Asian Electricity Firms Show Advancements in Climate Action to Investors

In a significant development, the Asia Investor Group on Climate Change (AIGCC) has released a report that highlights a more positive attitude among leading Asian power companies towards phasing out coal and preparing their businesses for a net zero economy.

The report, produced by the AIGCC, a regional investor coalition with members totaling over $11 trillion in assets under management (AUM), focuses on 7 of the region's largest utilities firms. These include China Resources Power Holdings, Huaneng Power International, CLP Holdings, PT Perusahaan Listrik Negara, J-POWER, Chubu Electric Power, and Tenaga Nasional Berhad.

One of the key findings of the report is the young asset profile of the utilities sector in Asia. Many coal plants in the region are less than 15 years old, with their technical lifetime stretching to 40-50 years. This presents both a challenge and an opportunity for these companies as they navigate the transition towards renewable energy.

Malaysia's state-owned utility, Tenaga Nasional Berhad, has taken a proactive approach to this challenge. They have published a comprehensive decarbonisation plan that focuses on integrating higher levels of renewable energy into its transmission grid. This aligns with Malaysia's goal of having 70% renewable energy in its power mix by 2050.

Yoshio Hishida, representative director and president of Sumitomo Mitsui Trust Asset Management, emphasized the need to accelerate the momentum and focus on phasing out coal plants to meet emissions reductions goals by 2030 or 2050.

Hong Kong's CLP Holdings has also shown commitment to this transition. They have linked executive remuneration to the achievement of science-based greenhouse gas emissions intensity targets and the phasing out of coal-based assets.

The report also notes that some Asian companies have set more granular, asset-level decarbonisation targets for 2030. However, it does not mention any new key members turning these findings into action.

The utilities sector in Asia accounts for more than $200 billion of stock market capitalisation. As the region, which hosts more than half of the world's population and is witnessing a rapid rise in energy demand, continues to transition towards a more sustainable future, this sector will play a crucial role.

Since its last statement in 2022, the AIGCC coalition has attracted 7 new members: abrdn, Cathay Life Insurance, LGIM, Lion Global Investors, Neuberger Berman, SeaTown Holdings, and Sun Life. However, the report does not provide specific information about which investment companies have joined the AIGCC since 2022.

The rise of AI is expected to become a new challenge for Asia, with China expected to double its data centres by 2030. Within the next two years, data centres could account for up to 6% of China's entire electricity demand according to the International Energy Agency. This underscores the need for a balanced approach that takes into account both the opportunities and challenges presented by the transition to a low-carbon economy.

The full report on the decarbonisation journey of Asian electricity companies can be accessed for a comprehensive understanding of the current state and future direction of the sector. Key members of the investor coalition, which include Nikko Asset Management, Sumitomo Mitsui Trust Asset Management, and Amundi, are turning the report's findings into action. The electric utilities sector, with its young asset profile and growing focus on renewable energy, is poised to play a significant role in the global fight against climate change.