• With food production estimated to account for a significant portion of the global greenhouse emissions, we believe the consumer sector has a significant role in the decarbonisation initiatives. In this report, we identify the key enablers and challenges on the path to sector net zero. We also zoom in on the regional markets to examine the decarbonisation progress and highlight each country’s policies. The featured stocks are chosen based on their exceptional commitment to net zero efforts. The stock picks include AEON Co M, Berli Jucker, CP ALL, DFI Retail Group, Heineken Malaysia, Mitra Adiperkasa, Nestle (M), Sheng Siong, and Unilever Indonesia.

• Malaysia aims for net-zero emissions by 2050, with the consumer sector playing a key role. Malaysian consumer companies are working on enhancing energy efficiency, utilising renewable energy sources and waste, and opting for biodegradable materials. Government programmes, including the National Energy Transition Roadmap (NETR), Green Investment Tax Allowance (GITA), and Green Income Tax Exemption (GITE), provide support for these efforts. However, the sector encounters challenges such as regulatory implementation issues, financial constraints, and supply chain complexity when striving to meet sustainability goals.

• Singapore aims for net-zero emissions by 2050 as outlined in The Singapore Green Plan 2030 which aims to tackle climate change with five pillars, including strengthening food security for sustainable living. Agriculture and food production remain small in Singapore, where most of the food supply is imported. As reducing reliance on food imports would safeguard Singapore’s food security, the country is incentivising increase in local food production, diversification of its import sources, and growth and cultivation of food overseas. Immediate beneficiaries would be local urban farms, while listed F&B players would be limited beneficiaries since most will practice more sustainable resources management.

• Indonesia aims to achieve net-zero emissions by 2060, with its Government conducting a number of roadmaps along with multiple initiatives. Consumer companies in Indonesia contribute to emissions through various operations and supply chain segments, ranging from waste management policies to efforts in preserving biodiversity. Nevertheless, challenges remain abound, ie policy implementation, financial resources, affordability of green products, and consumer awareness.

• Thailand aims to achieve net-zero emissions by 2065. Thailand consumer companies under our coverage had aggregated direct GHG emission, accounting for 1.5% of the country’s total GHG emission in 2022. The operators have raised environmental issues related to utilities consumption, inventory management, raw material sourcing, packaging, logistics, etc. As such, they are committed to supporting operations based on corporate projects that focus on improving quality and care for the environment.

Source: RHB Securities Research - 21 Aug 2024