clean energy drove more than a third of China’s GDP growth in 2025.

Everything will be run on full tilt in 2026, especially for China, as the Horse year is truly when it will see the successful culmination of its decade-long grand strategy for water & energy security. Now imagine the rapid progress in transition if the rest of world accepts Vice Premier He’s invitation: “We invite enterprises from all over the world to em

brace the opportunities from the green and low-carbon transition, and work closely with China in such areas as green infrastructure, green energy, green minerals and green finance”.

Want to know more on how China’s green finance, stress testing and regulations will shape up in 2026? Check out Syntao Green Finance & China SIF’s Top 10 Trends in Responsible Investment.

So, in 2026, it’s time to exorcise the neigh-sayers and say yay! Channel “firm resolve and maximum effort” like China and repeat the mantra “马到功成 – the horse will bring success” – for it will make sure you are in position to benefit.

5. Hot to trot game changers & physical risks will shape New World Order …

Physical risks will drive a new world order and level the playing field for richer and poorer nations. While poorer nations already bear the brunt of acute physical risks today, richer nations can still pretend it won’t affect them. But not for long – they too will suffer as their infrastructure was built for Water A not Water B. So being wiped out by floods/fires or blackouts from storms will therefore not just be a developing world problem; indeed, richer nations are seeing this happen to them now.

LA has still not recovered one year on from its wildfires

Everyone will suffer as physical risks could happen anywhere and everywhere, all at the same time. They will add to already existing economic woes across multiple countries and even cripple cities. One year on from the LA fires, the city has still not recovered. Recovery from disasters takes time, years, and lots of money. And if you get hit by another event (which given Water B is increasingly likely), the setback will be greater – insurance premiums will rise, asset values will plummet and the will to build back tested.

But it’s not just extreme weather – Arctic sea ice has also entered a new state – this new Water B state will be massively disrupting for the current world order and economic/ financial systems based on old trade routes established in the days of empire.

Panama/ Suez canals, Straits of Malacca may no longer be as strategic as shipping routes shift to the Arctic

Panama/ Suez canals, Straits of Malacca may no longer be as strategic as shipping routes shift to the Arctic. There will be winners and losers here – port cities could suddenly see their fortunes turn. As there is no “undoing” ice melt, this is on the cards so make sure you are positioned to take advantage of this. Trump looks like he is, with his Greenland/Canada grab.

Beyond disruptive changes in trade routes global shipping will also have to contend with rapid SLR which will swamp low lying ports (including those key for the oil trade) unless vulnerable ports are adapted.

Countries/corporates will also balk at the price tag as each port will need hundreds of millions to more than a billion dollars in adaptation costs and new Arctic trade routes will also exacerbate indecisiveness on adapting ports serving the traditional trade routes.

Such looming uncertainties are forcing corporates to make moves well ahead of impact dates … CK Hutchison is still trying to sell its 43 ports – 36 of these are vulnerable to 1m of SLR. Ready or not, global shipping and the entire marine sector are in for sweeping changes of the systemic kind in 2026.

Watch out! Global supply chains will face the Fire Horse’s wrath as there are many low-lying airports & ports. And just like that private equity funds which hold such critical infrastructure may not be such “safe” investment bets anymore.

Other Safe bets like investment in utilities may also be “not so safe” in an era of Water B – read our report Coastal Blackout – 1m of SLR could take out 65GW and that’s just for 3 countries.

Beware, Water B could turn things topsy-turvy very quickly.

Adaptation will speed up, enabled by big data, IoT – driven by the pure need to survive rising physical risks

“Climate change” has become a dirty word in some circles but cancelling it doesn’t stop it from happening. Adaptation will speed up, enabled by big data, IoT – driven by the pure need to survive rising physical risks. Those who are not grabbing market share/preparing for Water B will only lose out. At the same time, decarbonization will continue, arguably at an even faster rate than the so called “climate friendly” Obama era driven by market economics, AI, new tech low-cost solutions and the need to slow down the onslaught of risks from Water B.

We get creative when our backs are against the wall so don’t discount a “sudden invention” which will change the game. We believe one of these game-changers to be ROTOBOOST. It helps adapt existing LNG industrial processes to produce hydrogen & graphene on little water & carbon!

Now that’s not only decarb but circular as well! Imagine if the Global South adopted this tech – indeed, they are already working to scale up with Petronas and Baowu on green steel. Who knows, we could have green steel and ships could be running on hydrogen sooner than you think. Check out our interview with ROTOBOOST CEO Kaisa Nikulainen.

Seriously, watch out for shake-ups in old school hard-to-abate industries. We expect China to take the lead on these in the 15FYP – if you look at an article we wrote way back in 2015: “Made in China 2025: Are You On The List?” you would realise from the list that the only ones that are trailing behind is “Marine Engineering Equipment & High Tech Ship” and “New Materials” … so watch these zoom ahead from 2026. Net zero ports, EV vessels, rare-earth/graphene strengthened steel … it’s all hands on deck and big changes could happen fast so “Brace Brace”.

Don’t horse around … Dare greatly but stay focused!

We have to get a move on! The persona of the Fire Horse demands grand change – so dare to be transformative, not incremental be it in adapting or decarbonising or even starting new projects/ businesses. Also, the energy of the Fire Horse does not favour those who procrastinate. So delay not and dare greatly now – lean into the convergence – it’s here and there’s lots of money to be made.

Given Water B’s tight liquidity constraints…

…we are entering a new era of renewable/ hydrogen/ nuclear/ storage driven development

Systems are changing: oil/gas was the engine for growth of the 20th century but given tight liquidity constraints brought on by Water B, we are entering a new era of renewable/ hydrogen/ nuclear/ storage driven development. Hey, even data centres are heading to space to be powered by solar. So, reposition to capitalise on frontier energy tech now. But don’t get complacent, transitioning faster may slow down rising water risks but Water B will still wreak havoc.

It’s not an either-or strategy. Be holistic – cast out no sense climate strategies and jockey for pole position across all 5 trends and you will race ahead by a distance.

Remember, the only certain thing in 2026 is uncertainty. And these flames of uncertainty will only be fuelled by the current state of global politics and fanned by extreme weather events and shifting planetary baselines.

Meanwhile, global institutions or governance frameworks that we can turn to like international law and/or aid are also being systematically dismantled, adding more fuel to the fire. On the upside, Water B could also bring an end to warmongering as it focuses countries on their internal issues but on the downside, rising resource scarcity and changing sea ice states could easily turn countries into raiders.

In the midst of a sea change, it pays to stay nimble. And stay focused, put blinkers on if you have to avoid distractions – amid the chaos, focus only on the fundamental flows of water. Saddle up and remember to change tack often to up performance for an effortless win or 2026 will be a rough ride.

Further readings

More on Latest

• New Policies to Finance Silt Dams, Protect Soil & Water Plus Cut Emissions – A World First from China – Silt dams built to trap soil runoff also capture a surprising amount of carbon. Dr Shen explains how a new method to account for their emissions savings could finance rewards for carbon, soil & water
• Hydrogen Without the Water Footprint: A Conversation with ROTOBOOST – Decarbonisation only matters if it scales, says CEO Nikulainen, who shares how her hydrogen solution is getting some of heavy industry’s biggest players on board
• Top 10 Trends in Responsible Investment in China 2026 – Extreme weather & AI risks should be on your radar in 2026 as well as China’s pilot projects to boost transition & biodiversity finance, according to SynTao Green Finance & China SIF