Green Finance Advisor of Friends of the Earth (HK)
The APAC Climate Action Progress Report by MSCI ESG Research delves into the critical aspects of climate action in the Asia-Pacific region, focusing on emissions reporting, climate targets, transition risks, and opportunities. The report underscores the pressing need for corporations in the region to address climate change effectively, given the escalating global temperatures and the associated physical risks.
Asia-Pacific economies have experienced significant growth in recent years, contributing substantially to global GDP. However, this growth has come at a cost, with the region heavily reliant on fossil-fuel-powered generation, accounting for over 40% of global greenhouse gas emissions in 2023. This reliance poses challenges, particularly in the face of increasing climate-related risks such as coastal flooding and extreme heat, which could have severe implications for economic hubs in the region.
To combat these challenges, governments in the Asia-Pacific region have intensified their regulatory efforts to define decarbonization pathways. Many APAC markets have committed to nationally determined contributions under the Paris Agreement and are working towards achieving net-zero emissions by around mid-century. These targets often hinge on international financial support, highlighting the interconnected nature of global climate action.
The report emphasizes the role of corporations in driving climate action forward. It highlights the increasing trend of emissions reporting and the setting of climate targets among APAC companies. This shift towards transparency and accountability is crucial for measuring progress towards decarbonization goals. While larger corporations are leading the way in this regard, smaller and mid-cap firms are lagging behind. However, as they face mounting investor pressures and regulatory requirements, there is a growing demand for these companies to disclose their emissions and set climate targets.
In the realm of energy transition, the report discusses the shifting energy mix for utilities in the Asia-Pacific region. APAC utilities are gradually transitioning towards renewable energy sources while still maintaining coal-fired electricity generation capacity. Factors such as energy security and affordability play a significant role in determining the pace of this transition. The early retirement of coal-powered plants is identified as a crucial step for utilities to align with net-zero pathways and reduce their carbon footprint effectively.
Moreover, the report sheds light on the innovation and deployment of clean technologies by APAC corporations. These companies have emerged as key players in driving clean-tech innovation, with some industry leaders leveraging their supply chains to scale up the deployment of clean technologies and accelerate research and development efforts. The adoption of clean technologies, such as hydrogen fuels, presents a significant opportunity for companies in the region, especially with potential government subsidies and tax credits to support these endeavors.
The report also delves into the financial implications of climate change for APAC corporations. It introduces the Climate Value-at-Risk (Climate VaR) model, which assesses the potential financial losses due to physical climate hazards under different emissions scenarios. In a worst-case scenario where global temperatures rise to 5°C above preindustrial levels, the estimated discounted loss due to physical risk hazards could amount to a substantial portion of the enterprise value of companies in the MSCI AC Asia Pacific Investable Market Index (IMI). This underscores the urgent need for robust climate action to mitigate these risks effectively.
In conclusion, the APAC Climate Action Progress Report by MSCI ESG Research paints a comprehensive picture of the climate challenges and opportunities facing corporations in the Asia-Pacific region. It highlights the increasing momentum towards sustainability, driven by regulatory changes, investor demands, and the imperative to address climate-related risks proactively. The report emphasizes the importance of transparent emissions reporting, ambitious climate targets, and the adoption of clean technologies as key pillars in the region’s journey towards a more sustainable and resilient future.
References
MSCI ESG Research, APAC Climate Action Progress Report
