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New Green Laws: Asia-Pacific Inc. Re-strategizing their Carbon Liabilities and Forecasting

Wednesday, August 17th, 2011
green laws

Over the past several months, tighter laws on greenhouse gas emissions have been a cause of worry for firms located across the AsiaPacific region. These tougher laws have increased the negative financial performance of companies spread across the area, and they continue to rock the ability of firms to seek greater funds and capital.

Asia-Pacific Companies Face Higher Financial Risks and Costs with New Laws

In fact, studies and surveys in October 2010 showed that very few Asia-Pacific companies truly understood the risks involved in running a business on minimal carbon emissions.

The study, conducted by Standard & Poor’s Repu Tex, which analyses carbon emissions, found that close to 41 percent of Asia-Pacific businesses were already reeling under the impact of tighter carbon regulation laws, as raising further funds was drastically affected.

Some of the companies with earlyadoption strategies for new carbon laws, in fact, placed their green compliance as a tool for capital-raising but found that very few investors understood the advantages.

Can Companies Gain by Investing in Green Technology?

The results of the survey provided several answers to this question: “Existing levels of awareness around factors such as carbon prices, expected climate change regulation, financial risks, and opportunities are relatively low, indicating that there is a substantial knowledge gap that may need to be addressed to achieve effective risk management.” The survey was taken at a recent Carbon Expo conference.

In the survey, it was found that the most concern about the financial fundraising impact that new emission laws have on industry productions belonged to India and Japan, as well as Malaysia.

Industries which are experiencing the pressures of green investments, are spread across several sectors such as real estate, transportation, consumer products, metals, and mining. Another perceived threat was that climate changes would continue to influence the physical infrastructure of the firms. This means that utilities service providers are constantly under pressure to perform well and keep carbon emissions low.

The Repu Tex survey covered 300 companies, 28 companies’ responses and overall data from 1,657 Asia–Pacific companies. The survey also found that the industries that produced maximum emissions in the Asia-Pacific region are utilities, showing 58 percent emissions. The energy sector showed 18 percent emission rates of carbon, while the materials sector was pegged to emit close to 13 percent.

A country-based emission list showed Japan had the highest emission rates of 31 percent, China at 29 percent, and South Korea at 11 percent.

The survey also found that “Carbon changes commitments as a possible source of competitive advantage, leading countries to analyze future carbon liabilities while building carbon-management strategies.”

Investors and Carbon Risk

Standard and Poor’s survey also found that most companies were believed to be ”taking advantage of low-hanging fruit such as energy-efficiency measures, which often result in cost savings.” The survey has shown that as the regulatory and physical environment of the Asia-Pacific region evolves, investors will have the key parameters to identify and locate firms that are at greatest risk and will be financial liabilities in their portfolio.

The study concludes that “future emissions trading schemes and direct-emissions forecasting to determine future carbon liabilities” will help investors to buy stock in carbon-efficient leaders who adopt clean technologies, innovate and use renewable energy resources.

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