illustration of solar panels installed on a pagoda
© Alex Hahn

For hundreds of years, since early Maori explorers first landed their waka in the sheltered bays of the Marlborough Sounds, the area’s cool blue waters have provided a seemingly limitless source of fish.

So, in April, New Zealanders were stunned to learn that the country’s largest salmon farming operation had, for months, been taking hundreds of truckloads of its prized export-bound Chinook species and dumping them in a nearby landfill — victims of a rapid rise in water temperatures.

Grant Rosewarne, chief executive of New Zealand King Salmon, told the national broadcaster that, in terms of global warming, cold-water fish are just the canary in the coal mine.

The US president’s top climate envoy, John Kerry, was similarly direct when he told an audience of global leaders in Davos last month that the world was atop a “precipice”. 

He pointed to the disastrous effects of the planet’s addiction to fossil fuels, including 15mn annual deaths from air pollution and the gathering pace and intensity of natural disasters including droughts, fires, mudslides, floods and storms.

“We’re dealing with a crisis here, folks,” Kerry said. “It is a crisis made by human beings.” He was speaking to members of the World Economic Forum high in the Swiss Alps but, on almost every metric, the battle to stop global warming will largely be won or lost far to the east: in Asia-Pacific.

Column chart of Annual emissions from fossil fuels (billion tonnes)  showing Asia is the source of most of the world’s CO₂ emissions
Bar chart of Primary energy mix, by fuel, 2020 (%). Selected countries and regions showing The Asia-Pacific region relies heavily on coal and oil for energy

Investors and environmental watchdogs worry that the warnings are not getting through to Asia’s factories, energy providers, corporate boardrooms and corridors of power.

The region and its businesses, they say, are failing to respond with sufficient urgency to combat climate change.

The world’s most populous region and its most important growth engine is responsible for more than half of global greenhouse gas (GHG) emissions. From lossmaking steel mills in China’s northern rustbelt to India’s swelling power sector, from South Korea’s semiconductor fabrication plants to Japan’s automakers, fossil fuels — mainly coal — still underpin the bulk of economic activity.

Bar chart of Cumulative CO₂ emissions by region,  1750 to 2020 (% of global total) showing The bulk of Asia’s emissions have occurred over the past 40 years
Line chart of GDP per head at purchasing power parity (% of US level) showing Asian countries aspire to western standards of living

Most governments in the region have made long-term pledges to cut emissions, as have many of Asia’s biggest corporate polluters and energy users, including South Korean electronics group Samsung, Japanese car manufacturer Toyota, and India’s largest conglomerate, Tata.

But, at its current rate, environmental groups warn, the transition to renewable energy in Asia is nowhere near fast enough to arrest the rise in temperatures — as the mass fish deaths in the Marlborough Sounds demonstrate.

Bernadette Maheandiran, a research and legal analyst with Australia-based shareholder activist group Market Forces, cites the huge gap between Japanese companies’ promises of mitigation and concrete actions by executives in Tokyo.

“After the Japanese government made their net zero commitment, you saw a slew of Japanese corporations make similar commitments,” she says. “But what we’re seeing is the absence of an actual pathway to meet those commitments.” 

Line chart of Imports from developing Asian countries, as a share of total imports (%) showing The developed world has turned to Asia as a source of imports
Column chart of Top 40 countries in Global Climate Risk index* (low = most at risk) showing The Asia-Pacific region includes many of the countries most at risk from climate change

The sentiment is echoed loudly and publicly by campaign groups across the region — and more quietly and privately by concerned policymakers and corporate environmental, social and governance (ESG) teams. Many express growing frustration at inaction in the higher echelons of government and business.

According to investors and environmentalists, one of the most important keys that will unlock change in the region is simple: data.

Rather than paying lip service to the problem, companies could show they are serious about tackling emissions by releasing transparent data that can catalyse change. It would make them attractive to institutional investors and to increasingly environmentally focused consumers.

“We don’t have an issue with companies with big emissions [profiles] . . . because that is where there is the biggest scope for change,” says Anders Schelde, chief investment officer at Denmark’s Akademiker Pension, a member-owned pension fund. “The first step to take action is to start measuring. It really is a problem.”

