Climate transition requires significant and rapid action. Governments need to introduce clear policies, consumers and the public at large need to change their patterns of consumption and behaviour, and many companies need to adapt their business models. It is important for long-term investors such as the AP Funds that the companies they have a stake in manage climate risks responsibly. The transition is system-critical and the Council on Ethics is working to ensure that actors in emission-intensive industries work together on developing action plans to enable the transition to take place.
Background
In many emission-intensive sectors, the transition to a low-fossil society may be highly complex and costly. It demands a lot of individual companies to develop action plans for how best to manage the transition, as they are also dependent on the decisions and activities of other actors. In many cases, innovation and still-in-development technology are required. There is a major need for investors, companies, companies’ suppliers and customers, as well as other actors in the sector, to work together to identify and prioritise technologies, activities and measures if an entire sector is to succeed in the transition.
Objectives for the project
The objective of the Global Sector Strategies project, which is being conducted via the global investor collaboration Climate Action 100+, is for companies, investors, policymakers and other actors to work together on developing practical plans for transitioning to a low-fossil fuel society, and then to follow up implementation. The project is also producing and publishing expectations documents for emission-intensive sectors.
The project aims to bring together different actors in a sector’s value chain in order to develop joint action plans. Through coordinated interaction, investors are helping companies to increase the pace and scale of transition in their particular sector. The focus is on emission-intensive sectors such as energy and power, heavy transport, steel, cement, food, automotive, mining, chemicals and marine and air transport.
Outcome 2023
To accelerate the climate transition in particularly vulnerable sectors, Global Sector Strategies supports companies and their value chains in ensuring that they develop viable transition plans together. The work is performed by investors with in-depth industry knowledge in the sectors concerned, and in collaboration with other investors, experts and companies.
Efforts continued in 2023 to develop work on existing and new expectations documents. The following expectations documents have been published:
- Recommended investor expectations for net zero aviation
- Recommended investor expectations for food and beverage
- Investor interventions to accelerate net zero steel
- Investor interventions to accelerate net zero electric utilities
- Investor Expectations for Diversified Mining
The Council has closely monitored developments in order to identify where in CA 100+’s sectoral work the Council should focus its efforts. Individual AP funds also participate in CA 100+ on an ongoing basis.
Next steps
Work on both the development of additional expectations documents and activities linked to sectors identified is expected to continue during the coming year.
About Climate Action 100+
The pace of climate transition is too slow, and to counteract the negative impact of the climate transition, we need robust and rapid action. Governments must pursue policies that promote a just transition, individuals must change their patterns of consumption and behaviour, and companies must manage climate risks responsibly. Climate Action 100+ (CA 100+) was launched in 2017 and has grown into the largest investor engagement initiative on climate change. CA 100+ involves around 700 investors, who together have more than USD 68 trillion in assets under management. All AP Funds are participating in CA 100+.
The CA 100+ investor group collaboration is coordinating efforts to exert influence on the biggest listed companies that are sources of greenhouse gas emissions to reduce their emissions and transform their operations. The investor group is engaged in a variety of initiatives aimed at inducing listed companies to improve governance of their operations, reduce emissions and publish more transparent data and reporting on their efforts to do so. CA 100+ focuses on 170 companies that are considered to have a key role to play in the transition to a net zero greenhouse gas economy.
Commitments to net zero emissions
In 2017, only five companies had committed to reduce their greenhouse gas emissions to net zero. By 2022, the Council’s screening activities showed that 75 per cent of CA 100+ companies had committed to net zero emissions by 2050 or earlier. However, commitments to net zero emissions have not yet been matched by the development and implementation of credible corporate strategies to reduce greenhouse gas emissions. While external factors, such as the ongoing energy crisis, are raising the pressure for transition, companies must vigorously prioritise the development and implementation of credible corporate strategies to reduce greenhouse gas emissions. This would include, for example, companies setting short- and medium-term emission reduction targets, including all material emissions, including Scope 3 emissions, and aligning investment strategies with their greenhouse gas emission targets. The Council notes that progress continues to be made on commitments by companies to net zero greenhouse gas emissions. For many companies, however, implementation is slow. The need for development and implementation of fit-for-purpose policies and investment plans to reduce greenhouse gas emissions is urgent.
Through CA 100+, the Council has access to experts in the field, help with coordination of company dialogues and analysis of the companies’ work related to the expectations expressed. CA 100+ experts also participate in individual company dialogues.
Read more about Climate Action 100+ here.