In a campaign launched today by CDP, a group of 137 financial institutions representing assets of nearly $20 trillion is urging 1,800 of the most high-emitting global companies to set science-based emission reduction targets towards achieving a net zero future.
CDP is one of the founders of the Science-Based Targets initiative (SBTi), along with the World Resources Institute (WRI), the World Wide Fund for Nature (WWF), and the United Nations Global Compact (UNGC), with the goal to establish science-based environmental target setting as a standard corporate practice. To date, over 1,000 companies globally have pledged to align their decarbonization plans with the Paris Agreement by adopting science-based greenhouse gas reduction targets, and slightly over 450 companies have had their targets approved by SBTi.
Emily Kreps, Global Director of Capital Markets at CDP, said:
“The importance of investor engagement to drive sustainable corporate action cannot be overstated. Climate change presents material risks to investments, and companies that are failing to set targets grounded in science risk losing out – and causing greater damage to the world economy.
“As the interest in this campaign shows, investors want to see accelerated corporate commitment that reflects the unprecedented challenge the planet faces. To make this possible, they expect companies to commit fully to ambitious targets grounded in science. With business resilience and adaptation to systemic risks exposed by the recent public health crisis, the tide is rapidly turning against companies not taking note of investor demands.”
The companies targeted under the new campaign are the source of 13.5 Gt of emissions each year, in just their Scope 1 and 2 emissions, equivalent to 25% of total global emissions. According to CDP, across their entire value chains, the companies have influence over 3x this volume of cumulative emissions.
Several members of the investor group explained that they increasingly look to avoid climate risk, and invest in companies that are well-positioned for the coming energy transition. Setting science-based targets for emissions reductions are seen as one of the key steps expected for their portfolio companies.
Ted Maloney, Chief Investment Officer at MFS Investment Management, said:
“As an active investment manager we allocate capital to companies that we believe can outperform throughout an economic cycle. Companies that do not set science-based targets risk being surprised by increased costs or lost business that could result from the increasing focus on climate change by society and regulators. We need companies to rigorously evaluate the ways in which their businesses need to change to keep global warming below a 2-degree increase. Science-based targets not only encourage this kind of rigor and critical self-evaluation, but also enable institutional investors to better serve their clients through improved analysis.”
Hiroki Tsujimura, Chief Investment Officer at Nikko Asset Management, said:
“Nikko AM is committed to integrating ESG into its investment management processes, but this is only possible with strong commitment and transparent disclosure from companies, and the willingness of senior management to engage with investors. We hope this campaign will signal that investors are serious about climate issues, and emphasize the importance and urgency of creating a forward-looking science-based target, integrated with long-term corporate strategies.”
Jean-Jacques Barbéris, Director of the Institutional and Corporate Clients division & ESG at Amundi, said:
“The adoption of emission reduction targets by corporates is a critical factor of capital mobilization. Responsible investors want to invest in companies that are transitioning to a Paris-aligned economy. Science-Based Targets represent a global, robust and helpful tool to support companies on their transition journey. Limiting global warming requires collective response; corporate actions and investors’ mobilization to decarbonize portfolios go hand-in-hand. Supporting CDP for this important initiative is part of our broader engagement to support climate action”.
CDP stated that while companies can set science-based targets at any point throughout the year, investors will be engaging with companies until May 2021, when the impact of the campaign will be evaluated.