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Investors urged on to “emergency footing” over climate change

climate changeA climate change group backed by institutional investors and asset managers has found a significant degree of corporate failure in terms of action related to the Paris Climate Agreement – but they also say the situation is improving.

Only one in 10 of the world’s 274 highest-emitting companies are reducing carbon emissions fast enough to keep global warming below 2°C in line with the Paris aims, the Transition Pathway Initiative (TPI) said.

TPI, which has $14 trillion of backing from the likes of Calpers and Church of England investors, also found 25% of companies were not reporting emissions and 86% were yet to undertake and disclose climate scenario planning, which is considered highly important for investors. 

Other findings were that:

  • 46% of companies are failing to adequately integrate climate change into their business decisions
  • Only 1 in 8 companies (12.5%) are reducing carbon emissions at the rate required to keep global warming below 2°C

TPI said it was urging investors to adopt “an emergency footing” to get companies moving faster on climate and to avoid “Catch 22 on disclosure”.

The report assesses the climate performance of 274 of the world’s highest-emitting publicly-listed companies.

A total of 160 companies are analysed on carbon performance and the research found that only 20 companies are aligned with a pathway that would keep global warming below 2°C.

Adam Matthews, co-chair of TPI and director of ethics & engagement at Church of England Pensions Board, said engagement was starting to show results, but not at the pace needed and a failure to grasp the seriousness of the warning from the TPI will “directly undermine our ability as pension funds to manage the financial risks within our portfolio for our beneficiaries”.

He added: “The clock is ticking on irreversible climate change. The fact only one in eight of the highest-emitting firms are responding at anywhere near the pace required is an urgent challenge to investors. Investors themselves need to adopt an emergency footing otherwise the window to secure the change we need will be gone.”

Faith Ward, Co-chair TPI on behalf of the Environment Agency Pension Fund, added: “As the effects of climate change accelerate we can expect to see more capital flow away from those companies that bury their head in the sand, and towards those companies aligning with a 2°C pathway.”

She added: “The failure of 25% of high-emitting companies to report their own emissions is putting investors in a Catch 22 situation on disclosure. The UK is one of several countries moving to make climate risk reporting by asset owners mandatory, yet without emissions data from a quarter of the high emitting companies that request will be impossible to deliver.”

Some of the more positive findings were that:

  • Among the companies assessed for the second consecutive year, 35 of 130 companies (27%) improved how they integrate climate change into their business decisions.
  • One in four (27%) companies assessed for a second year were improving on climate management.
  • 12.5% of companies assessed for their current and planned greenhouse gas emissions are aligned with the most ambitious below 2°C benchmark. These include E.ON, Iberdrola, Stora Enso and Edison International.

Edison International, a US utilities firm, was cited as a best practice company, among others.

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