Sector represents 40% of global annual emissions

Climate-focused investor engagement initiative Climate Action 100+ and the Institutional Investors Group on Climate Change (IIGCC) announced today the publication of “Global Sector Strategies: Investor interventions to accelerate net zero electric utilities,” outlining investor expectations for the electric utilities sector companies in order to reach net zero by 2040, the level seen as necessary in order to hit global 2050 net zero goals.

Climate Action 100+ is an initiative, with over 615 investors representing more than $60 trillion in assets, that targets the world’s largest corporate greenhouse gas emitters to promote taking necessary action on climate change and align their business strategies with net zero in order to help limit average global temperature rise to 1.5 degrees Celsius.

The new guidelines form part of Climate Action 100+’s Global Sector Strategies, an approach recently launched by the initiative, focusing investor engagement strategies for decarbonization at the sector level, targeting high-emitting sectors, and aiming to foster investor-led sector-level dialogue on reaching global climate goals. The sector strategies are developed by Climate Action 100+’s founding investor networks, including AIGCC, Ceres, IGCC, IIGCC and PRI.

According to Climate Action 100+, the global electricity sector represents 40% of global emissions, the most of any sector. Moreover, many other sectors will rely on low carbon energy sources from the sector in order to achieve their own climate goals. The new sector strategy envisions reaching net zero for the sector by 2040 globally and by 2035 in advanced economies, in order to align with global net zero targets, as outlined recently in a report by the International Energy Agency (IEA).

Stephanie Pfeifer, IIGCC’s Chief Executive and current Climate Action 100+ Steering Committee Vice-Chair, said:

“Electric utility companies need to lead the transition to net zero, with much of the technology and tools required to reach this available earlier than in other sectors. But we’re not seeing ambitious enough targets from companies to get there and the sector is urgently running out of time. The report’s actions will help inform investor engagement with companies, clearly and definitively outlining what business alignment with net zero transition goals looks like.”

In addition to setting 2040 net zero targets (2035 in advanced economies), key expectations set out in the report include mapping out clear decarbonization strategies that minimize the use of carbon capture and offsets, setting a date to phase out coal generation, immediately halting new coal generation investments, ensuring that new natural gas generation will be net zero, and setting a net zero target for all sold or distributed energy. The report also sets an expectation for companies to commit to a Just Transition, mitigating any negative social impacts on vulnerable groups from the net zero transition, and managing its wider societal impact. The report also highlights priority actions for investors, including supporting action to remove regulatory and policy barriers, and scaling up clean energy investments, particularly in developing countries.

Pfeifer added:

“As recently highlighted by the head of the International Energy Agency, trebling clean power investments in the next decade will be a key contributor to overcoming challenges that the energy sector is currently facing. This report highlights that overcoming barriers to achieve this level of investment is possible and provides clear actions for companies and investors to accelerate a rapid and just transition in the power sector.”