Economic Update

Published 21 Apr 2022

– New report finds 8% of Asia-Pacific companies are working towards net-zero emissions goals

– The Asia-Pacific region is particularly at risk from the effects of climate change

– A growing number of companies are seeking to demonstrate climate leadership

– Regional pacesetters are driving innovative approaches to achieving net-zero targets

A recent report found that relatively few companies in the Asia-Pacific region have adopted net-zero carbon emission strategies to date. Nevertheless, there are grounds for cautious optimism as pacesetters in the region announce ambitious targets and experiment with innovative decarbonisation strategies.

State of play

The report, published in April by the Carbon Disclosure Project (CDP), found that by the end of 2021 just 8% of companies in the Asia-Pacific region had signed on to plans to reach net-zero carbon emissions. Furthermore, less than one-third of responding companies had adopted science-based targets.

The CDP, a non-profit organisation that maintains a global environmental disclosure system, analysed data from 3879 companies across 21 markets, which together account for around 14% of global market capitalisation.

The report warned that the gap in corporate efforts to control emissions had to be closed if the targets of the 2015 Paris Agreement are to be met.

The urgent need for action was recently underlined by the Intergovernmental Panel on Climate Change’s “Sixth Assessment Report”, published in August 2021. Among other warnings, it noted that 3bn people around the globe are highly vulnerable to the effects of climate change.

A substantial proportion of the most at-risk populations are in Asia Pacific. Indeed, the CDP predicts that exposure to climate-related hazards could erode between 5.5% and 26% of its collective GDP by 2050.

Ongoing carbon emissions are also a concern. In 2020 Asia Pacific was responsible for 52% of global energy-related CO2 emissions and had a decarbonisation rate of 0.9% – significantly below the world average of 2.5%. A global average of 12.9% is needed to limit the Earth’s temperature increase over pre-industrialisation levels to 1.5°C.

Regional trailblazers

While the situation is worrying, the CDP report outlined a few reasons for cautious optimism.

More and more companies in the region are signing up to climate targets, with firms competing to display climate leadership; for example, 2021 saw a 29% increase in corporate disclosures relative to the previous year, according to the CDP report.

At the same time, there is growing awareness of the commercial opportunities associated with net-zero actions.

In the middle of last year Grab and Gojek – South-east Asia’s biggest super apps that specialise in ride-hailing and delivery – pledged to achieve net-zero carbon emissions.

While Singapore-based Grab did not provide a timeframe for its transition, the company expressed that it was aiming for “a net-zero-carbon future”, which it will achieve in part by adopting electric vehicles and partaking in reforestation programmes.

Indonesia’s Gojek – which has since merged with e-commerce firm Tokopedia to form holding company, GoTo – committed to net zero by 2030. This will involve shifting its entire fleet to electric vehicles and producing zero waste. Gojek is setting an ambitious standard in the industry: Uber, for its part, aims to reach net zero by 2040.

Other tech start-ups are contributing to the movement towards net-zero emissions by nudging consumers towards green alternatives. Carro, also based in Singapore, is one of the region’s largest online car marketplaces, and last year it launched low-interest car loans which only apply to hybrid and electric cars.

Another area where the region is making strides is green or sustainability-related bonds, with Asia-Pacific banks increasingly participating in environmentally friendly lending and net-zero portfolios. At the end of 2021, for instance, Malaysia’s CIMB group, which operates throughout ASEAN, committed to mobilise RM30bn ($7bn) in sustainable finance through to 2024 and achieve net-zero carbon emissions by 2050.

On a similar note, 2021 saw Nippon Life Insurance – one of Japan’s largest private institutional investors – announce a goal to achieve net-zero emissions for companies in its stock and bond portfolios by 2050.

Energy transition

The Asia-Pacific region, and China in particular, is also at the forefront of many sustainable energy developments.

After a decade of building solar and wind power plants, China now has some 570 GW of installed renewable energy capacity, and is the world’s largest producer of wind turbines and solar panels.

Other countries are also expanding their footprints in the space. Thailand, for example, has for some years been trialling innovative approaches to expand its renewable energy segment. Australian blockchain firm Powerledger has been working with Thai Digital Energy Development to foster the country’s energy trading infrastructure, enabling the trading of renewable energy certificates and carbon credits. In April this year the firm announced a further expansion of the project.

As these and many other examples show, innovative efforts to achieve carbon neutrality are gathering pace among companies in Asia Pacific. With a growing number of firms committing to science-based, net-zero carbon emissions targets, the region’s business community could yet rise to the urgent challenge of slowing or halting the damaging effects of climate change.