AES

AES has an interim target to reach an emissions intensity of 0.16 tonnes of carbon dioxide (CO2) equivalent per megawatt (tCO2e/MW) of energy generation by 2030, a 75% reduction from 2016. This target is aligned with the company’s 1.5°C pathway. The company is also aiming to be carbon neutral for its scope 1 and 2 emissions by 2040 across all emission scopes by 2050. However, these targets could not be assessed in this benchmark as AES does not disclose if it intends to use offsets to achieve the targets. AES’s net-zero target year is also not ambitious enough to meet IEA’s sectoral expectation. The company should aim to be carbon neutral by 2035 as per the IEA recommendation for electricity generation companies with assets in advanced economies.

AES does not report R&D data and does not provide an indication of its R&D spending on low-carbon technologies. However, it qualitatively describes its R&D investment in projects and joint ventures, such as Fluence, the energy storage services and digital applications provider, and 5B, the solar technology innovator aimed at delivering solar photovoltaic (PV) installations at greater speed and efficiency. AES can improve its disclosure of financial information on its climate-related R&D investments. R&D expenditure on low-carbon technologies will be essential for AES to develop a low-carbon product portfolio and be successful in a low-carbon economy.

AES has committed to achieving a coal phase-out by 2025. This is a strong near-term target which the company has implemented since the previous EU sector assessment in 2021. Since 2017, AES has sold or retired more than 13.1 gigawatts (GW) of its coal generation assets. In 2017, coal accounted for 54% of the company’s total electricity generation, while it now accounts for 37%. AES must continue this fast-paced coal phase-out to reach its 2025 target. AES has already secured plans to retire or sell 66% (4.7 GW) of its remaining coal assets and is now working on plans for the other 34% (2.4 GW).

AES reports a number of low-carbon business models that it hopes to progress in order to achieve its carbon neutrality goals. AES Clean Energy recently announced a first-of-its-kind 24/7, carbon-free energy supply agreement with Google. AES has committed to providing 90% or better carbon-free energy measured on an hourly basis. It has also invested in Uplight, a digital energy efficiency provider, which offers customer-centric technology solutions, including demand management solutions. These business models provide evidence of AES’s intention to diversify its services portfolio away from fossil fuel-based power generation.

AES Corporation is aiming to be carbon neutral for its scope 1 and 2 emissions by 2040 and across all emission scopes by 2050. The company is targeting an emissions intensity of 0.16 tCO2e/MW for its energy generation by 2030, which is a 75% reduction from 2016 levels. This target is aligned with the company’s 1.5°C pathway. Between 2022 and 2027, AES aims to triple its renewable energy capacity. The company is also committed to phasing out its coal-fired energy generation by 2025.

AES is aiming for renewables to represent 76% of its total energy generation capacity by 2027, up from 46% in 2022. Between 2021 and 2025, AES Corporation is planning a capital expenditure (CapEx) of USD 9.6 billion. Its five-year CapEx plan aims to direct 77% of the funds towards solar and wind power storage, 13% towards hydropower and 10% towards coal and gas power generation. In the same period, AES plans to invest USD 1.2 billion to modernise AES Indiana’s electric grid. AES Clean Energy is partnering with Clean Power Alliance on Luna Storage, a 400 megawatt-hour (MWh) lithium-ion battery storage facility.

In 2022, 72% of AES’s electricity generation came from fossil fuel sources: 37.4% coal, 29.8% gas. The remaining 28% came from renewable sources. In 2022, AES reported a CapEx of USD 4.5 billion. However, the company does not provide a breakdown of this CapEx figure. AES has entered into a joint venture with Siemens to create Fluence, an energy storage services and digital applications provider. Further, AES Clean Energy, a subsidiary of AES, recently announced a first-of-its-kind, 24/7, carbon-free energy supply agreement with Google. The company has committed to providing 90% or better carbon-free energy measured on an hourly basis.

