Climate-linked corporate disclosures rising among Apac listcos, but progress is uneven: MSCI report

DISCLOSURES of corporate emissions are rising in the Asia-Pacific (Apac), but progress varies across emissions categories and company-size segments, says investment research company MSCI, following research on environmental, social and governance (ESG) in the region.

In a May report titled Apac Climate Action Progress Report, MSCI noted that 71 per cent of companies from New Zealand disclosed Scope 1, 2 and 3 emissions in 2021, the highest among the markets analysed by MSCI’s ESG & Climate Research.

This was followed by 44 per cent of companies in Japan, and 41 per cent in Australia.

In contrast, under 25 per cent of companies in China, India and South Korea reported Scope 3 emissions. (Scope 1 emissions are direct greenhouse-gas emissions released through activity at a facility level; Scope 2 emissions are those released at the power station generating electricity for the company’s operations; Scope 3 emissions are the indirect emissions arising from a company’s supply chain.)

The report examined constituents of the MSCI AC Asia-Pacific Investable Market Index in 13 Apac markets.

MSCI said its findings may reflect Apac’s diverse regulatory landscape, shareholder preference and the industry mix. It noted that mandatory climate disclosure is still under development in several markets, and that regulators in New Zealand and Japan were early adopters of Scope 3 reporting.

New Zealand and Japan once again led the markets in terms of the proportion of companies that have set climate targets for 2024 and beyond. The report noted that 88 per cent of companies in New Zealand have made these commitments, and that 73 per cent of companies in Japan have done so.

Hong Kong was third among the markets, at 66 per cent.

MSCI also found that the disclosure rates of small- and mid-cap companies trailed those of large-cap ones in Apac. It said: “We found gaps of more than 25 per cent between the two size segments across all markets, except for Hong Kong and China. The widest gaps – more than 50 per cent – were in Australia and South Korea.”

MSCI noted that regulatory development and investor engagement may push companies of different sizes to strengthen the quality and comprehensiveness of their emissions disclosures.

The report also found that utilities in the Apac region grew both renewable and coal-fired electricity-generation capacity between 2015 and 2022, and that early retirement of coal plants is increasingly viewed as a key step for utilities in the region looking to get on net-zero pathways.

Wang Xiaoshu, head of Apac ESG & Climate Research at MSCI, said: “Given the economic contribution and emissions growth, climate trajectories in Apac will weigh on global net-zero ambitions. Our research still showed evident gaps between the current fuel mix development and net-zero pathways.

“As the shift to a clean-energy economy stands at a crossroads, the role of the capital markets in improving the viability of coal-phaseout programmes becomes increasingly important,” she added.