The FT’s inaugural Asia-Pacific Climate Leaders list, compiled with Nikkei Asia and data provider Statista, aims to draw together what data there is, and to encourage companies to supply more of it. It identifies the 200 Asia-Pacific businesses that made the biggest cuts to their Scope 1 and 2 GHG emissions — arising respectively from a company’s own operations and from the energy it purchases — relative to revenue between 2015 and 2020.

The list has limitations. Mainland China is excluded because of the unreliability of some corporate data. And Scope 3 emissions — from those parts of the value chain not covered by Scopes 1 and 2, and typically most of a company’s GHGs — are insufficiently disclosed to be factored in.

But the companies included are at least making a start — and some of those not featuring, such as Toyota, are striking.

Schelde says across Akademiker Pension’s portfolio, fewer than half the companies provide reliable emissions data. But, in Asia, including more developed markets such as Japan, the world’s third-biggest economy, there remains firm resistance to shareholder engagement and activism over climate change.

“My impression is the culture is less mature than in Europe and the US — companies are less used to investors approaching them and being critical,” he says. “In our part of the world, it is part of the way we do business.” 

Maheandiran adds that companies in Asia must not only improve disclosure of their own emissions and be more transparent about their carbon pricing assumptions, but do so “across their entire supply chains”. 

These shortcomings appear to be reflected within corporate hierarchies. While companies have hired ESG specialists, they lack the clout of their European and US counterparts.

“The whole thing about sustainability and purpose and corporate responsibility, it is much more in the boardrooms in our part of the world,” says Schelde.

However, national policies and history are also partly to blame.

Governments across the region — including those of China and India, the biggest GHG emitters — have long bristled at being urged by the west to implement costly overhauls of their energy and industry sectors before achieving the levels of development seen in Europe and the US. 

They point out that the same western countries that are now among the loudest climate campaigners enjoyed growth underpinned since pre-industrial times by coal and oil. The US, for example, is the world’s biggest emitter historically, and still second only to China today. They note, too, that the west has benefited for decades from cheap manufacturing in Asia, while overlooking the fact the region’s industries are powered by coal.

Last year, as the international community rallied to make more ambitious national emissions reductions at the COP26 UN climate change conference in Glasgow, Asia’s coal-fired power plants and energy-intensive factories were intensely busy, serving a post-pandemic rebound in industrial demand. Emissions surged.

Little wonder that China and India, insisted — successfully — that COP26 water down a proposed commitment to “phase out” coal so that it became one to “phase down” its use.

While the amount of coal power plant capacity under development declined in most regions in 2021, advanced economies in East Asia were the exception, according to data from a network of non-governmental organisations, including Global Energy Monitor, Solutions for Our Climate and the Sierra Club.

“There is simply no carbon budget left to be building new coal plants,” says Flora Champenois, an analyst at GEM. “We need to stop, now.”

Vladimir Putin’s invasion of Ukraine and the disruption to Russian oil and gas supplies have further complicated the outlook, with rocketing inflation and fears of commodity shortages prompting governments to reprioritise energy security over the climate response.

Still, environmentalists and investors are holding out hope the transition to renewable energy can be fast tracked in Asia. They say this can be achieved by leaps into low-cost solar and offshore wind generation and adoption of electric transport fleets, along with efficient use of capital and carbon pricing.

Investors, too, are eagerly hunting for opportunities to support the transition to renewables and cleaner fuels — despite their frustration over the distance between countries’ climate commitments and the reality of massive fossil fuel dependency and deforestation in the region.

Li Shuo, an energy expert with Greenpeace in Beijing, suggests there is still cause for optimism as Asia could “spearhead the clean tech transition” in energy sectors including solar and electric vehicles.

“The solar industry did not exist in China 10 years ago; now it is the dominant player on the world stage,” Li points out. “That demonstrates how Chinese companies are good at leveraging favourable government policies [and] its domestic market, and [at] perfecting complex supply chains to be cost competitive.”

“It is not an exaggeration to say companies in Asia hold the key to our climate challenge. If the polluters don’t move, we are doomed. If
the innovators accelerate, the world benefits from the solutions they provide.”

Climate Capital

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