More than a hundred companies have been sent letters by a group of major investors demanding the organisations set out their net zero transition plans.
The letter—sent to companies including BAE Systems, Ferrari and Ryanair, to name but three of 107—asks for “clarification” of their “plans to align with the goals of the Paris Agreement”.
Signed by 93 fund managers, including the Church of England Pensions Board, Allianz Global Investors and Legal and General Investment Managers, the letter asks for the publication of transition plans and confirmation by the end of April that the targeted companies have “developed or intend to develop” a net zero transition plan.
The letters form part of the launch of the Net Zero Engagement Initiative (NZEI), a campaign run by the Institutional Investors Group on Climate Change (IIGCC).
Adam Matthews, chief responsible investment officer at the Church of England, says the church is committed to achieving net zero and needs to engage with companies in which it invests through the campaign.
“Expanding the universe of companies responsible investors engage with to deliver on net zero targets is critical to achieving the Paris Agreement,” he adds.
The new engagement campaign has been designed to be used globally to cover more companies over the next two years to help investors align their portfolios with net zero.
Andres van der Linden, senior responsible investment adviser with PGGM Investments, a Dutch asset manager, says the campaign “helps to further scale investor impact by combining a centralised approach with focused engagement sprints. It comes at a critical phase of the energy transition, where particular attention to the demand side of energy is needed.”
Urgent warning
This month, the Intergovernmental Panel on Climate Change (IPCC) warned that holding global warming to just 1.5 degrees C above pre industrial levels—the Paris Agreement target—“requires deep, rapid and sustained greenhouse gas emissions reductions in all sectors”.
The IPCC’s Synthesis Report noted that greenhouse gas emissions have “continued to increase” with “human-caused climate” already “affecting many weather and climate extremes in every region across the globe”.
Christopher Trisos, one of the IPCC report authors, said: “Accelerated climate action will only come about if there is a many-fold increase in finance. Insufficient and misaligned finance is holding back progress.”
The engagement campaign will pile pressure on companies, though that should be no surprise. Experts have predicted that there would be increasing demand for transition plans this year.
Elsewhere, campaigners have taken a more direct approach by launching legal action against companies and boards that they consider falling short on climate change.
NGO ClientEarth is in the process of making legal history by bringing a case against board members at energy giant Shell, arguing they “breached their legal duties” with the company’s transition plan because it fails to align with the Paris Agreement.
At a meeting during the World Economic Forum’s annual gathering in Davos, legal experts predicted many more companies would face climate litigation as regulatory authorities increased disclosure requirements during the coming year.
Pressure is mounting on companies to adjust. The NZEI shows that investment managers have embraced climate change and carbon gas reduction targets. Let’s hope it works in time.