13 October 2020 / Company

Asset managers back engagement campaign for science-based climate targets

By Natalie Kenway

Aegon, AXA, Nordea, LGIM, Neuberger Berman, Lazard. Allianz and Federated Hermes among 137 financial institutions signed up

Asset managers back engagement campaign for science-based climate targets

A group of asset managers representing $20trn in assets under management (AUM) have signed up to a campaign urging companies to commit to climate action by setting science-based targets.

The 137 financial institutions, which includes AXA Group, Legal & General Investment Management, Nikko Asset Management, BMO Global Asset Management, Aegon Asset Management, Amundi, Allianz SE, BlueBay Asset Management, ClearBridge Investments, Federated Hermes, Fidelity International, Insight Investment, KBI Global Investors, HSBC Global Asset Management, Lazard, Neuberger Berman, Nordea and many more, will be engaging with high-emitting global companies to commit to a net zero future by setting targets based on science-based findings.

The campaign has been set up by CDP, a non-profit firm that runs an environmental disclosure platform.

Letters have been sent to 1,800 of the highest emitting companies, which together are the source of 13.5 Gt of emissions (Scope 1+2) each year, equivalent to 25% of total global emissions, according to CDP. These companies represent 40% of the MSCI ACWI Index, and across their entire value chain, the companies have influence over three times this volume of cumulative emissions.

 The financial firms are calling for these companies to set targets through the Science Based Targets Initiative (SBTi) to ensure that they are independently verified against an industry standard for science-based corporate climate target setting, said CDP, which will enable investors and companies to measure climate ambition in a uniform, comparable way. The SBTi is a collaboration between CDP, the United Nations Global Compact (UNGC), World Resources Institute (WRI), and the World Wide Fund for Nature (WWF), and one of the We Mean Business Coalition commitments, to champion science-based target setting as a way of boosting companies’ competitive advantage in the transition to the low-carbon economy.

CDP added over 1,000 companies are already setting science-based targets for reducing emissions, and among these 300 are setting their ambition at 1.5°C through the Business Ambition for 1.5°C campaign.

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, CIO at Nikko Asset Management, which are taking part in the campaign, 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, another firm backing the campaign, added: “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”.

Investors will be engaging with companies until May 2021, when the impact of the campaign will be evaluated.

Part of the Bonhill Group.