Signals | September 29, 2021

Investors push companies to set science-based targets and obey the “carbon law”

Amy Cortese
ImpactAlpha Editor

Amy Cortese

ImpactAlpha, Sept. 29 – Global financial institutions holding nearly $30 trillion in assets are pushing Boeing, Alaska Air, Fedex, Duke Energy, Tata Steel and hundreds of other carbon-intensive companies to set emissions targets that align with 1.5 degree Celsius warming scenarios.

The Science Based Targets initiative aims to set goals that ripple through portfolios and supply chains and keep the goals of the Paris climate agreement within reach. Companies with science-based targets – absolute emission-reduction goals that don’t rely on offsets – have cut greenhouse gas emissions by an average of 6.4% a year since 2015, even as global emissions rose an average .85% annually.

Carbon law

The “carbon law,” based on the computer industry’s Moore’s Law, is aimed at halving emissions every decade, or 7% each year.

“If we can get every company to set a science-based target, we may actually be able to prevent climate change,” said Simon Fischweicher of CDP, which is coordinating the target-setting campaign.

More than 1,000 companies have set, or committed to set, such targets.

Universal owners

Dozens of new investors joined the campaign this year as a way to mitigate systemic risk from climate change and green their own portfolios.

“Every company will be impacted by climate change one way or another,” Frederick Isleib of ManuLife, a global asset manager with more than $400 billion under management, told ImpactAlpha.

More than two dozen large corporate buyers responsible for $500 billion in annual procurement, including L’Oréal, Renault Group, Bayer, and HP, also are pressing their suppliers for science-based targets. 

“They’ve set science based targets and they want their suppliers do the same,” said Fischweicher. In many cases, he added, “their science based targets are reliant on the reduction of supply chain emissions, which on average are 11.4 times higher than direct operational emissions, so that will drive the number of companies setting science based targets even further.”

Aiming higher

The 1,600 targeted companies make up more than a third of the MSCI World Index and emit as much greenhouse gasses as the U.S. and E.U combined.

Last year, 154 companies joined the Science Based Targets initiative, a partnership between CDP, the United Nations Global Compact, World Resources Institute and the World Wide Fund for Nature. Investors are hoping to press an even higher number of companies this year and drive even greater emissions reductions.