Investor heavyweights including Legal & General Investment Management, Dutch pension fund PGGM and Aviva Investors are collaborating on an engagement initiative targeting coal lenders and energy firms in Asia.
The Asia Transition Platform will engage with some 50 Asia-based firms over the next three years, with an initial focus on carbon risks at the biggest coal financiers and coal-exposed energy firms in the region. Only China’s state-owned utilities Huaneng and Huadian have been identified as engagement targets.
Other founding members of the new initiative are BMO Global Asset Management, Fidelity International and LAPFF, the representative body of UK-based local authority pension funds.
The investors want the Asian banks to commit to stop “financing fossil fuel expansion and related infrastructure”. The energy firms will be asked to explain how they will align with Paris Agreement targets.
Andres van der Linden, Responsible Investment Advisor at PGGM, described the focus on financial institutions as “critical”. “Without the backing of banks, the development of fossil fuel assets would be seriously hindered”, he told RI.
Members of the platform, which will be coordinated by Singapore-based consultancy Asia Research & Engagement (ARE), will also engage with financial regulators to “strengthen disclosure and risk management” around climate risks and opportunities.
ARE’s Founder and Managing Director, Benjamin McCarron, said the initiative would aim to “bridge the gap” between investors seeking to drive the climate transition and Asian firms that will be vital to achieving the objective.
“There is a huge opportunity for Asian companies to take the lead in tackling the climate emergency”, said Mirza Baig, Global Head of ESG Research and Governance at Aviva Investors. “This platform brings together investors dedicated to achieving the breakthroughs required to do so.”
Yasmine Svan Saarela, Senior Sustainability Analyst at Legal & General Investment Management, added that while Europe and North America have a number of initiatives that mobilise investors around decarbonisation, there are far fewer focused on Asia – particularly when it comes to financial institutions and power companies in China.
“Asia needs to move rapidly to get onto a decarbonisation trajectory, and the largest companies in each market must take the lead in this transition,” she added.
Earlier this year, the Asia Investor Group on Climate Change – backed by institutional investors with more than $8.8trn in assets under management – launched its own engagement programme focused on five Asian electric utility firms: China Resources Power Holdings, Hong Kong’s CLP Holdings, Chubu Electric Power Co. and Electric Power Development Co. – both Japanese – and Tenaga Nasional Berhad in Malaysia.
The launch of the new investor platform comes as a study by the International Energy Agency has found that China has the “means and capabilities” to transition to clean energy even faster than its stated 2060 goal. The intergovernmental body’s Executive Director Fatih Birol said that this “accelerated transition would put China’s CO2 emissions into marked decline after 2025, opening up the possibility of China reaching carbon neutrality well before 2060”.