A new investor-led engagement programme has been launched to set Asian electric utilities on a path towards net-zero emissions by 2050.
The initiative, called the Asian Utilities Engagement Program, will work with five utility firms in its first year to lower emissions and enhance disclosure and governance of climate-related risks. It is backed by 13 institutional investors and stewardship service providers responsible for US$8.8 trillion in assets under management or advice.
Focus companies were chosen due to their substantial greenhouse gas emissions, vast coal fleets, or strategic role in curbing emissions. The five firms selected collectively emitted about as much carbon dioxide as Spain in 2019.
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They include China Resources Power Holdings (China), CLP Holdings (Hong Kong), Chubu Electric Power Co. (Japan), Electric Power Development Co. (J-Power) (Japan) and Tenaga Nasional Berhad (Malaysia).
Investors behind the programme, which is coordinated by the Asia Investor Group on Climate Change (AIGCC), an influential investor group that encourages climate action among Asian banks and asset owners, include the likes of BNP Paribas, JP Morgan, and Amundi.
Under the new programme, investors commit to engaging with at least one focus firm each year to bolster the board’s accountability of climate risk, identify physical risks to the company, and ensure utilities back policies aligned with global climate goals.
Investors will also support the selected companies in their efforts to spur a coal phase-out and other carbon cuts across the value chain consistent with the Paris accord, drive an expansion in renewable capacity, and identify physical risks to the company.
“Climate change is now widely recognised as a systemic financial risk that no long-term investor can afford to ignore,” said AIGCC in a statement. “To support the full implementation of the Paris Agreement, it is vital that major companies move swiftly to address the risks and pursue the opportunities presented by climate change and the transition to net-zero emissions.”
Asia burns more than 65 per cent of global thermal coal for electricity production and the region’s utilities account for 23 per cent of the world’s total emissions. Their transition to net-zero emissions is critical for the world to meet the Paris Agreement goals to limit warming to 1.5 degrees Celsius, said AIGCC executive director Rebecca Mikula-Wright.
But the average age of coal plants—the biggest driver of human-caused warming—in Asia is only 13 years compared to an average economic lifespan of 40 years, making rapid emission reductions challenging. Addressing the issue will require active investor collaboration, said Manish Tibrewal, chief executive officer of Singapore-headquartered financial institution Maitri Asset Management.
“As managers of capital, we can be a significant influencer in the critical shift towards sustainability stewardship,” he said.
Liew Tzu Mi, chief investment officer for fixed income at sustainability committee of GIC, a fund management company in Singapore, said emission cuts and improved disclosure and governance standards would not only advance the focus companies’ sustainability agenda but also protect their long-term value.
AIGCC said the new programme will complement and run in parallel to Climate Action 100+, the world’s largest investor engagement initiative, which it has coordinated in collaboration with four other regional investor networks since its 2017 launch. Asian utilities that are currently the focus of Climate Action 100+ were excluded for consideration for the new programme.
The announcement comes two months after Climate Action 100+, which is supported by 575 investors with US$54 trillion in assets, issued a net-zero company benchmark of the world’s biggest corporate emitters, defining key indicators of success for business alignment with the Paris Agreement.
The benchmark found that while corporate climate action was gaining traction, companies lagged in disclosing how they will meet their net-zero carbon pledges, including short and medium-term targets.