$1.6trn investor coalition pushes chemicals sector on net-zero
It is technically feasible to fully decarbonise the production of chemicals by 2050 and it is becoming increasingly economically viable to do so, according to responsible investment group ShareAction.
Despite its contribution to climate change, the chemicals sector has been largely untouched by shareholder engagement, the group said.
One reason for this lack of attention is that the sector has typically been seen as hard-to-abate, with investors focussing their attention on lower hanging fruit in the energy and transport sectors.
However, ShareAction research found producing emissions-free chemicals has only a “very marginal effect” on the price of the end product.
Producing plastic bottles with emissions-free chemicals, for instance, would only be expected to increase the price of those bottles by 1%.
The report found that, as renewables and green hydrogen come to undercut the cost of their fossil counterparts by 2030, the transition to an emissions-free chemical sector is becoming increasingly economically viable.
But, it warned, the transition requires action beyond just chemical production.
Fertilisers and plastics are key end products of the chemical industry, so companies must also target their Scope 3 (indirect) emissions as part of their decarbonisation strategies.
Despite the environmental and economic risks, ShareAction’s report found credible transition plans in the sector remain scarce. For example, only two out of the 21 Stoxx Europe 600 chemicals companies having a Science Based Targets initiative (SBTi)-approved 1.5C target.
ShareAction has put together a $3.2tn working group of investors to take these recommendations forward in their own engagements and disseminate the findings into investor engagement practices more broadly.
The group includes EOS at Federated Hermes, Barrow Cadbury Trust, EdenTree Investment Management, Jesuits in Britain, NN Investment Partners, and Sarasin & Partners.
EOS at Federated Hermes’ engager and chemicals sector lead Joanne Beatty said: “In our view, 2021 will be seen as a tipping point for investor engagement on climate action, with greater focus shifting towards neglected sectors such as chemicals, which is vital to accelerate company progress on the climate transition.”