The virtual summit series kicked off in Asia, and Tom Delay, Chief Executive, explained why that was a fitting place to start.
“The global economy in 2050 will be twice the size it is today, and Asia is growing 1.5 times faster than the rest of the world, so it will be particularly important in achieving Net Zero.”
At the same time, the region should, in theory, find it easier to decarbonise quickly as their economies grow, when contrasted with than many mature economies where high-carbon assets, such as coal-fired power plants, are longer established.
“We have seen the Net Zero movement gather pace across the globe, including in Asia,” said Grace Fu, Minister for Sustainability and the Environment of Singapore, in her keynote address. “Japan and South Korea have pledged to be Net Zero by 2050, and China aims to be carbon neutral by 2060.” Singapore plans to peak public sector emissions by 2025 and the entire economy’s emissions by 2030, and halve them by 2050, she added.
The magnitude of climate impacts in the region is disproportionate, with a significant proportion of GDP at stake, said Datuk Muhamad Umar Swift, Chief Executive, Bursa Malaysia. “A large proportion of the population and economic activity is concentrated along coasts, and there is a high economic dependency on nature and agriculture.
“At the same time, ASEAN is a significant manufacturing hub for global supply chains. The case for us to adopt the low carbon economy as the new norm is now very clear.”
However, “greening our economy will have far-reaching effects on the labour force. It is inevitable that some industries such as coal will be reduced. This is where we need a Just Transition Mechanism as well as high quality social protection mechanisms. People need to be reskilled and upskilled to take on the new jobs that will be created.”
In the private sector, the UN’s Race to Zero campaign “has grown exponentially. As the world’s largest Net Zero coalition, it demonstrates the role of the private sector clearly to governments and shows that the transition to a decarbonised economy is gathering pace,” Fu pointed out.
An estimated US$7 trillion is needed for sustainable infrastructure each year to 2030, so more private capital must be mobilised. To help do this, Singapore has launched Climate Impact X, a global carbon exchange for high quality carbon offsets for, initially, nature-based solutions that offer co-benefits such as biodiversity preservation and coastal adaptation.
But Net Zero targets must be translated into concrete implementation plans, the minister continued, and firms should incorporate a carbon price into their business. “This will allow them to factor in the cost of greenhouse gases and shift towards low-carbon technologies.”
And as more companies adopt Net Zero goals, calls are growing for transparency on their interim targets and how they plan to achieve them, in order to address concerns about greenwashing.
The first steps to Net Zero are to calculate your carbon footprint, create a clear, defined boundary and set targets, explained Eloise Burnett, Senior Asia Manager, the Carbon Trust. “We know it can be complex, but it is highly achievable.”
Knowing your carbon footprint and setting targets has become expected by investors and other stakeholders, said Amelie Tan, South East Asia Regional Lead, Commit to Action, Science Based Targets initiative and CDP. “The science is pretty clear, and policies are still not at the level we need, so the private sector really needs to step up to close that gap.”
Signing up to science-based targets (SBT) is one of the best ways to approach Net Zero, but it presents challenges, especially when it comes to reducing Scope 3 emissions, those created either in your supply chain or by your customers’ use of your products. “You need to engage everyone, especially for Scope 3,” said Judy Zhu, Operational Process Manager Sustainable Development for Decathlon. “Our value chains are quite long and we need to focus on our suppliers. Most suppliers are at the very start of this.”
Collecting data is one of the key issues, added Huidong Zhou, EHS Director, Envision Group. “Having a consistent view of what is going on will really help you, and consistent monitoring is also a key tool.”
It is notoriously difficult to keep track of data for Scope 3 emissions, agreed Tan, but companies engaging with their Tier 1 suppliers can ask them to carry out the same process so it cascades down to lower tier suppliers. HP Enterprises, as part of its SBT, aims to have 80% of its manufacturing spending to go to suppliers with SBTs, she added.
It is important not just to take action to cut emissions but also to demonstrate that you are doing so in a transparent manner. Making sure your activities are assured and certified saves you money, facilitates compliance and improves your reputation, said Lijian Zhao, China Director, the Carbon Trust. You can certify an entire organisation, a single product, your supply chain or climate financing such as green bonds.
Many companies sign up with CDP’s supply chain programme and ask suppliers to use the same structural data as them, which makes the process much easier.
Kelvin Tan, Head of Sustainable Finance and Investments - ASEAN, HSBC, explained how his bank works with Walmart to decarbonise its supply chain by establishing and administering the Walmart Supply Chain Finance Programme.
When it comes to target setting, the three key issues are technology, policy and behaviour, said Anirban Ghosh, Chief Sustainability Officer, Mahindra Group. From an Asian perspective, some technologies from the West travel faster than others, while “in developing countries, especially those with large populations and resource constraints, sometimes policy takes time to get going because of incumbent infrastructure such as distribution networks. It hinders the pace at which we can move.”
Changing behaviour often comes down to awareness, he added. “It doesn’t help if you say we didn’t cause the problem so we shouldn’t act – taking action on climate is safer not just for nations and organisations but people, too.”
All of these Net Zero commitments need financing, pointed out Lau Xin Yi, Green Finance Lead, South East Asia, the Carbon Trust. “Asian financial institutions are at a crossroads. They must strive to be more aligned to international expectations while grappling with the responsibility of managing their carbon exposure.”
All of the Net Zero financial sector alliances that have recently been created will have an impact because they will increase pressure to increase the amount of Net Zero assets under management or to decrease the footprint of your portfolio, said Caroline Le Meaux, Global Head of ESG Research, Engagement and Voting, Amundi Asset Management.
But there are things we must stop financing, too, she added. It is crucial that Asian banks – and others – and insurers stop funding new coal capacity.
“The Asian electricity sector is critical to the Net Zero transition because it is responsible for almost a quarter of global CO2 emissions,” said Rebecca Wright, Chief Executive, Asia Investment Group for Climate Change (AIGCC).
Asian financial institutions have a lot of exposure to clients in carbon-intensive sectors, and to SME clients, pointed out Yi.
“We can’t achieve our Net Zero ambitions without the support of our customers,” said Kelvin Tan, Head of Sustainable Finance and Investments - ASEAN, HSBC. “There is still a lack of awareness, and many companies are yet to start on their sustainability journey. Financial institutions have a key role to play in raising client awareness – including for SMEs – of how climate change and the transition to low carbon could affect them.”