Nordea Asset Management’s Climate Investing 2.0 approach seeks real-world change

When you think of Hawaii, you probably think of sun-drenched sandy beaches, monster surf spots and a constant warm breeze sending wind- and kite-surfers skimming across the clear water. With all these natural resources on tap, it seems a pity that the state’s largest supplier of electricity would use coal plants and diesel generators as part of its energy mix to power the islands.

Hawaiian Electric Industries (HEI) is the largest supplier of electricity in the state of Hawaii and is a holding in Nordea Asset Management’s (NAM) Global Climate Engagement Strategy. The company and its subsidiaries, Maui Electric Company and Hawaii Electric Light Company, serve 95 percent of the state’s 1.4 million residents on the islands of Oahu, Maui, Hawaii Island, Lanai and Molokai.

In 2017, the state of Hawaii defined and approved a roadmap to put Hawaii on the road to get 100% of its electricity from renewable sources, including wind, solar, photovoltaic, geothermal, wave, hydroelectric, municipal waste, and other biofuels, by 2045. In the same year, NAM decided to take a position on HEI with the aim to engage with the company to accelerate its transition towards an energy mix of 100% renewables, which will save 1,320 tons of CO2 emissions annually.

Our initial engagement was focused on the acceleration of solar deployment, which also made economic sense due to favorable conditions for solar energy in the region. Later, we also pushed for board refreshment to include members with sustainability and utility backgrounds, who we see better qualified to drive the energy mix transition.

We also worked with HEI on their reporting to the Task Force on Climate Related Financial Disclosures (TCFD) which provides information to investors about what companies are doing to mitigate climate change risks, and their transparency about the way they are governed.

More recently we have encouraged the company to publish emissions reduction targets in terms of carbon intensity to account for economic growth, and to seek approval from the Science-Based Target Initiative (SBTI). HEI has now formally committed to seek SBTi approved short-term and net zero targets, moving the company closer to obtaining third party approval that its decarbonization targets are in line with science. Also, the company’s net zero target is now credited by the Transition Pathway Initiative, which we believe will help promote HEI’s positive decarbonization strategy.

Discussions are now focused on how HEI plans to further increase the amount of solar and wind power in its energy mix, and how it will develop new energy storage technologies to help manage the intermittent nature of renewable energy. As shareholders we will continue to engage with, and guide, HEI as the company moves towards its 2045 goal to achieve net zero emissions.