Dozens of investors press high-emission companies for better climate plans
Fidelity International, Scottish Widows and Schroders are among the 93 investors spearheading a new initiative urging more corporates to publish credible net-zero transition plans.
The new Net-Zero Engagement Initiative from the Institutional Investors Group on Climate Change (IIGCC) has launched today (27 March) with members sending letters to 107 companies in sectors including oil and gas, automotive, aviation, chemicals, cement and food and agriculture.
The letter calls on the companies to set a net-zero target covering emissions across all scopes if they have not already. According to Net-Zero Tracker, while almost 800 corporates now have a net-zero target, only 15% of these targets cover emissions across all scopes. The most common omission is some kinds of Scope 3 (indirect) emissions.
Beyond a top-level target, the investors want to see credible transition plans including interim targets to cut greenhouse gas emissions and plans to finance their delivery. They also want to know how the corporates will be tracking and reporting on their progress to reduce emissions, and whether the transition plans will be put to a shareholder vote.
The letter additionally explains how investors increasingly want information on corporate governance for climate mitigation and on how businesses they invest in are lobbying on climate topics – either directly or through trade bodies.
IIGCC members will “seek to engage” where transition plans “appear lacking or not sufficiently robust”, the letter states. The Group has stated that, based on the response from companies, new engagement strategies will be developed. For companies facing specific, sector-wide challenges to decarbonisation, investors will collaborate to conduct engagement “sprints”.
“Transition plans provide a key tool for understanding the alignment of investment portfolios and are central to the most commonly used investor net zero alignment framework, the Net Zero Investment Framework,” the letter states.
“We understand that developing transition plans aligned to net zero requires considerable work. However, challenges presented by both energy insecurity and the financial risks related to the onset of climate change are pressing. The fulfilment of requests such as these is therefore important to long-term shareholder value.”
Companies to have received a letter include Aston Martin, Drax Group, easyJet, Ferrari, Johnson Matthey, Kerry Group, Orsted, Tesco, TUI Airlines and Wizz Air.
IIGCC has stated that its initiative has been designed to scale to cover more companies over the next two years.
The Group’s chief executive Stephanie Pfeifer said: “The Net Zero Engagement Initiative provides part of the solution to the greatest challenge facing investors who have made net-zero commitments: how to deliver on these through engagement with companies. By building on other initiatives, including Climate Action 100+, and by scaling up engagement, the NZEI adds to the ‘how’. In doing so, the NZEI supports investors in the implementation phase of their net-zero journey.
“We are excited about the scalability of the initiative and look forward to growing it in the coming years, both in terms of the investors involved and the number of companies covered.”
Just last week, investors managing more than $4trn of assets wrote to 13 of Europe’s biggest chemicals companies demanding more credible climate transition plans, in an action co-ordinated by ShareAction. ShareAction has also been putting pressure on European banks, asset managers and financial services giants to increase climate ambitions and actions in 2023.
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