Asian Utilities Engagement Program

The program is an investor-led initiative to engage with Asia’s systemically important utility companies and help them curb emissions across the value chain, strengthen climate-related financial disclosures, and improve governance of climate-related risks that may affect them.

The program’s objective is to enhance climate engagement with focus companies through five key investor expectations for Asian utility companies, sending a powerful signal that investors are asking for and expect companies to respond to climate change.

20

investors

$11T*

USD AUM

5

markets

*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.

Current Focus Companies

Focus companies 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. For more information regarding the company and the latest update on engagement, please refer to each company page below.

The Program’s Key Managers

Monica Bae, Director, Investor Practice

Anjali Viswamohanan, Director, Policy

Serena Li, Manager, Investor Practice

Firdaus Anuar, Project Manager, Japan

Nigel DeCoopman, Policy Manager

Joy Wang, Senior Associate

Background: Asia’s electric utility sector is critical to the net zero transition

The sector contributes approximately 25 per cent of global carbon dioxide emissions in 2022¹. This sector has a young asset age profile of less than 15 years on average (compared to 40-50 years² technical lifetime of a coal plant) and represents more than $US200 billions of market capitalisation on Asian stock markets³. The continued heightened climate ambitions of many Asian governments and the rapid pace of technological progress further creates a positive environment for the net zero transition of the Asian electric utilities sector.

Investors are increasingly recognising their exposure to climate risks and their fiduciary duty to act. While they can redirect investment to companies and projects that will accelerate the necessary clean technology translation, they also have a powerful opportunity to influence behaviour, diversification and transformation among the most carbon-intensive companies through their equity and fixed-income holdings. This is possible through investment stewardship – including direct engagement with public companies to align corporate practice with long-term value protection and creation.

¹IEA World Energy Outlook 2023. This percentage is calculated based on electricity and heat sector emission, Page 280, Page 294.
²IEA, 2022 (p.75). Coal in Net Zero Transitions: Strategies for rapid, secure, and people-centered change.
³MSCI AC Asia Pacific Utilities Index (July 2024).

The Investor Expectations of Asia’s Electric Utilities Companies

The program’s participants have agreed AIGCC’s Investor Expectations of Asian Electric Utilities Companies and intend to work with the boards and senior management of these companies to:

Implement a strong governance framework that clearly articulates the board’s accountability and oversight of climate change risks and opportunities.
Take action to reduce greenhouse gas emissions in a way that is aligned with the Paris Agreement.Companies should have clear decarbonisation strategies with short-, medium-, and long-term action plans including a timetable to phase out coal-based emissions in line with 1.5°C temperature scenarios, such as the International Energy Agency (IEA) NZE2050 scenario. The IEA NZE2050 scenario specifies that unabated coal power is phased out in advanced economies by 2030 and at the latest by 2040 in all other regions. Generation using natural gas without carbon capture starts falling by 2030 and is 90 per cent lower by 2040 compared with 2020.
Provide enhanced corporate disclosure moving towards International Sustainability Standards Board (ISSB).
Outline physical risks to the company and relevant adaptation strategies to mitigate these risks.
Engage with public policy makers and other stakeholders in support of cost-effective policy measures to mitigate climate-related risks and facilitate low carbon investments in line with achieving net zero emissions by 2050 or sooner.

Alongside this high-level agenda, participants are identifying and communicating with companies on more detailed company-specific expectations.

Investor Expectations of Asian Electric Utilities Companies

Investors’ Statements

Investors’ Launch Statement (June 2021)
Add-on Statement from New Investors (July 2022)
Investors’ Expectations Statement (2024)

Asian Utilities Engagement Program 2023-2024 Progress Report

In the third progress report, key Asian energy companies have made important progress this year in their difficult path to net zero. Decarbonising Asia’s energy systems continues to be an extremely high priority for investors because the climate damage caused by continued high emissions endangers widespread economic growth and returns for their beneficiaries.

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The Program’s Process

Identifying the Asian Utilities Engagement Program focus companies

A four-step process was developed to identify the program’s focus companies:

Start universe: Begin with a company universe of all major listed utility companies in Asia.
Truncate universe: Cut universe to the largest 30 companies by market capitalisation and systematically important unlisted national utilities.
Rank by emissions: Sort the 30 companies according to their Scope 1 and 2 emissions using latest publicly released data.
Consultation with investors: To further screen for companies where investors have a meaningful shareholding and a qualitative analysis regarding the readiness of companies to participate.
In subsequent years, repeat process to expand Asian Utilities Engagement Program focus companies and investor involvement.

Benchmarking and tracking progress

The program tracks how each company is performing with respect to the high-level goals of the initiative. There are three main ways that progress is tracked:

Investor updates: The lead investor for each focus company is required to share high-level information on each company’s progress via AIGCC and other program forums.
Annual investor forum: The lead investor for each focus company and each investor engaging a focus company individually are required to share high-level information on each company’s progress. This includes observed areas of improvement and updated priorities for the next phase of engagement.
High-level public progress report: AIGCC will produce a public report detailing the progress observed by the initiative in consultation with participants at regular intervals.

Investor Participants

Join the Program

The program is open to members of AIGCC. We welcome new investors to join the engagements at any time. Participants may be asset owners or investment managers who are formally representing assets and who typically engage with companies directly. Prospective investors are required to:

Support a public statement outlining the program’s objectives and agenda;
Be a member of AIGCC;
Commit to engage with at least one focus company during each year of the initiative;
Write a letter to the focus company in question outlining the initiative’s five expectations;
Decide if they would like to join as a lead and/or contributing investor;
If the participant is a lead investor, provide high-level reports on the progress and priorities of their engagement.

To learn how to become an AIGCC member, click here.

For more information about the Asian Utilities Engagement Program, please contact info@aigcc.net

Disclaimer:

The Asian Utilities Engagement Program does not facilitate or require collective decision-making regarding an investment decision. The initiative will not provide recommendations to investors to divest, vote in a particular way or make any other investment decision – investors continue to make their own independent investment and strategic decisions. The purpose of the Asian Utilities Engagement Program is to engage Asian utilities on financially material climate-related issues and not to exercise any control over these entities.

AIGCC’s AUEP has been a valuable channel in deepening engagement through collaboration in Asia, a region where collaborative engagements are gaining momentum.

Through AIGCC, we have engaged top management of major Japanese electric utilities that need to leverage Japan’s innovative spirit and technological advancements to drive transformative change. Robust collaboration with domestic and international investors enabled constructive dialogue on decarbonisation. Outside of Japan, this also rings true as we engage with companies and their key stakeholders such as regulators, to harness the power of collaboration.

While progress is commendable, we’re not complacent in a warming world. We look forward to jointly accelerating decarbonisation in the region and setting new standards.

Stefanie Drews, President, Nikko Asset Management

In 2024 the leading Asian power companies have a much more positive attitude when it comes to phasing out coal and preparing their businesses to thrive in the coming net zero economy… This year’s results show that strong and smartly targeted stewardship works and it’s a vital part of investors’ fiduciary duties.

Rebecca-Mikula Wright, CEO, AIGCC

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