Decarbonising the transportation sector has become crucial in addressing climate change, according to the coverage of RHB’s regional thematics report titled “Net Zero Transport”.
The report focuses on documenting the current situation and action plans in Malaysia, Thailand, Singapore, and Indonesia towards the decarbonisation of transportation, which currently contributes around 21% of total global carbon dioxide emissions.
Across the region, RHB equity research analysts Nai Wan Yan and Shekhar Jaiswal note that Singapore has not been a major greenhouse gas (GHG) producer following its significant domestic efforts towards achieving net zero emissions through its alignment with international obligations, such as the Paris Agreement.
Transport currently accounts for around 16% of Singapore’s total GHG emissions, holding the position as the country’s third-largest carbon dioxide emitter.
In response, “aggressive” domestic efforts made under the Singapore Green Plan 2030 to promote public transport as the key mode of transport, green public transport fleets and private vehicles have been made under a pledge to cut 80% of peak land transport emissions by or around the middle of 2050.
In their report, the analysts highlight the planned net zero journeys of some Singapore transport sector companies which include ComfortDelGro C52 (CDG), Singapore Technologies Engineering S63 (ST Engineering).
“As an international mobility operator, it is crucial for CDG to deliver clean, low-carbon transport solutions with the aim of reaching net zero emissions reduction targets by 2050,” says Nai and Jaiswal.
The analysts note that 2022 saw the approval of CDG’s emission reduction target by the Science-Based Targets initiative (SBTi) along with the group’s consistency in its reductions requirement to limit global warming to 1.5 degrees celsius above pre-industrial levels, under the Paris Agreement.
For Scope 1 and Scope 2 emissions, CDG’s SBTi-validated targets are aimed at a 54.6% reduction. This is in conjunction with a 61.2% reduction of GHG emissions in absolute Scope 3 Category 3 - which pertain to fuel and energy-related activities - by 2032 from the baseline year of 2019.
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The group’s decarbonisation plan is in line with the SBTi’s absolute contraction approach with CDG utilising sector-specific decarbonisation pathways to transition its fleet to cleaner energy vehicles, optimising operations to reduce resource consumption, and working with like-minded partners to expand sustainable mobility solutions.
That said, while a key part of the group’s decarbonisation strategy focuses on its vehicle fleet transition to cleaner energy vehicles, the analysts note that CDG also continues to consider the feasibility of using carbon credits to offset its residual emissions.
Meanwhile, 2021 marked the start of ST Engineering’s climate-related financial disclosures (TCFD) journey alongside its inclusion of climate change in its business areas’ strategies as well as conducting preliminary physical climate risk assessments on significant operating sites globally.
The same year, the group also set a target to reduce Scope 1 and 2 absolute emissions by 50% by 2030 compared to the base year of 2010.
Within 2022, the analysts note that the group has assessed key areas of existing practices against TCFD disclosure requirements and their implications for its business. The group has also conducted climate scenario analysis for the material portion of its business and incorporated its findings into strategy, decision-making, and the Emerging Risk Management (ERM) approach.
They highlight that ST Engineering has since established a roadmap for expanding its Scope 3 data collection and disclosure and implemented an internal shadow carbon price on major capital expenditures in 2023.
Additionally, Nai and Jaiswal note that the group’s current efforts include reducing its energy consumption by conducting energy audits and improving production energy efficiency and preventing contamination of surrounding air such as by monitoring and minimising stack emissions and the level of air pollutants.
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ST Engineering also tackles the reduction of Scope 1 and 2 emissions through optimising energy efficiency and replacing equipment and fixtures due for replacement with energy-efficient models and installing solar PV systems across its global site, respectively.
Aviation companies Singapore Airlines C6L (SIA), SIA Engineering Company (SIAEC) and Sats, which are not rated by RHB, also aim to go green in various ways.
SIA aims to achieve net zero carbon emissions by 2050 as well as reduce waste across its operations. So far, the airline has made several commitments including driving the development, production, and consumption of sustainable aviation fuel through joint feasibility studies and partnerships with the Civil Aviation Authority of Singapore (CAAS), Temasek, Changi Airport Group (CAG) and other stakeholders.
“SIA believes that multiple decarbonisation pathways are required for it to successfully achieve the ambitious goal of net zero carbon emissions by 2050. These include continued investments in new generation aircraft, achieving higher operational efficiencies, adopting low-carbon technologies such as SAF, and sourcing for high-quality carbon offsets,” write the RHB analysts.
According to them, one of the most immediate and direct ways for an airline to reduce its carbon emissions is to operate a young and modern fleet of aircraft. SIA, which operates one of the youngest fleets globally, has achieved this. SIA’s fleet has an average age of six years and nine months, more than half the global average of 15 years and eight months.
SIAEC, which also committed to reaching net-zero emissions in 2050, has further set an intermediate target to half its Scope 1 and 2 emission levels from FY2019 to FY2020 by 2030.
“In establishing these carbon emission targets, SIAEC has identified key pathways that will aid it in meeting its decarbonisation objectives in the near to longer term,” say the RHB analysts.
“It has also embarked on a climate risk assessment study to develop a preliminary understanding of the risks faced by the group based on recommendations from the Task Force on Climate-related Financial Disclosures. This will enable the group to implement appropriate mitigating plans after assessing the impact of these risks,” they continue.
In addition, SIAEC has undertaken measures to reduce its environmental impact including its plans to achieve the Building and Construction Authority (BCA) Green Mark Certification for all its facilities. So far, two of the company’s hangars have achieved the highest Platinum rating for the Green Mark Certification, including attaining Super Low Energy Building status.
Finally, SATS’s decarbonisation strategy includes electrification, solarisation, and optimisation. The airline caterer has continued to build and deploy smart infrastructure that reduces its carbon footprint It is also committed to converting all the available roof space across its facilities for solarisation where viable.
The company is also looking to reduce waste by exploring and implementing initiatives to turn food and material waste into sources of energy.
RHB has “buy” calls on CDG and ST Engineering with target prices of $1.65 and $4.50 respectively.
As at 3.27pm, shares in CDG, ST Engineering, SIA, SIAEC and Sats are trading at $1.36, $4.32, $7, $2.37 and $3.04 respectively.
