The Glasgow Financial Alliance for Net Zero Asia-Pacific (GFANZ APAC) Network has launched a public consultation on its proposed set of voluntary guidance for financing the early retirement of coal-fired power plants in Asia-Pacific.
The consultation is open until Aug 4. The final guidance will outline practical steps that financial institutions committed to net zero can independently take to support the financing of coal phase-out transactions. In doing so, the guidance seeks to strengthen the credibility of these transactions in the eyes of relevant stakeholders.
The launch was announced at the opening session of the GFANZ APAC summit on June 5 by GFANZ vice-chair Mary Schapiro and Ravi Menon, GFANZ APAC Network advisory board chair and managing director of the Monetary Authority of Singapore (MAS).
The GFANZ APAC guidance will build on emerging frameworks for the managed phase-out of coal-fired power plants, including GFANZ’s Managed Phase-out of High-Emitting Assets guidance, released last year.
Coal power generation is the largest source of carbon dioxide emissions globally. Although coal power usage globally most likely peaked in 2022, it is expected to continue to rise in Asia for several more years due to growing energy demand in the region, says the GFANZ APAC Network.
Pursuing a phase-out of coal power while ensuring an affordable and reliable energy supply, especially in the face of increasing demand, requires careful planning to reduce coal dependencies and accelerate investment in renewable energy, adds the Network. “It also requires grid infrastructure and power storage for intermittent renewable sources — all while harnessing the opportunity for local communities, including jobs for local workers.”
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Financial institutions will need to work alongside governments, multilateral development banks and other public and private sector parties to support sufficiently credible, financially viable and inclusive coal phase-out transactions, says the GFANZ APAC Network.
Through this consultation, the GFANZ APAC Network is seeking feedback on aspects that financial institutions should consider in a credible, accelerated coal phase-out plan. This includes how to achieve transparency and accountability for coal phase-out plans in line with the GFANZ Net-zero Transition Plan framework.
The development of this guidance was co-led by DBS and HSBC, involving more than 10 GFANZ financial institutions. It was supported by key partners, including MAS, and incorporated existing work on coal phase-out by GFANZ, independent nonprofit RMI, Climate Policy Initiative and the Asean Taxonomy Board.
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Schapiro says: “The early retirement of coal is critical for decarbonising the global economy to net zero and in Asia-Pacific. As this guidance takes shape, it will become a practical tool for financial institutions to support plans to wind down the use of coal, help identify and implement clean energy projects and support them to create positive environmental and economic impact. This will add to the growing toolkit of resources developed by GFANZ to ensure a transition that is global, just and inclusive.”
Menon says: “The GFANZ APAC Network has made significant progress in the past year to help the APAC region raise its climate ambition. The managed phase-out of coal in a timely and considered manner is critical to an orderly net-zero transition in the region. The guidance to support the financing of the early retirement of coal-fired power plants in Asia-Pacific seeks to provide financial institutions with practical guidance to accelerate their efforts and help them meet their commitments to an inclusive and just transition to net-zero.”
Piyush Gupta, chief executive officer of DBS, says: “Coal-fired power plants in Asia are among the youngest in the world. Accelerating their early retirement will be complex and costly, but also key towards achieving a low-carbon future. The guidance aims to lay the foundation for financial institutions to work more effectively with governments and companies to drive collective action for a just transition — by helping to reduce Asia’s reliance on coal and enable greater access to affordable, clean energy.”
Yuki Yasui, managing director of the GFANZ APAC Network, says: “Financial institutions will play a critical role in the Asia-Pacific region to support the phase out of coal assets at the pace and scale required for the global net-zero transition. The consultation is an important step and we encourage all stakeholders to engage so we can build consensus and credible guidance for managed phase-out of coal power.”
GFANZ is a global coalition of eight financial sector net-zero alliances working together to support the world’s transition to net-zero emissions by 2050. GFANZ has united over 550 institutions across the financial sector, including banks, insurers, asset owners, asset managers, venture capitalists, financial service providers and investment consultants; spanning 50 countries and representing 40% of global private financial assets.
MAS announced last week that it will launch a consultation on its proposal to include the managed phase-out of coal-fired power plants in the Singapore-Asia Taxonomy.
Formerly referred to as the Singapore Taxonomy, the guidelines were expected to be published in June. Instead, MAS will seek feedback on additional criteria from financial institutions “within the next few weeks”, said Gillian Tan, chief sustainability officer (CSO) of MAS, on May 30.
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The move comes as regional guidelines are being updated to include the managed phase-out of coal.
In March, the Asean Taxonomy Board determined that projects phasing out coal can obtain transition financing, a first for any regional taxonomy.
These projects are graded on a “traffic light” model, with the lowest tier — “Amber Tier 3” — qualifying coal plants built between 2023 and 2027, provided they adopt best-in-class technology that are affordable, accessible, reliable and can be implemented within a reasonable timeframe.
