Asian corporates are improving their disclosure around climate emissions – and the emissions themselves – but there is still much room for improvement, according to research from Barclays.
The firm analysed 31 of the 50 largest Asian corporate emitters for the paper Asia 50: Further progress evidenced and found regulation is driving more organisations to be better at emissions disclosure and more are introducing interim decarbonisation targets.
For instance, Chinese oil and gas company PetroChina has revealed that 10% of its executive KPIs are now linked to environmental targets, while state-owned iron and steel company Baosteel disclosed its carbon-impact calculation in various scenarios as part of its reporting in line with the Taskforce for Climate-related Financial Disclosure (TCFD).
The KPIs detailed in PetroChina’s sustainability include energy savings, water savings, chemical oxygen demand, ammonia emissions, sulphur dioxide emissions and nitrogen oxides emissions.
“While many companies discuss carbon markets in their ESG reports, it is often done in a descriptive manner instead of in relation to quantified financial impacts,” said the Barclays report.
In its sustainability report, Baosteel calculated total compliance costs needed in a net-zero scenario, and outlined the company’s strategy to achieve its carbon goals.
This additional information demonstrates an upgrade from Barclays’ earlier comments in March, which argued that while the region’s top 50 emitters had ambitious climate targets, but the goals were not yet been matched by action.
“A strong ESG governance structure with sufficient board oversight and executive remuneration linked to ESG objectives should help to effectively incorporate an ESG mindset into business strategies and follow-through with strong execution,” said the report.
However, Barclays noted some major disclosure gaps remain. For instance, the largest corporate emitter in the region in 2020, Huaneng Power has ceased reporting greenhouse gases emission data since 2020.
Regulators in the region are also striving to address these disclosure gaps with new reporting rules and Barclays noted that the Hong Kong stock exchange published a consultation paper last month to enhance corporate reporting on climate disclosure to align with the International Sustainability Standards Board (ISSB) Climate Standard and tighten Hong Kong’s commitment to mandate TCFD disclosures by 2050.
“With 19 of the Asia 50 listed in Hong Kong, the key [regulatory] changes should help address some of our most important concerns on climate actions such as target refinement, capital alignment, remuneration and carbon strategy,” said Barclays.
Last year, the Hong Kong stock exchange was rated by Morningstar as the most sustainable non-European stock market when it comes to corporate-level sustainability. Meanwhile, China is also set to roll out its compulsory ESG disclosure requirements.