Sustainability specialist Jaideep Panwar on APG's CO2 ambitions in South-East Asia
Coal-fired power stations are being closed all over Europe, but at the same new coal-fired power stations are being built in Asia to meet increasing energy demand. This contributes to global CO2 emissions, which are a key driver of climate change. As a large investor, APG wants to realize a transition within Asian companies: from fossil fuels to renewable energy. That requires subtle maneuvering, persuasiveness and a long-term approach, says sustainability specialist Jaideep Panwar.
July, 2020 – The Indian company Reliance Industries Limited organizes a shareholder meeting. Due to the corona crisis the meeting is a virtual one, for the first time in the company’s history. Jaideep Panwar, sustainability specialist at APG in Asia, is following the meeting behind his pc at his office in Hong Kong. Chairman Mukesh Ambani shares great news: the industrial conglomerate - active in the oil and gas industry and owner of the largest refinery in the world - wants to be CO2 neutral by 2035. The company plans to deploy clean technology to transform the emission of greenhouse gas into new products and materials. Panwar almost falls off his seat in amazement. APG – which has invested in the company on behalf of its pension fund clients - has been engaging with the management for over two years about a more ambitious climate policy. However, he could not have hoped for such challenging objective.
Asian economic growth leads to rising consumption of fossil fuels
Engaging with Asian companies on their climate ambitions is much needed. Although standards of living and per capita CO2 emissions in Asia are still (much) lower than in Europe and the US, economic growth in recent years has caused a considerable rise in the demand for energy and the consumption of fossil fuels in Asia. Coal-fired power stations are being used to generate electricity. China, India, Indonesia, Laos and the Philippines have announced plans to build new coal-fired power stations, according to the Global Coal Plant Tracker. Since 2000, Asian CO2 emissions related to the coal-fired coal plants have increased no less than 165%, according to data of the International Energy Agency (IEA). In that same period, European CO2 emissions by coal-fired power stations have actually decreased by 30%.
Long and winding road
In order to achieve the Paris climate goals (limit global warming to well below 2 degrees Celsius and preferable 1.5 degrees), a transition from fossil fuels to renewable energy sources (such as solar and wind) also has to take place in emerging economies. As a large responsible investor, APG wants to contribute to these goals by influencing the climate approach of companies in which it invests on behalf of its pension fund clients. Panwar and his colleagues are working on engagement each and every day: calling the management to account for their responsibilities in terms of the environment and society, conveying investor expectations and giving their view on how fast management should consider owning or investing in renewable energy sources instead of fossil fuels. Not an easy road to travel, it seems.
Is engagement in Asia different than in Europe or the United States?
“Asia is a continent with huge differences. On the one hand, there are emerging economies such as the Philippines, India and Indonesia, and on the other hand, there are wealthy and highly developed countries such as Japan and South Korea. Malaysia, Thailand and China are situated somewhere in between. However, in all these countries the same holds true: that is not that common for companies to enter into a dialogue with their shareholders, as has been normal practice in Europe and the US for many decades now. This means we have to make greater efforts in order to get our voice as a shareholder heard. Another characteristic of Asian markets is that certain families or the government often hold a substantial stake in companies. In this respect there are similarities with Europe. In the US, the UK and Australia, company ownership tends to be spread more widely.”