While efforts to combat climate change often focus on public companies, the actions of state-owned enterprises will be critical to the transition to a low-carbon economy, Fitch Ratings says.
In a new report, the rating agency said state-owned enterprises (SOEs) are dominant players in many industries in key emerging markets.
“Their contribution to global emissions is substantial,” the report noted.
As a result, these kinds of firms “have a key role to play in energy transition and will shape the growth of low-carbon technology,” Fitch said.
For instance, the report said the market power of government-owned firms can have a significant impact on the cost structure for low-carbon technologies.
“This has been particularly visible in the last decade, when large solar photovoltaic procurement in China, and government support in the form of subsidies and other research and development incentives, have significantly driven down component and capital costs for the solar industry as a whole,” it said.
Additionally, the development of hydrogen energy and low-carbon steel projects in China has been dominated by government-owned firms, the report said.
At the same time, while a number of major government-owned firms have tapped capital markets in recent years, investors have largely focused their attention on the private sector in climate change engagement efforts, the report noted.
“Disclosure of data on emissions remains limited among SOEs in general,” it said.
The report also noted that the ownership structure of state-owned firms can have implications for their approach to climate, and broader ESG issues.
The governance of state-owned firms “often involves a more complex chain of stakeholders than for private sector companies, including taxpayers, legislative and executive branches of government and government institutions, as well as the board and management of SOEs themselves,” it said.