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China, APAC moves in run-up to ‘make or break’ COP26
Xi Jinping ends overseas coal-fired power funding, big AUM investors ally as climate summit nears
Bayani S. Cruz 24 Sep 2021
Chinese President Xi Jinping
Chinese President Xi Jinping

Asia-Pacific (APAC) institutions are urgently preparing the 26th United Nations Climate Change conference, also known as COP26, with last minute alliances, initiatives and policy announcements. The COP26, expected to be most important climate change conference in the world this year, is scheduled to be held in Glasgow, Scotland, between October 31 to November 12.

The most recent, and most important, initiative was the announcement by Chinese President Xi Jinping before the United Nations General Assembly on September 23 that China will cease financing coal-fired powered plants overseas.

Although Xi’s announcement did not contain any details, it is significant due to the fact that Chinese entities were involved in the financing of US$160 billion worth of coal-fired power plants outside of China between 2014 and 2020, according to a new report published by the Green BRI Center at the International Institute of Green Finance in Beijing.

Another late-breaking initiative was the September 20 launch of an alliance of investment consultants, known as the Net Zero Investment Consultants Initiative (NZICI), which includes 12 investment consulting firms responsible for advising institutional asset owners on assets of approximately US$10 trillion. The NZICI announced nine specific action points that its members will use to drive their commitment to supporting the goal of global net-zero greenhouse gas emissions by 2050 or sooner. Most of the members have substantial operations and clients in APAC.

This follows a similar initiative, three months ago, by 13 institutional investors responsible for US$8.8 trillion of assets under management (AUM) that established the Asian Investor Group on Climate Change (AIGCC), which seeks to create, among Asia’s asset owners and financial institutions, awareness about and action on the risks and opportunities associated with climate change and low-carbon investing. AIGCC members come from 13 different Asian and international markets and, with the addition of new investors, now include asset owners and managers with a combined AUM of over US$26 trillion.

The AIGCC is advocating an approach that uses direct engagement between institutional investors and power utilities that still use coal-fired power plants or are heavy carbon emitters.

On September 24, the AIGCC highlighted the success of its engagement programme with power utilities that still use coal-fired power plants when it commended Hong Kong’s CLP Group for its commitment to achieving net-zero emissions by 2050 and phasing out its coal power fleet by 2040. The CLP Group is one of five companies the AIGCC is engaging with on climate change risks and opportunities through its Asian Utilities Engagement Programme.

Under the programme, the AIGCC’s  investors have adopted a common agenda to guide this engagement, which seeks from companies, among other things: clear decarbonization strategies with short-, medium-, and long-term action plans, including a timetable to phase out coal-based emissions in line with 1.5 degree Celsius temperature scenarios; enhanced disclosure on climate risks; and a strong governance framework for the management of climate risks.

“The commitment by CLP to phase out its coal fleet by 2040 and target net-zero emissions by 2050 is a critical market signal for Asia as the region progresses in its energy transition towards a low-carbon economy,” says Paul Milon, head of stewardship, Asia-Pacific at BNP Paribas Asset Management. “Through the AIGCC Asian Utilities Engagement Programme, we look forward to continuing to constructively engage with CLP as it implements these commitments and further enhances its robust climate approach towards a 1.5 degree Celsius pathway.”

Although President Xi’s announcement, as well as, the NZICI and AIGCC initiatives happened independently of each other, they are all apparently in preparation for the COP26, which is generally considered as a “make or break” summit to effectively addressed the global fight against climate change.

In addition, in recent weeks, a host of institutional investors, corporates and asset managers with large Asian businesses have been announcing their own commitments to climate change targets under the Paris agreement as well as entering into climate-change related alliances with academic and research entities, in preparation for the COP26. These include real estate developer New World Group, technology company Honeywell, the Marriott hotel group, Burger King, software company SAP.

The importance of COP26 for Asian institutional investors and asset managers has also been highlighted in recent weeks with a flood of panel discussions, webinars and articles.

“From an investment and economic impact perspective, COP26 is an opportunity, for example, for governments to come together and understand what they can collaborate on and where the support lies,” says Michael Woolley, director sustainability for Eastspring, in a MSCI COP26 Conversation. “And we've already seen evidence of this, of countries increasing their commitment to nationally determined contributions.”

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