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Saturday, June 19, 2021

Stewardship in Asia, a source and a victim of climate change


Asia has been taking a more active role in addressing climate change, with net-zero emissions pledges by China, Japan and South Korea. Is the region catching up?

Climate change has a considerable impact on Asia, including in terms of physical risk such as more natural disasters occurring. Just think of the number of typhoons and droughts the region has experienced. So, climate action matters. According to WWF, failing to achieve climate objectives could mean that the number of people suffering from floods every year in South Asia would rise from 13 million to 94 million.

Asia is also a region that makes an impact on climate change: China alone contributed over 27% of total global emissions, far ahead of the US with 11% (although on a per capita basis, the US are well ahead).

Since Asia – the world’s largest regional economy – is growing at a faster rate than the EU and US, CO2 emissions there can be expected to keep increasing if we cannot decouple emissions from economic growth. The effects of climate change, however, differ across the region (see exhibit 1).

It is fair to say that we can’t achieve the worldwide climate goals without leadership from Asia, including China, which is the largest global emitter of greenhouse gases (GHGs). So these pledges are important: they set the direction of travel for corporates and regulators, i.e. towards net zero.

Accordingly, they indicate how business models should evolve to align with these national objectives. We have seen this in China: after Beijing’s net zero pledge, companies in sectors from energy to finances have announced their intention to align with the country’s emissions goals.

The EU has been leading the world on regulatory developments such as SFDR. [1] What is happening in Asia?

Asia has been catching up. Regulators are taking an active role. We are seeing regulatory developments over how companies should be run, such as setting ESG [2] disclosure rules, and how investors should invest – think of stewardship codes and guidelines. Regulators are also increasingly looking at product labelling and what can be considered a green or ESG fund to fight the risk of ‘green washing’ or ‘ESG washing’ and make it clear which funds are sustainable.

In addition, investors such as BNP Paribas Asset Management are taking part in initiatives such as Singapore’s Green Finance Industry Taskforce and Hong Kong’s Technical Experts Group. Investors and regulators are working together to make progress in this area.

You mentioned stewardship. Can you tell us more about your activities related to the energy transition?

We are working with Climate Action 100+ on ensure that the world’s largest GHG emitting companies take the necessary action on climate change. In Asia, we are leading, or co-leading, engagement with three companies.

So, as an example, we are talking with China Petroleum & Chemical Corporation (Sinopec) about its intention to target net zero in line with China’s national target and to come up with concrete ways to first peak carbon dioxide emissions, and then deliver on the net-zero objective, including via research projects related to green hydrogen.

We also have been engaging with Asian electric utilities as part of our (divestment from) coal policy. [3] Asian power utilities have a critical role to play in achieving both local and international climate goals as they represent a combined 23% of global GHG emissions. So we believe there’s an opportunity to engage with these companies, to identify which companies are actively reducing their reliance on coal and synchronising the carbon intensity of power generation with a ‘Paris-aligned’ trajectory.

Gender diversity is a hot topic: Asian companies tend to have fewer women in senior management. How do you go about promoting greater diversity?

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