ESG Essentials: in the news last week

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Funds demand science-based emissions targets from 1,600 firms

Earlier this week funds managing $30 trillion in assets called on 1600 of the world’s highest polluters to set science-based emissions reduction targets (SBTs) as a matter of urgency.  Coordinated by CDP, powerful investors including Allianz, Amundi and Lombard Odier said they had written to CEOs of companies they invest in to demand targets that would help to cap global warming at no more than 1.5c. 

Over 1775 companies are already part of the SBTi, and over 550 of those have approved targets in line with 1.5°C. Analysis shows that companies who have already set SBTS are typically cutting emissions by 6.4% per year- and CDP are calling on others to follow suit. 

Laurent Babikian, Joint Global Director Capital Markets at CDP said that not having an SBT raises a ‘red flag’ for investors as it indicates that companies are failing to manage climate risk. 
“Ahead of COP26, we must see greater ambition from the companies accountable for the bulk of global emissions if we are to achieve a net-zero emissions economy, and mitigate the most serious impacts of climate change, which have been all too visible in 2021 so far,” he said.

Alternative protein could take up 64% of global protein market by 2060, report finds

A new report by the FAIRR Initiative found that investments in alternative proteins are growing rapidly – the industry has seen more than $2.7 billion in investment so far in 2021. 

The research found that global food retailers and manufacturers are getting behind the shift as the number of firms adopting formal targets to expand their alternative protein offerings is on the rise – growing from 0 in 2018 to 28% of companies in 2021.

FAIRR’s research also found that 2021 has been the ‘year of cultivated meat’. Investments in cultivated meat technology grew sixfold from 2019 to 2020, and this year firms have already seen investment grow to $506 million. This trend is set to increase and Jenn-Hui Tan, Head of Stewardship and Sustainable Investing at Fidelity International, said: 

“The shift towards sustainable proteins will prove an essential tool for addressing serious climate risk, whilst also meeting the demand for nutritious food in a resource-scarce world. This year Singapore became the first country in the world to approve cultured meat for sale. 

“With other countries poised to follow suit, investors should be aware of the impacts and opportunities within this shift and food companies should be innovating at pace.”

Climate change replaces pandemic as insurers’ biggest worry (£)

A new report from French insurance giant AXA SA found that climate change is the biggest concern for insurers, knocking the pandemic off the top spot. According to AXA Chief Executive Officer Thomas Buberl, this is no bad thing:

“This is good news since last year we feared that the explosion of health risks may overshadow the climate emergency.” 

Global warming took the top spot in both 2018 and 2019 as the biggest risk to society over the next five to ten years, but was bumped down to second place by the health risks following the coronavirus pandemic. Cybersecurity risk is also on the rise, with 61% of respondents to the AXA survey putting it among their top five concerns. 

Insurers are experiencing increasing challenges due to risks relating to climate change. As extreme weather events continue to increase in severity and frequency, insurers are trying to push the industry’s largest players to exclude polluting companies and focus on those that have “clear and credible transition plans”. 

Net zero pledges: not even next management’s problem (£)

The disparity between the relatively short average tenure of some CEOs and the long-term Net Zero goals they set means that bosses will most likely be completely out of the picture by the time their targets will be reaching their full maturity. 

Research from the FT’s Lex column has confirmed that those companies setting bolder, nearer-term targets tend to be those that have a lower carbon footprint. Thus, higher polluting companies seem to be synonymous with longer Net Zero goals, and the research shows that many of these CEOs won’t be around to be held accountable if and when the company reaches its Net Zero target.

Would it be more beneficial if Net Zero emissions targets be broken down into lots of incremental steps? This way, CEOs could be held accountable if they fail to achieve specific targets during their tenure, and will help end the cycle of chief executives breaking the promises of their predecessors. 

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