Stewardship case study – CLP

Background

Engagement is a cornerstone activity of our stewardship efforts. Investment teams and our Responsible Investment team work closely together to deliver client advocacy, improve financial and non-financial outcomes through engagement or to be a force for systematic change.

A great example of this is our ongoing engagement with CLP, which we hold across our Global Equity range. CLP is one of several utility companies that we have engaged with on just transition. For a number of years, we have been advocating for a ‘just transition’ which asks companies and governments to consider the social implications of moving to a low-carbon economy. The purpose of this engagement is to encourage companies to integrate social considerations in their climate transition plans. We met with CLP twice in 2022 and twice again this year, to discuss this topic.

Action

Throughout our engagement we learned that just transition is a critical part of enabling the phasing out of the coal generation plant in Yallourn by 2028, as the local community relies on the power plant for employment. The company is working actively with local authorities to reskill its workforce and transform its business model. As a result of engagement, our future dialogue will focus on the success of reskilling the workers and finding a tangible business model for the Yallourn power station.

Focusing purely on coal demand in Asia where it is most significant and growing, we met CLP Holdings, an energy utility based in Hong Kong, twice in 2022. We were pleased to hear that the company did not see any significant barriers to decarbonisation in Hong Kong, India, China, or Australia. The company has coal-fired plants in all these geographies. The company also does not believe divestment is the correct approach to delivering its climate targets and that just transition is an important concept to integrate. We later met CLP’s Head of Sustainability and requested the company provide further details on their coal phaseout plans and just transition. CLP is exploring options to replace coal generation. Enabling additional renewables to come on stream is part of the puzzle, as well as capacity mechanisms such as battery storage and pumped hydro technologies.

Positive outcome

This year, CLP has published its asset-by-asset coal phase-out plan. The company has published a just transition case study of its Yallourn Coal plant in Australia, describing how it is engaging with the community and workers and investing to repurpose the coal plant site for energy storage. During our meeting with the CEO and CFO they acknowledged our feedback, alongside that from other investors, in its decision to enhance disclosures.

This is a financial promotion and is not investment advice. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. Portfolio characteristics and holdings are subject to change without notice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.