Asia’s electric utilities remain under growing pressure from institutional investors to strengthen emissions reduction strategies and demonstrate clearer capital allocation towards the energy transition, according to a recent report.

The findings come from the Asia Investor Group on Climate Change ( AIGCC )’s Asian Utilities Engagement Programme ( AUEP ), a collaborative initiative involving 23 institutional investors managing approximately US$13 trillion in assets. The programme focuses on engaging some of the region’s most systemically important power companies on their climate transition strategies.

The AUEP report evaluates eight major utilities across Asia, including CLP Group, China Resources Power, Chubu Electric, Huaneng Power International, Jera, J-Power, Indonesia’s state-owned PLN and Malaysia’s Tenaga Nasional.

While the companies have shown incremental progress in areas like governance and climate disclosure, stronger action is still needed, investors say, to align their business strategies with global decarbonization targets.

“Results from AUEP’s latest progress update show that utility companies still need to do much more to accelerate the energy transition,” notes Rebecca Mikula-Wright, the AIGCC’s CEO. “The impacts of physical risk, exacerbated by climate change, will only accelerate and grow along with economic costs. So, companies cannot afford for climate action to take a backseat.

“Companies with clear transition plans, aligned with the Paris agreement, that include robust decarbonization strategies and show greenhouse gas emissions reduction, as well as capital allocation plans, will give investors more confidence,” she added.

Disconnect

Many companies have improved governance structures, according to the AUEP report, with board-level oversight of climate issues becoming increasingly common. Some utilities have also begun linking executive remuneration to climate-related performance indicators, signalling a gradual integration of climate considerations into corporate management.

However, structural gaps remain across several areas. None of the assessed utilities currently promote greenhouse gas emissions reductions throughout their value chains, and only one company has introduced emissions-reduction requirements or targets for suppliers.

This highlights, investors say, a disconnect between high-level climate commitments and operational execution.

Despite the gaps, engagement between investors and utilities, the report acknowledges, has matured over the programme’s four years. Conversations have moved beyond broad climate commitments towards more detailed scrutiny of transition pathways.

Investors are increasingly examining future power generation mixes, financing strategies, coal phase-out plans, renewable energy deployment and grid optimization. The key question is whether companies’ stated ambitions are supported by concrete implementation plans with defined timelines and investment commitments.

While some utilities have begun disclosing investments in renewable energy, grid infrastructure and other low-carbon technologies, evidence remains limited, investors say, that capital allocation is shifting materially away from high-emissions assets. Disclosure around emissions across the value chain also remains inconsistent.

Investors are calling for clearer reporting of Scope 1, 2 and 3 emissions trajectories, asset-level retirement timelines and more detailed short- and medium-term targets.

Without this information, it remains difficult to assess, investors say, whether companies’ transition strategies are credible and resilient to evolving policy, market and technology risks.

There is growing concern, the report also highlights, around the physical climate risks to powering infrastructure. Utilities’ assets are increasingly exposed to extreme heat, flooding and other climate-related disruptions.

Yet, none of the companies assessed have disclosed dedicated capital expenditure or operational spending on climate adaptation. Only CLP has conducted comprehensive asset-level climate risk assessments.

Without resilience measures, physical climate risks, the report suggests, could reduce average company earnings by between 6.6% and 7.3% annually.

Energy demand

The AUEP programme also examined companies’ approach to the “just transition”, which seeks to minimize the social and economic impacts of shifting away from fossil fuels. While some utilities have engaged stakeholders, none have disclosed measurable or time-bound indicators for supporting workers and communities affected by the transition.

For investors, addressing these issues is not only an environmental priority, but also a financial one.

“Electric utility companies are critical to the energy transition,” notes Joanne Khew, Eastspring Investments’ head of sustainability. “Climate risk is systemic financial and operational risk, exacerbated by increasing severity and frequency of climate hazards.

“Companies that demonstrate commitment from the top of their governance structure in incorporating these risks, including tapping on areas of opportunity in climate transition and appropriately disclosing such measures, would boost investor confidence and empower us to make informed investment decisions and allocate capital more effectively.”

The AIGCC plans, it says, to deepen engagement with utilities, investors and policymakers, while expanding discussions to include non-listed and state-owned power companies. The group also aims to support efforts to mobilize institutional capital for renewable energy deployment and broader energy transition investments across Asia.

The central challenge, investors say, is no longer ambition, but execution. With climate risks intensifying and energy demand continuing to grow across the region, the next phase of the transition will hinge on whether utilities can translate their commitments into credible investment strategies that will reshape Asia’s power systems.