Responsible Investment Report 2022

37

Active ownership

Introduction

ESG integration

Climate change

Partnership with Prudential

Community and people

A final word

Milestone 5 C ompany has satisfactorily resolved the issue

A private conglomerate in Southeast Asia.

As part of our assessment, the company has good-quality disclosure on its targets to reduce carbon emissions for the short- term, medium-term, and long-term. It also started disclosing in CDP’s Climate Survey in 2020, when it has sufficient data inventory on its carbon emissions. The company has also set up a Sustainable Development Office in 2021 with the CEO serving as the Chair of the Sustainable Development Committee. The company has integrated climate-change related KPIs from the CEO to heads of various business units, to all employees. The CEO has an ESG-related KPI of 30% of total performance, and this KPI is assessed by the Board of Directors to translate into annual variable incentives.

However, details of its decarbonisation journey appeared to be vague and lacking in detail. This was the primary reason for engagement with the company. We engaged with the company’s senior management including the CFO. To reach its short-term target of reducing carbon emissions by 2025, the management explained that it would largely rely on changes in energy sources from fossil fuels to alternative sources including biomass. Specifically, the management aimed for 50% of its energy sources coming from alternative fuel sources by end of 2022.

The management also articulated the key milestones for the decarbonisation journey from its medium-term target of 2031 to net zero target by 2050. To transition, the management shared that it plans to invest into green energy (e.g., hydrogen), utilise carbon capture, and propose internal carbon price to incentive employers to reduce carbon emissions at a faster pace. The company also plans to introduce new products that are highly recyclable and low energy consumption. We rate this company as Milestone 5 as it has fulfilled our criteria on disclosure, targets set to reduce carbon emissions, and its decarbonisation plan was clear and thoughtful.

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