While many talk about ESG, renewable energy has radically shifted the traditional energy industry towards a real green solution. From a corporate perspective this means a commitment to ESG that runs throughout the business model, the organisation and the people. While the green energy agenda is embedded within developed countries, the emerging markets are having to manage the conflict of cost and sustainability when it comes to infrastructure investment.
We spoke with Roy Tang, CFO at Blueleaf Energy, about his involvement with ESG, the role developers need to play in order to deliver the required infrastructure and how political will is essential.
Roy began his career within financial services, working for companies such as Westpac and Barclays. He then moved into the area of renewable energy infrastructure where ESG now plays a pivotal part within his role.
How did you become interested in ESG?
If I am truthful, I fell into the industry. While the bulk of my career has been within financial services, my family were involved in the oil and gas industry so my background was firmly within the bricks and mortar element of infrastructure. So I guess I am going back to my roots.
When I had the opportunity to join Asia Power Development Platform (ADPD) as CFO I was excited to take it. We all know that our reliance on fossil fuel has to stop and working for ADPD gave me the opportunity to support the move to renewable energy and start building something that would give my kids a better future.
I joined the company in 2018 as CFO, attracted by the fact ADPD was a joint venture between Macquarie Group and STEAG, the German power generation company. I felt that it brought together the key requisites of a good infrastructure development company; strong financial backing and blue-chip industry knowledge.
ADPD is a power infrastructure development company based in Singapore and Jakarta. They are involved in the development, construction and operation of power generation assets across South East Asia, giving me a valuable insight into the different geo-political approaches to renewable energy.
In 2020 I moved to Blueleaf Energy which gave a greater opportunity to be involved in the net zero agenda. As CFO of Blueleaf Energy we develop, finance, own and operate renewables and storage assets that accelerate the net zero energy transition.
Are you seeing a demand for green energy in the Asian market?
Blueleaf Energy operates across Asia, which means that I get a real insight into the local country markets. From what I see, people recognise the value of green infrastructure but that the challenges, particularly around financing and political support, often hinder progress.
You do get some real pockets of traction, so for example Singapore is definitely leading the way. Lee Hsien Loong, the Prime Minister of Singapore, is committed to the green agenda and this means that it is becoming part of business life. He talks about the ESG in the National Day address and they are starting to look at ‘car light’ states to help reduce carbon emissions. In a similar way the Singapore Government is supporting start-ups and SMES; pre 2020 it was through digitalisation and now since COP26 it is environmentally focused.
Singapore is doing well because they have been able to forward plan and are now advanced along this journey. Other areas in Asia don’t have the same support. Often this is due to the combination of funding challenges and current political systems. To make the change to a proactive environmental strategy there needs to be financing available and political will to make it change. Without both these in place countries fall into inertia and infrastructure developers who could be contributing to the green energy are left just watching from the side-lines.
Should developers be leading the change?
It is an interesting question, but while infrastructure developers are key to making the change to green energy, the real driving force is the funding. Project financing remains an issue, particularly for emerging markets. Part of the solution is to be able to demonstrate the bankability of power purchase agreements (PPAs) so that investors have transparency around the returns over the lifetime of the project. The trouble is the renewable sector is competing against traditional fossil fuel energy such as coal. At the moment coal is established, it is a known quantity and is currently cheaper when it comes to implementing and constructing the infrastructure.
If we want to shift away from fossil fuels towards renewables then there needs to be the right funding mechanism in place. I have been to several conferences which have looked at this issue. One solution seems to be that the ECAs band together as a conglomerate and then target renewable energy. This would include working with each government to standardise the risks around PPAs so that there is transparency and consistency from the start. The result would be increased confidence for lenders around the projects.
The local country would benefit, by using project financing developers would be able to source the main project to generate a levelised cost of electricity. This means the cheapest construction in the most efficient design would be selected, adhering to the basic ESG principles around minimising resource utilisation and impact on the environment.
Is Blueleaf Energy committed to ESG?
We are committed to upholding the highest environmental, social, governance and safety standards, our customers are corporate and industrial consumers and large utilities who want access to competitive and green energy mix and solutions to achieve their own sustainability targets.
ESG is embedded in our culture, which is why we live and breathe it. We integrate recognised international performance standards throughout our business activities set out under ISO 14001, IFC Performance Standards and the Equator Principles.
For each project we have a dedicated HWC directive for each of our solar, wind and storage projects which means that ESG remains at the forefront of the work.
However, when we go into certain markets we are competing with local developers who don’t have the same ESG commitments. This means that the local company accesses local finance, can source materials cheaper and doesn’t apply to the same international standards. This provides an ongoing challenge which provides a short-term financial advantage to the local country but negates achieving net zero further down the line.
How do we nurture change?
COP26 provided a clear platform of change, but we haven’t seen any fundamental shifts since. I think we need to look to the pockets of success that are happening and look to become involved in those. By coming together in smaller pockets we can influence change and make a difference.
Within Asia the key pockets of ESG change are India, Japan and Singapore. Companies committed to ESG need to look to these to leverage the incentives and initiatives they are generating. They are putting effort and commitment to build momentum for change. If you want to make a difference then you need to join these pockets and show your commitment to change.