Investors have launched a programme to engage Asia’s systemically important electric utilities on cutting emissions, strengthening disclosure and improving governance of climate-related risks as part of efforts to drive the transition to net zero emissions.
The new programme, backed by 13 institutional investors and stewardship service providers with US$8.8 trillion in assets under management or advice, is coordinated by the Asia Investor Group on Climate Change (AIGCC) and will complement and run in parallel with the global Climate Action 100+ initiative.
In the first year of the programme, investors will collaboratively engage with five utility companies, namely China Resources Power Holdings (China), CLP Holdings (Hong Kong), Chubu Electric Power (Japan), Electric Power Development (J-POWER) (Japan), and Tenaga Nasional Berhad (Malaysia).
The companies have been chosen because they produce substantial greenhouse gas emissions, have large coal-fired power capacity or have a strategic role in driving the net zero emissions transition. The five utilities emitted a total of 285 million tonnes of CO2 in 2019, equivalent to the national emissions of a country like Spain.
Asian electric utility companies that are currently the focus of Climate Action 100+ were excluded from consideration.
Investors are working through the programme to increase the effectiveness of climate engagement with the focus companies through a common agenda, shared objectives and collaborative effort. Investors commit to engaging with at least one focus company during each year of the initiative as part of a collaborative group.
The common agenda for discussion with companies includes strengthening the board’s accountability of climate risk, action to reduce emissions across the value chain (including coal phase-out consistent with the Paris Agreement goals), enhancing disclosure, identifying physical risks and ensuring companies are supporting policy in line with achieving net zero emissions by 2050.
AIGCC executive director Rebecca Mikula-Wright, says: “The transition of Asian utilities to net zero emissions will be critical for the world to meet its Paris Agreement goals to limit global warming to 1.5°C.”
Asian utilities are responsible for 23% of the world’s total carbon emissions. The average age of coal-fired power plants in the region is only 13 years, compared to an average life of 40 years.
“This new programme will complement the current engagement effort of Climate Action 100+ in Asia and assist investors to increase the effectiveness of their work with Asian utility companies to manage and mitigate climate risk,” she adds.
The 13 investors and stewardship service providers participating in the first year of the programme are Amundi, BNP Paribas Asset Management, Cathay Financial Holdings, Eastspring Investments, EOS at Federated Hermes, Fidelity International, GIC, Income Partners Asset Management, J.P. Morgan Asset Management, Maitri Asset Management, Manulife Investment Management, Resona Asset Management and Sumitomo Mitsui Trust Asset Management.