Report on Utility Engagements
The Asia Investor Group on Climate Change (AIGCC) releases a report on utility engagements, aimed at summarizing the progress of cooperation between investors and utility companies, as well as the energy transition situation in Asia.
The Asia Investor Group on Climate Change believes that utility companies need to actively address climate change, ensure long-term sustainable development, and take action to achieve the global climate warming goals of the Paris Agreement.
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Asian Utilities Engagement Program by AIGCC
According to the International Energy Agency (IEA), the electric utility is the world’s largest source of carbon emissions, accounting for 44%. The Asia Pacific region accounts for 49% of the world’s electricity production capacity, of which 69% comes from fossil fuel power generation. In order to enhance the effectiveness of cooperation between investors and utility companies, the Asian Investors Climate Change Group launched the Asian Utilities Engagement Program in 2021, engaging with key utility companies in Asia to encourage their participation in energy transformation. Investors’ suggestions include:
- Governance: Implement a robust governance framework that clarifies the board’s responsibility for dealing with climate change risks and opportunities.
- Decarbonization Strategy and Scenario Stress Testing: Take action to reduce carbon emissions, develop short-term, medium-term, and long-term decarbonization strategies, and comply with the Paris Agreement warming path.
- Transparency and Disclosure: Disclose climate-related information based on the International Sustainability Standards Board (ISSB) standards.
- Physical Resilience: Describe climate physical risks and develop strategies to mitigate them.
- Public Policy: Support cost-effective policies to mitigate climate risks and promote low-carbon investments in society.
The current Asian Utilities Engagement Program has 20 members, all of whom belong to Asia Investor Group on Climate Change, with a cumulative asset management scale of $11 trillion. These members collaborate with seven electric utilities and focus on the following areas:
- Climate and Decarbonization Strategy: Discuss the company’s energy transition plan, encourage the company to set climate goals, and increase low-carbon investments.
- The role of natural gas and nuclear energy in decarbonization strategy: Incorporate clean energy such as natural gas and nuclear energy into the company’s decarbonization strategy.
- Asset Level Physical Climate Risk Assessment and Adaptation Strategies: Assess the climate physical risks to a company’s assets and how to address these risks.
- Just Transition Consideration in Company’s Transition Planning: Analyze the potential negative impact of the company’s transition plan on stakeholders.
Policy Engagement for AIGCC Investors
In addition to engaging with companies, members of the Asian Utilities Engagement Program also incorporate policy engagement into their scope of action, discuss current and upcoming energy transition policies with regulatory agencies, and accelerate energy transition. These policy interventions include:
- Role of asset owners: Emphasize the role of asset owners in energy transition and cooperate with asset managers.
- The role of decarbonization technologies: Consider the economic feasibility of decarbonization technologies as well as new technologies.
- The role of policy environments that support credible transition: Emphasize the role of stable and sustainable policies in energy transition.
- Sustainability related disclosure and carbon pricing: Discuss the importance of sustainable information disclosures and carbon pricing for corporate transition.
- Relationship between climate related policies and effort for renewable deployment: Analyze the impact of climate policies on the development of renewable energy.
- The importance of having coherent policy: Emphasize the correlation between climate policy and energy policy.
The Asian Investor Climate Change Group believes that climate change is a long-term systemic financial risk, and investors need to collaborate with companies to address climate risks and opportunities, in order to achieve long-term investment returns in the future.
Reference:
Investors See Climate Progress for Asian Electricity Companies
