The Glasgow Financial Alliance for Net Zero’s (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 as part of a just net-zero transition.
The final guidance will outline practical steps that financial institutions committed to net zero can independently take to support the financing of coal phaseout transactions. The consultation is open until August 4, 2023.
In doing so, the guidance seeks to strengthen the credibility of these transactions in the eyes of relevant stakeholders. The GFANZ APAC guidance will build on emerging frameworks for the managed phaseout of coal-fired power plants, including GFANZ’s Managed Phaseout 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.
Pursuing the phaseout 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.
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. 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 phaseout transactions.
Through this consultation, the GFANZ APAC Network is seeking feedback on aspects that financial institutions should consider in a credible, accelerated coal phaseout plan.
This includes how to achieve transparency and accountability for coal phaseout plans in line with the GFANZ Net-zero Transition Plan framework. Financial institutions are increasingly using transition planning aligned with this GFANZ voluntary framework to implement their own net-zero commitments and will need governments, state-owned enterprises, and companies to undertake similarly ambitious, transparent transition planning.
The development of this guidance was co-led by DBS and HSBC, involving 10+ GFANZ financial institutions. It was supported by key partners, including the Monetary Authority of Singapore, and incorporated existing work on coal phaseout by GFANZ, RMI, Climate Policy Initiative, and the ASEAN Taxonomy Board.
Ravi Menon, Managing Director of the Monetary Authority of Singapore and Chair of the GFANZ APAC Advisory Board said: “The GFANZ APAC Network has made significant progress in the past year to help the APAC region raise its climate ambition. The managed phaseout 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.”
Mary Schapiro, Vice Chair, GFANZ added: “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.”