Between 2017 and 2022, the company’s emissions intensity trend significantly decreased. Although, this was not at a sufficient rate to align with its 1.5°C pathway, during this period AES increased its renewable electricity generation from 18% to 28% and decreased its coal-based generation from 54% to 37%. However, the company’s gas-based electricity generation increased by approximately 7% in this period. Since 2017, AES has announced the sale or retirement of more than 13 GW of its coal-based generation capacity. In 2021, AES acquired the US renewables developer Community Energy Solar, adding renewable energy projects with a total capacity of 10 GW to its growth pipeline.

AES is targeting an emissions intensity of 0.16 tCO2e/MW for its energy generation by 2030 compared to 2016 (a 75% reduction). This target is aligned with the company’s 1.5°C pathway. However, AES’s climate neutrality targets could not be assessed in this benchmark as the company does not provide sufficient information on its intention to use offsets. Despite plans to triple its renewable energy capacity by 2027, AES does not report any specific CapEx or R&D investments to support this target. Additionally, AES does not provide sufficient data on its purchased power sources that could be scored for the forward-looking modules that assess its sold-product performance.

The company discloses the categories of stakeholders it engages with on a just transition, including local and national governments, communities, its people and unions. However, no evidence was found of the company having a general commitment to social dialogue, nor to demonstrate the company’s ongoing social dialogue and meaningful engagement with affected stakeholders. The company incorporates social dialogue and stakeholder engagement in its just transition planning. However, no evidence was found that the company has a set of time-bound, measurable indicators to mitigate the social impacts of the low-carbon transition on workers, affected stakeholders and its business relationships.

The company discloses the actions it takes, including partnerships with others, to create green jobs. However, no public commitment by the company was found stating its intention to create and support access to green and decent jobs as part of the low-carbon transition. Moreover, no evidence was found of the company’s actions to promote these jobs in a way that ensures gender balance and inclusion of vulnerable groups. Additionally, no relevant disclosure was found of the company’s assessment of employment dislocation risks. No public commitment by the company was found stating its intention to reskill and upskill workers displaced by the transition to a low-carbon economy. Additionally, no evidence was found that the company reskills and upskills workers in a way that ensures gender balance and inclusion of vulnerable groups.

The company demonstrates how it contributes to addressing the impact of the low-carbon transition on workers’ social protection, for example, by supporting private and public actions, and providing exit plans for workers in case of plant closure. However, no other relevant disclosure was found to show if the company identifies impacts of the low-carbon transition on social protection for workers and affected stakeholders. Additionally, no evidence was found that the company expects its business relationships to contribute to the social protection of their workers and affected stakeholders. No relevant disclosure was found to show how the company identifies any misalignment of its lobbying activities with policies and regulations that support the just transition, nor of the measures it takes to address misalignment. Furthermore, no evidence was found that the company lobbies for policies and regulations for green and decent job creation; retention, education and reskilling; and social protection for workers.

The company commits to respecting human rights. However, no evidence was found of the company’s process to identify, assess and mitigate salient human rights risks in its own operations and in its supply chain. Moreover, no evidence was found of the company disclosing the stakeholders whose human rights have been affected by its activities. The company does, however, have a grievance mechanism available to workers and external stakeholders.

The company expects its business relationships to respect the health and safety of their workers and discloses how it monitors the health and safety performance of its business relationships. Additionally, the company discloses some information about the diversity of its workforce. However, the company can strengthen its disclosure on these subjects, as well as on its living wage and working hours practices.

The company commits to protecting personal data. However, no evidence was found of the company having a privacy statement regarding the collection, sharing and access to personal data. Additionally, no relevant company disclosure was found regarding responsible tax practices. The company does have a policy prohibiting bribery and corruption, and it includes corresponding clauses in its business relationship contracts. However, the company can strengthen its disclosure on these subjects, as well as on its lobbying and political engagement practices.