Money managers must bring heavy industry’s climate refuseniks to heel

The Transition Pathway Initiative today publishes a report on the world’s 72 largest companies in the cement, paper, aluminium and steel sectors. Their progress towards climate targets has been miserably slow. Fund managers must use their voting power to force change, says James Moore

Notable backsliders in the battle to cut emissions include the aluminium and steel sectors, where there is no improvement to report (AFP/Getty)

Businesses are terribly keen to tell us that they take the climate crisis seriously.

If you take a look at what they’re actually doing it is, however, easy to be cynical.

Take supermarkets. A number of them of have announced plans to go “carbon neutral” over the next decade or two with great fanfare. But they still come up with all sorts of excuses for why they can’t put energy-saving doors on their fridges and freezers, something that their peers in France routinely do.

That said, despite their destructive addiction to mountains of plastic, they’re positively paragons of virtue compared to the heavy emitters of heavy industry.

The Transition Pathway Initiative (TPI) assesses companies’ preparedness for transitioning for a low-carbon economy with the support of investors overseeing more than $18 trillion of combined assets.

This morning it has released research into the world’s 72 largest companies in the cement, paper, aluminium, and steel sectors, which was carried out for it by the London School of Economics.

It does not make for happy reading. Only 14, less than a fifth, have in place emissions reduction plans comparable with limiting climate change to two degrees celsius.

The TPI has seen some, shall we say, modest progress since the last assessment in 2018. For example, the number of cement companies aligned with the Paris pledges has grown from two to five.

The proportion of companies disclosing their emissions has also increased, from 61 per cent to 76 per cent. A welcome development is that much of the improvement in this sphere comes from companies listed in Asia, especially China, and Russia.

Overall, 29 per cent of the companies covered are set to align their emissions with the Paris pledges by 2030, up from 24 per cent last time around.

But you can file these developments under the heading “crumbs of comfort” rather than a healthy menu to put before the world’s younger generations, who will have to live with the unpleasant consequences of a rapidly heating world.

The TPI, established as a joint initiative between the Church of England National Investing Bodies and the Environment Agency Pension Fund, concludes that the “overall pace of change in the industrial sector is far too slow for international climate goals to be achievable”.

Notable backsliders include the aluminium and steel sectors, where there is no improvement to report.

This will only change if change is forced upon these businesses by the managers of the $18 trillion, and other big investors who can call upon the TPI’s research for free, using their votes.

Some among them will. The Church of England is led by a former oil industry executive in the form of Archbishop of Canterbury Justin Welby but has become a surprisingly doughty campaigner on the subject of climate change. It has declared its ambition to be “at the forefront of institutional investors subject to legal fiduciary duties addressing the challenge of the transition of a low carbon economy”.

This involves a mixture of “intensive engagement” – for which read acting as a very necessary pain in the necks of carbon polluters – and divestment.

But more like that is needed, particularly from the world’s giant asset managers, who have the power to vote on behalf of millions of small investors as well as pension funds and the like but don’t often do that.

The asset management industry’s favoured tactic of behind-the-scenes diplomacy, perhaps a quiet word in the ear with the chairman over a lunch with the board set up by the head of investor relations post-results, just won’t cut it anymore if the planet is to be preserved. Ditto its economy, not to mention the investment returns they are supposed to covet. The climate crisis will plunge a dagger into them if it isn’t addressed.