Apac entities’ climate disclosures on par with North America, but lag Europe
Janice Lim
ENVIRONMENTAL disclosures among organisations in the Asia-Pacific are on par with those in North America, with both regions having an “average” disclosure rating, according to Sustainable Fitch, the sustainability arm of Fitch Solutions.
However, entities in these two regions lag Europe, Middle East and Africa (EMEA) as a whole. The group has a “good” disclosure rating.
Comparing across sectors, Sustainable Fitch found that energy companies generally performed well, given that the sector has been the target of calls by governments and investors for greater transparency on emissions. In fact, oil and gas companies emerged among the top five sectors in terms of environmental disclosure scores for Scope 1 and 2 emissions.
(Scope 1 emissions are direct emissions from operations that are owned or controlled by the company; Scope 2 emissions are emissions from the generation of purchased or acquired electricity, steam, heating or cooling consumed by the company.)
Looking across both regions and sectors, Sustainable Fitch said utility companies in Europe had some of the best disclosures regarding their greenhouse gas emissions. This was bolstered by their alignment with the European Union’s taxonomy.
Even within the Asia-Pacific, energy companies did well in disclosing their emissions. The sector had the highest concentration among the top-rated entities in the region.
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North America’s energy sector scored an “average” rating.
“These regional scores reflect the different level of regulatory and investor pressures to make climate-related disclosures across the different regions, with those on the whole manifesting most prominently in Europe, which is reflected in a better rating for environmental disclosures,” said Sustainable Fitch.
However, the energy sector did not perform as well for Scope 3 emissions, which covers emissions resulting from the supply chain. Fewer than half of rated power and utility companies disclosed such emissions.
Beyond the energy sector, the report found that healthcare, as well as information and communications technology, also performed strongly in disclosing their Scope 1 and 2 emissions.
At the other end of the spectrum, retailers and public entities tended to have lower average disclosure scores. Sustainable Fitch said that among public-sector organisations, nearly half received a rating indicative of either poor or altogether absent disclosures.
Banks were the best-performing entities for disclosing Scope 3 emissions, with more than 80 per cent in Sustainable Fitch’s dataset doing so. This was partly driven by regulations.
Entities’ public disclosures of their greenhouse gas emissions are a key metric that the ratings agency uses when assigning its overall environmental, social and governance ratings.
Despite the average performance of organisations in the Asia-Pacific region in making emissions disclosures, Sustainable Fitch said that they showed the least improvement in reducing their greenhouse gas emissions and natural-resource consumption. They also lag their counterparts in Latin America.
Categorising the improvement as evolution scores, EMEA was the top-performing region, with North America in second place.
Sustainable Fitch said that the divergent performances across these regions are largely due to differences in regional economic development, regulatory pressure on climate change, technology development, and investors’ awareness of promoting sustainability.
Asia-Pacific entities are concentrated in higher-emitting sectors, such as chemicals or homebuilding, the agency noted, adding that the absence of regulatory pressure means companies in this region have fewer incentives to rapidly decarbonise.
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