Investors urge companies producing 25% of global emissions to set science-based targets

A nearly $20-trillion strong group of 137 financial institutions, including AXA Group, Legal & General Investment Management, Nikko Asset Management Co and Generation Investment Management, is asking companies to commit to climate action in line with 1.5°C and a net-zero future by setting science-based targets.

The ask is announced today in a new engagement campaign coordinated by CDP, a non-profit which runs the global environmental disclosure platform, sent to over 1,800 of the most high-emitting global companies.

Together, they are the source of 13.5 Gt of emissions (Scope 1+2) each year, equivalent to 25% of total global emissions. Across their entire value chain, the companies have influence over 3x this volume of cumulative emissions.

The group of financial institutions are urging companies to set targets through the SBTi to ensure that they are independently verified against the de-facto industry standard for science-based corporate climate target setting. This enables investors and companies to raise climate ambition that can be measured in a uniform, comparable way.

Given that these companies represent 40% of the MSCI ACWI Index, MSCI’s flagship global equity index, investors and financial institutions are keen to manage exposure to climate-risks in, and de-carbonise, their portfolios. With previous CDP research warning that companies see US$1 trillion at risk from climate impacts, investors like Amundi and HSBC Global Asset Management are urging these high-emitting companies to commit to science-based climate action.

Over one thousand companies across the globe are already setting science-based targets for reducing emissions, among them over 300 setting their ambition at 1.5°C through the Business Ambition for 1.5°C campaign.

Reducing value chain emissions in line with climate science can increase companies’ resilience and competitiveness, help drive innovation, respond to regulatory adjustments and increase investor confidence.

Emily Kreps, Global Director of Capital Markets at CDP, commented: “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.”

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”.

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."

Over the last two decades, CDP has created a system that has resulted in unparalleled engagement on environmental issues worldwide with investors and businesses alike. This campaign combines CDP’s track record, and expertise as a founding partner of the SBTi, to use investor authority to take disclosure further. Earlier this month the SBTi released the first framework for financial institutions to set science-based targets for their own operations and portfolios, and is now inviting financial institutions to submit targets for validation.

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 this campaign will be evaluated.