Investors are cultivating green shoots in Asian electric utilities

It is early days, but there might just be reasons for optimism about Asia’s vital energy market and its progress to a clean green future.

At the Asia Investor Group on Climate Change, we are into the fourth year of a program that connects investors to Asia’s systemically important electric utility companies. It gives us unique and invaluable insights.

Those power companies are starting to make commitments to climate action, and the leaders are growing their low-carbon solutions, and it could not come a moment too soon.

This shift is crucial: Asia’s energy demand is accelerating fast, across industries, and particularly in tech-based economies. The boom in artificial intelligence and data centres has led to unprecedented energy demand. That puts more pressure on Asia’s electric utility sector, which already has a difficult path towards its net zero journey.

From where we sit, we have seen the utility companies’ change of heart has been won because energy executives, policymakers, and investors have been talking all together and realising the economic value in getting carbon out of the energy system and building up renewables.

But first, a little background: over the past three years, 20 highly influential regional investors with $11trn* in assets under management or advice have agreed on a set of climate-related expectations of electric utility companies.

That is what they use when talking to the senior executives and directors, and it is producing outcomes.

Malaysia’s state-owned utility, Tenaga Nasional Berhad's (TNB) new decarbonisation plan spans its entire value chain, with a focus on decarbonising energy sources. TNB is enhancing its transmission grid to support Malaysia's goal of having 70% renewable energy in its power mix by 2050.

Japan’s J-POWER and Chubu Electric both announced that they will decommission coal-fired power plants by 2030.

J-POWER plans to shut down up to five units by 2030 as part of its target to reduce 46% of CO2 emissions from 2013 levels.

Chubu Electric has committed to shut down all inefficient coal fired power plants (supercritical or less) by 2030. They will expand their renewables capacity, starting the full-scale operation of ammonia co-firing technologies in the 2030s.

These moves further support the discussions on energy that investors are having with policymakers.

But to sustain this long-term progress, investors will expect to hold the board accountable for climate change risks and opportunities.

Again, there are clear market leaders: Hong Kong's CLP has aligned the performance measures and remuneration of their executive directors and senior management with science-based greenhouse gas emissions reduction targets and the phase-out of coal-based assets.

More ambitious climate action needed

This is only the start. Much more - at scale and speed - needs to be achieved. While significant progress has been made, the journey to a net zero future is far from over. Continued investor engagement, coupled with strong government policies and corporate leadership, is essential to accelerate the transition to renewable energy sources and ensure a just and equitable transition for all.

All electric utilities in Asia need to be more ambitious in their climate action - transition quickly to renewables so that they remain competitive and to avoid stranding their fossil fuel assets. By collaborating closely with these stakeholders, we can turn these cautiously positive signs into a success story for Asia, demonstrating the region's leadership in the global fight against climate change.

*The Asian Utilities Engagement Program includes participation by some investors that are acting on behalf of their clients that have chosen to have their assets managed with the goal of achieving net-zero alignment.

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Investors see climate progress at Asian electricity companies