From Tesla to Rio Tinto: Investors call on thousands of businesses to set science-based targets

Tesla, Nest, TIU, Roche Holding AG and Rio Tinto are amongst the 1,800 companies that have been urged to set science-based targets by a group of investors and financial institutions representing more than $20trn in assets under management.

Coordinated through CDP, a new engagement programme has seen a group of 137 financial institutions reach out to some of the largest companies that are yet to commit to climate action in line with the 1.5C pathway of the Paris Agreement.

The investors have made the call to more than 1,800 of the most high-emitting companies in the world, including the likes of Tesla and Rio Tinto.

The businesses are accountable for 13.5 gigatons of emissions across scope 1 and 2 – equivalent to 25% of all global emissions. When taking value chain emissions from these firms into consideration, it is believed that the volume of emissions could be more than three times higher.

The companies also represent 40% of the MSCI ACWI Index, MSCI’s flagship global equity index. With investors keen to futureproof portfolios against climate risks, the likes of  AXA Group, Legal & General Investment Management, Nikko Asset Management Co and Generation Investment Management have all engaged with the 1,800+ organisations.

CDP’s global director of capital markets Emily Kreps said: “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.”

The investors will attempt to engage with the companies until May 2021, at which point the impact of the programme will be evaluated.

Need for change

CDP research notes that the mean damage costs of climate change will reach $5.4trn annually by 2070 and “spiral” to up to $31trn per year by 2200 if the global temperature rise hits 4.4C by the end of this century – which it will unless ‘business-as-usual’ is transformed.

As such, the organisation is imploring the uptake of 1.5C science-based targets that would assist with the net-zero transition. So far, more than 300 companies have set said targets through the Business Ambition for 1.5C campaign.

In fact, the Science Based Targets initiative (SBTi) last month issued its first guidance on what will ultimately lead to the development of a new global standard to ensure that corporate net-zero carbon targets are aligned with climate science.

The Foundations for Science-Based Net-Zero Target Setting in the Corporate Sector paper has been released by the SBTi, which consists of representatives from CDP, UN Global Compact, the World Resources Institute (WRI) and WWF. The paper was created following consultation with businesses, financial organisation, conservation organisations and the scientific community.

The paper is the first step in an effort to ensure that corporate net-zero targets are aligned to climate science and efforts to deliver a net-zero world by no later than 2050.

Matt Mace