In a new, three-piece podcast series, experts from APG Asset Management together with external guests uncover and discuss some of the most important topics that are shaping the world of resposible investing. In the first episode, host Shahzad Memon (Portfolio Manager Responsible Investment Fixed Income at APG) discusses the role of emerging markets in the global energy transition with Manfred Schepers (founder and CEO of ILX Management) and Thijs Aaten (CEO of APG Asset Management Asia).
Asia is home to over half of the world’s population and responsible for 60% of global emissions. It also plays also a very important role in global economic growth. Emerging markets, not just in Asia but also in Afria, have a rapidly growing middle class which in turn increases the demand for energy. This leads to challenges. For instance, emerging markets need $2 trillion annually by 2030 to achieve net-zero emissions by 2050. “Without Asia, there won’t be an energy transition or a solution to climate change”, Aaten states in the podcast. “The continent is not only responsible for more than half of global emissions, but also for a lot of the innovative solutions we need for the energy transition.”
‘Just transition’
A so-called ‘just transition’ of emerging economies is not only about renewable energy, according to Schepers. “Renewable power without roads, education or efficient agriculture makes no sense. The broader economic agenda needs to be taken into account. It would be a big mistake if the focus is primarily on renewable power.” That is precisely the reason why APG recently invested on behalf of its pension fund clients in Indonesian toll roads, adds Aaten.
“Not only financial institutions and asset owners but also regulators and politicians should be thinking about the right incentives, as the entire financial ecosystem needs to be geared to making the energy transition happen,” says Aaten. “Finding the right balance between public finance and private finance is a delicate and new task, but we have to do it”, adds Schepers. “There’s a big burden put on the World Bank and Asian Development Bank to really step up and fill the gap which is not filled by the conventional capital markets. Forget about the larger European and American banks, they won’t fill the gap, as their regulators and shareholders don’t like it, so the capital has to come from a different place.”