quarters. The International Sustain-

ability Standards Board – an entity

under the International Financial Re-

porting Standards (IFRS) that sets

global sustainability standards and

climate-related reporting – will issue

standards in June, its chair said in

Davos.

There are many other organisations

and institutions applying such pres-

sure on companies. The Task Force

on Climate-Related Financial Disclo-

sures (TCFD) is another initiative

with plenty of muscle. It was formed

after a recommendation by the G20

nance ministers and central banks to

the Financial Stability Board – an in-

ternational body that monitors and

makes recommendations about the

global nancial system.

The various pressures now require

businesses to set out concrete game

plans for their short- and long-term

net zero strategies. These comprise

commitments and roadmaps to realise

net zero emissions by 2050. So, what

are corporates supposed to do? One

recommendation comes from the

CEO of the We Mean Business Coali-

tion, Maria Mendiluce. Her organisa-

tion calls for a ‘4As’ approach: ambi-

tion, action, advocacy, and

accountability. Corporates must have

a science-led aim for net zero. They

must have an actionable plan embed-

ding climate in their business pro-

cesses – including tackling supply

chains and going beyond the value

chain. They must advocate or speak

up their science-based climate poli-

cies. Lastly, they must be accountable

through such actions as publicising

their plans, reporting progress, and

offering transparent governance.

All of these pressures are highly

taxing for corporates trying to run a

protable business. Unfortunately,

the train has already left the station.

Frameworks, rules, regulations, stan-

dards, and other guidance are evolv-

ing by the day. Ignoring these forces

will ultimately impede the business to

function. Plainly put, businesses

won’t be able to nance their opera-

tions, and shareholders as well as

stakeholders will ostracize the ser-

vices or products the business offers.

It is difcult for an energy company

in Asia-Pacic or in Europe to raise

the nance to build a coal red power

plant, for example. Conversely it is

easier for such a company to raise -

nance to build a large wind farm.

European corporations lead net zero

emissions disclosure. This can be

measured in a variety of ways. One is

looking at data from TCFD. It identi-

ed in its 2022 Status Report that

companies in the Asia-Pacic, Eu-

rope, and North America all had

sharply raised their levels of climate-

related nancial information disclo-

sure aligned with the TCFD recom-

mendations. Between 2019 and 2021,

the increase was 23 percentage points

for European corporates, 12 for North

America ones and 11 for Asia-Pacic

ones. The highest adoption was in

housands of people, including

hundreds of government and

business leaders, descended on

Davos, Switzerland, in January for the

annual general meeting of the World

Economic Forum (WEF). While sev-

eral hot topics were discussed in the

sub-zero temperatures of the alpine ski

resort, one of the hottest among them

was the climate – not only climate

change factors but also the role of busi-

nesses in the net zero transformation

to slow global warming.

Corporations now face multiple

pressures from governments, share-

holders, and other stakeholders to

adopt sustainability and net zero

strategies, particularly those in-

volved in energy. There are pressures

on their nancing, requirements for

nancial and other reporting, and

demands for short- and long-term

corporate strategies.

Typically, energy corporates in

Asia-Pacic have lagged behind their

European counterparts in terms of

sustainability and climate strategies.

But the lag can be seen as a positive.

It means energy companies in the re-

gion have the opportunity to learn

from their European and global peers.

Also, given the bulk are in growth

markets, they have the opportunity to

create and innovate and potentially

design new net zero strategies.

The capital markets increasingly

demand utilities and other corporates

address net zero emissions. Com-

mercial banks, multilateral banks, and

other nancial institutions themselves

are being asked by regulators and

shareholders to implement green -

nancing measures.

The industry-led Net-Zero Banking

Alliance is one example. It was formed

in April 2021 to get the member nan-

cial institutions to align “their lending

and investment portfolios with net

zero emissions by 2050”, states the

United Nations Environment Pro-

gramme - Finance Initiative. The Al-

liance has 126 member banks from 41

different countries, representing

41per cent of global banking assets. It

“reinforces, accelerates and supports

the implementation of decarbonisa-

tion strategies” within the institution,

which in turn means members must

encourage their clients to adopt net

zero emission strategies.

