Asian companies emit a relatively large amount of CO2 compared to their Western counterparts. So if you can convince the ten companies with the largest emissions per Asian country to reduce their CO2 emissions, that will make a difference. And that is exactly what the Climate Focus 10 program is aimed at, which APG carries out on behalf of its pension fund clients. Yoo-Kyung (YK) Park, Head of Responsible Investment & Governance Asia Pacific, on Asia-Pacific's crucial role in global emissions reduction.
On September 15, 2022, Samsung Electronics announced its new environmental strategy and has joined the RE100 initiative. Samsung is the largest company in South Korea and, among other improvements, wants to aim for net-zero emissions by 2050. This is partly due to APG’s engagement efforts through its Climate Focus 10 program. The companies in this program are all active in CO2-intensive industries, such as chemicals, iron and steel, energy, telecom, semiconductors and consumer electronics. The aim of the program is to persuade the largest CO2-emitting companies in a country to reduce their CO2 footprint, with APG focusing on South Korea and Japan for the time being. Yoo-Kyung Park, who is South Korean herself, is responsible for the engagement with these companies.
Why are the emissions of Asian companies so high, compared to American and European companies?
"There is not really a sense of urgency about climate change among many Asian companies. A significant proportion of Asia is made up of developing markets and, fundamentally, more focused on growth and less so on their climate impact. But given the scale of these companies and their climate impact, if we want to achieve net zero emissions globally by 2050, we simply need to have Asia-Pacific on board. Without these countries, we will not achieve that net-zero target."
Why does APG choose to engage with South Korean and Japanese companies first?
"As OECD countries, Japan and South Korea have already developed markets, having gone through the process of industrialization and economic growth. As part of the OECD, in addition to economic performance they have also paid attention to non-economic indicators in the last decades. For example, education and healthcare, but also environment and sustainable development. Companies from OECD countries are therefore more receptive to calls from outside to become more sustainable than companies from emerging markets such as China and India, where the level of prosperity is lower. The emerging countries are the next step in our Climate Focus 10 program."
What does APG expect from the ten companies it engages with in South Korea?
"We want them to start by making a commitment to co2 emissions reduction. Just before the annual shareholders' meeting, we send the companies in question a letter addressed to the board. This letter contains questions like: Is your emission reduction target ambitious enough? Are you investing enough in this? Do you communicate sufficiently with shareholders about your emissions, so that they also understand the risks involved? We ask the companies to announce their emission reduction target at the subsequent shareholders' meeting. Six months later, we approach the company again to determine whether it has made progress. And we will continue this, and various other levels of engagement, until we see improvements."
What were the results of those efforts?
"All the companies in Korea that received a letter from APG in February 2022 have replied to it. A number of them, including Samsung, appeared to have made some progress. Hyundai Steel, for example, did not yet have a long-term target for its emissions reduction; now it does. LG Chemical previously only revealed scope 1 and scope 2 emissions, now also scope 3 (see box). This is important, because the greater the insight into emissions, the more a company can do about it. Posco Chemical did not yet have any emission reduction targets; now it wants to have net zero emissions by 2050 and has expressed an ambition for 2030."