NTPC and Tata Power have clean energy plans with significant capital expenditure and they need to ensure more transparency in their clean energy transition plans, a report by the Institute for Energy Economics and Financial Analysis (IEEFA) said.
Their plans to reduce emissions intensity by 17 percent and 20 percent, respectively, by 2030 fall short of the Intergovernmental Panel on Climate Change’s (IPCC) proposed pathway – a key consideration for global ESG investors.
Tata Power is expected to publish revised emissions reduction targets, which are in the validation stage with the Science-Based Targets initiative (SBTi).
Tata Power and NTPC need to follow IPCC’s emissions reduction pathway or the SBTi’s recommendations to keep warming below 1.5˚C.
NTPC would have to accelerate the decommissioning of coal mines and existing coal-fired power plants and stop constructing new ones.
Tata Power would have to disclose and set out a plan to divest from stakes in Indonesian coal as well as accelerate decommissioning of its coal-fired power plants.
IEEFA’s report compares the clean energy deployment and greenhouse gas emissions reduction pathways of NTPC and Tata Power with those of Italian energy company major Enel, which raised billions of dollars to fund its decarbonisation.
“Successfully engaging serious green investors would depend on the companies’ ambition and the transparency of their transition plans,” Saurabh Trivedi, Research Analyst at IEEFA, said.
The Reserve Bank of India (RBI) has recommended that financial institutions voluntarily mitigate the potential climate risk in their portfolios. Such a move would require their clients in the emissions-intensive industries to set sustainable energy transition strategies.
The RBI’s recent consultation paper recommended that financial institutions start factoring in climate risk while investing in or lending to energy transition-vulnerable sectors.
NTPC and Tata Power may be able to meet their capital requirements through traditional financing. However, if the RBI’s recommendations are implemented the companies are likely to face rising financing costs.
“Global investors are increasingly concerned about climate risk,” says Christina Ng, Research & Stakeholder Engagement Leader, Debt Markets, at IEEFA.