Investors see climate progress at Asian electricity companies

The electric utilities sector is at the forefront of a global road to net zero, having contributed approximately a quarter of global greenhouse gas (GHG) emissions in 2022. This plays out especially in Asia which hosts more than half of the world’s population and is witnessing a rapid rise in energy demand.

The decarbonisation journey of Asian electricity companies has been at the centre of a new report produced by the AIGCC, a regional investor coalition which counts 20 investors with more than $11trn in AUM as its members.

The report focused on 7 of the region’s largest utilities firms including China Resources Power Holdings and Huaneng Power International from China, CLP Holdings from Hong Kong SAR, PT Perusahaan Listrik Negara from Indonesia, J-POWER and Chubu Electric Power from Japan, and Tenaga Nasional Berhad from Malaysia.

Findings of the report are being turned into action as key members of the investor coalition, which includes Nikko Asset Management, Sumitomo Mitsui Trust Asset Management and Amundi. Since its last statement in 2022, the coalition has attracted 7 new members: abrdn, Cathay Life Insurance, LGIM, Lion Global Investors, Neuberger Berman, SeaTown Holdings, and Sun Life.

Now in its fourth year, it drew some positive conclusions. “In 2024, leading Asian power companies have shown a much more positive attitude towards phasing out coal and preparing their businesses for a net zero economy,” said Rebecca Mikula Wright, CEO of AIGCC.

Sumitomo Mitsui Trust Asset Management representative director and president, Yoshio Hishida, said: "We are encouraged by the progress from Japanese electric utilities in the program over the past year. To make sure we are on track to meet emissions reductions goals by 2030 or 2050, we need to accelerate this momentum and focus on phasing out coal plants” he emphasised.

Progress 

Many of the firms surveyed have now produced detailed transition plans with companies beginning to disclose more detailed short- and medium-term plans for decarbonisation, including the phasing out of coal-fired power plants, the report found.

Malaysia’s state-owned utility, Tenaga Nasional Berhad (TNB), for example, published a comprehensive decarbonisation plan across its value chain, focusing on integrating higher levels of renewable energy into its transmission grid to support Malaysia's goal of having 70% renewable energy in its power mix by 2050.

Another area of progress are asset-level decarbonisation targets, the report found with some companies now setting more granular, asset-level decarbonisation targets for 2030.

Crucially, some companies have gone as far as linking executive pay to climate goals, a measure which the largest energy firms in Europe and the US have been reluctant to take. For example, Hong Kong's CLP Holdings have linked executive remuneration to the achievement of science-based greenhouse gas emissions intensity targets and the phasing out of coal-based assets.

New challenges

But AIGCC also acknowledged that despite this progress among individual companies that Asia's economies are still on track to generate significant emissions.

One challenge is the fact that the utilities sector in Asia has an extremely young asset profile, with many coal plants being less than 15 years old and the technical lifetime of these plants stretching to 40-50 years.

In addition, the utilities sector also forms a cornerstone of Asian stock markets, accounting for more than $200bn of stock market capitalisation. The rise of AI is expected to become a new challenge for the continent with China expected to double its data centres by 2030, compared to 2021 figures. Within the next two years, data centres could account for up to 6% of the nation’s entire electricity demand the International Energy Agency predicts.

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The full report can be accessed here.