The consultation aims to develop voluntary guidance and practical steps financial institutions can take to support the financing of the managed phaseout of coal-fired power plants

SINGAPORE – June 5, 2023 – The Glasgow Financial Alliance for Net Zero’s (GFANZ) APAC Network has today 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. 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 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 consultation is open until August 4, 2023.

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.

Mary Schapiro, Vice Chair, GFANZ: “The early retirement of coal is critical for decarbonizing 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.”

Ravi Menon, Managing Director of the Monetary Authority of Singapore and Chair of the GFANZ APAC Advisory Board: “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.”

Piyush Gupta, Chief Executive Officer, DBS: “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.”

Surendra Rosha, Co-Chief Executive, Asia-Pacific, HSBC: “The phaseout of coal is a matter of when and how it should be done. The guidance we’ve set out serves as an ambitious and practical foundation to support catalytic and pioneering transactions. By building on the recent work by GFANZ and partners, we will further develop the tools and frameworks needed to help regional financial institutions work with asset owners on managing the phaseout.”

Yuki Yasui, Managing Director, GFANZ APAC Network: “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 phaseout of coal power.”