Another example is the massive rise

of thematic bonds such as green

bonds; their issuance proceeds are

limited to projects with clear environ-

mental benets. There are increas-

ingly other types of climate change

solutions-linked xed-income nan-

cial instruments; accumulated pro-

ceeds reached about $2 trillion in late

2022 in just ten years.

In addition, for those companies

listed on stock exchanges, regulators’

demands are multiplying. The US

Securities and Exchange Commis-

sion, for example, wants companies

to include climate-related risks and

other disclosures in their lings.

There are also increasing demands on

nancial institutions, which in turn

affect corporations. Hong Kong’s

Securities and Futures Commission is

now asking fund managers to disclose

climate-related risks with their invest-

ments, for example. These are some

of the developments forcing corporate

behaviour changes.

Businesses also have a greater -

nancial reporting burden. They must

address Environmental, Social and

Governance (ESG) factors as the

capital markets look at evaluating and

determining future nancial perfor-

mance based on ESG factors. Corpo-

rate sustainability reporting is now

commonplace. Financial reporting

will also be harsher in the coming

Europe with 60 per cent, followed by

Asia-Pacic at 36 per cent and North

America at 29 per cent. Capital mar-

kets practitioners would generally

agree that Europe is ahead, and Asia-

Pacic is lagging.

But although Asia-Pacic corpora-

tions are behind, this is changing fast

due to demands from global and re-

gional capital markets. Investors

themselves are setting net zero targets

for their portfolio but they will not be

able to do so if companies do not

embark on the energy transition path.

So, where do investors in Asia-Pacic

actually stand?

The Asia Investor Group on Climate

Change (AIGCC) offers some in-

sights. The group comprises asset

owners and managers from 11 mar-

kets around the region with over $39

trillion in assets under management in

public equities, private debt, private

equity, direct property, unlisted infra-

structure, and venture capital. In a

survey, AIGCC found that “29 per

cent of respondents had set a 2050 net

zero target for their whole portfolio,

and 18 per cent have net zero targets

on some asset classes”. Also, it estab-

lished that about 41 per cent who had

not yet set net zero interim targets to

be achieved by 2025 or 2030, were

actively considering doing so.

The net zero ambitions disclosures

by corporates in the Asia-Pacic re-

gion may lag European peers, but it

must not be looked at as a negative.

Firstly, disclosure is accelerating

and will speed up in the coming years

given pressures from governments,

shareholders, and stakeholders, espe-

cially the capital markets.

Secondly, the formulation of short-

and long-term net zero strategies is

still evolving for some of the more

advanced corporates because the

rules, regulations, and guidelines

themselves are evolving.

Finally, as detailed in the book

‘Asia’s Energy Revolution’, the ma-

jority of countries in the Asia-Pacic

region are developing economies,

with only about one-tenth of total

energy consumption coming from

developed Asia. So, while the fossil

fuel footprint of these countries is

high, given growing consumption

new energy supply is needed. Domes-

tic and global pressures in the major-

ity of these developing economies,

leads them to prioritise low- to zero-

carbon generation. The percentage of

fossil fuel generation, especially coal

red, will certainly steadily decline

over the next 27 years and creating

enormous new business and invest-

ments opportunities.

Joseph Jacobelli is Managing Part-

ner at direct investments advisor Asia

Clean Energy Investments, and at

single-family ofce Bougie Impact

Capital. He is a prominent Asia-

Pacic energy markets expert, author

of ‘Asia’s Energy Revolution’, and

host of ‘The Asia Climate Finance

Podcast’.

THE ENERGY INDUSTRY TIMES - FEBRUARY 2023

Corporate Decarbonisation

Corporations in the Asia-Pacic region have lagged behind their European counterparts when it comes to sustainability

and climate strategies. But this is changing fast, as the future energy landscape brings new opportunities.

Joseph Jacobelli.

The business of climate strategy:

opportunities vs. risks

Percentage of companies

disclosing TCFD-aligned

information

Source: Task Force on Climate-

related Financial Disclosures (2022).

Task Force on Climate-related

Financial Disclosures 2022 Status

Report, Page 5. [online] https://

www.fsb-tcfd.org/. Available at:

https://assets.bbhub.io/company/

sites/60/2022/10/2022-TCFD-Sta-

tus-Report.pdf [Accessed Jan. 22,

2023].

Europe Asia Pacific North America

Percentage

2019 2021