Despite some welcome progress towards phasing out coal and expanding renewables investment within the utilities space, investors in Asia are calling for an increase in pace and more detail in meeting their net-zero targets, according to the Asia Investor Group on Climate Change (AIGCC).
The body has carried out its second Asian Utilities Engagement Programme (AUEP), which sees investors who collectively manage more than $12trn engage with seven ‘focus companies’ within the region. These have been chosen as they produce substantial greenhouse gas emissions, have large coal-fired power capacity or have a strategic role in driving the net zero emissions transition, according to the AIGCC.
The most recent results show that investors have described progress so far as “promising” but want to see companies accelerate their decarbonisation plans and become more specific.
“Since AIGCC launched the Asian Utilities Engagement Program in 2021, collaborative engagements between investors and focus companies have been progressing well, yielding some promising results on coal phase-out and expanded renewables capacity,” AIGCC chief executive officer Rebecca Mikula-Wright said.
“However, investors would like to see more of the focus on companies’ climate transition plans, including setting short-term science-based targets and immediate emissions reductions with demonstrable progress towards coal phase-out.”
This year, Malaysia’s Tenaga and Indonesia’s PT Perusahaan Listrik Negara (PLN) have both committed to the early retirement of selected coal plants while considering the feasibility of climate technologies and financing options. PLN has also committed to not building any new coal projects. To date, however, only Hong Kong headquartered CLP Holdings has outlined a specific phase-out schedule for all coal-based assets by 2040.
Participating investors have also increased their calls for focus companies to expand their renewable energy portfolios, including developing more solar energy, offshore wind, and battery storage options.
Additionally, the focus energy companies are encouraged to ensure their entire current generation capacity of 360 gigawatts combined becomes aligned with a 1.5°C pathway, which includes having a reliable transition plan.
Investors also said they are increasingly looking for a strong governance framework at a company’s board that clearly articulates the board’s accountability and oversight of climate change risks and opportunities.
“For transition plans to be credible, companies looking to explore alternative renewable technologies, such as hydrogen, should ensure they are truly zero-emissions throughout the supply chain, and make sure they have a genuine advantage over more mature clean energy options,” continued Mikula-Wright.
“Policy engagement will continue to be an important, complementary element to our ongoing engagements with energy companies, ensuring the right incentives exist in the overall economy.”