Finance & Investment Circular Economy Organizational Governance

Investors Worth $29T Urge 1,600 Companies to Set Science-Based Targets

220 global financiers holding $29.3 trillion in assets call on world’s highest-impact companies to set science-based emissions-reduction targets ahead of COP26; they are joined this year by 26 CDP supply chain member companies.

Published 3 years ago | About a 4 minute read

Image: Tom Fisk/Pexels

Financial institutions holding $29.3 trillion in assets are calling on the world’s most impactful businesses to set science-based emissions-reduction targets through the Science Based Targets initiative (SBTi) in line with 1.5°C warming scenarios, ahead of COP26 in November.

The 2021 CDP Science-Based Targets campaign, coordinated by CDP, is signed by 220 financial institutions across 26 countries, whose collective assets are worth more than the GDP of the United States, China or the entire EU. It represents significant growth in support by 60 percent on last year, with an increase of 51 percent in assets behind the call to action.

The group includes some of the world’s biggest investors and lenders — Allianz, Amundi, Cathay Financial Holding Co, Credit Agricole, DWS Group, Legal & General Investment Management, Insight Investment Management, and Manulife Investment Management.

Joining the financial institutions in asking for SBTs this year are 26 CDP supply chain members — large corporate buyers using CDP to optimize their supply chains – including L’Oréal, Renault Group, Bayer, AstraZeneca and HP Inc, with $500 billion in annual procurement.

They are pressing 1,600 companies to set emissions-reduction targets with SBTi to ensure that corporate ambition is independently verified against the de-facto industry standard for robust and credible climate targets. From July 2022, these must be aligned with a 1.5°C pathway to be approved.

“2021 has been a year when global financial institutions have committed en masse to achieve net zero by 2050. But these goals are impossible to achieve without the companies they lend to and invest in having robust science-based targets that drive rapid decarbonization in the entire value chain,” said Laurent Babikian, Joint Global Director Capital Markets at CDP. “It is that simple; and when so many investors and lenders are collectively saying the same thing, companies must act or risk seeing their cost of capital rise.

“Not having an SBT raises a red flag that they 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.”

CDP sent the letter to over 1,600 companies worldwide, including Anhui Conch Cement, China’s biggest cement manufacturer; Hyundai Motor Company, Duke Energy, Associated British Foods, Nippon Steel, Tata Steel, Lufthansa and Samsung.

The businesses targeted have a market capitalization of over $41 trillion, make up 36 percent of the entire MSCI World Index, and account for 11.9 gigatons of emissions (scope 1 and scope 2), equivalent to more than the annual total of the US and EU, combined. Over 20 percent of companies by global market capitalization are already part of the SBTi.

Last year’s CDP Science Based Targets campaign contributed to strong momentum of the number of companies joining the SBTi. 154 companies, with emissions approximately equivalent to Germany’s annual total and a market capitalization of $5.2 trillion, joined since this time last year. It represents 8.1 percent of the companies targeted in this campaign last year. 56 percent of companies asked by CDP reported that the campaign had a direct influence over their decision, while 96 percent reported that general investor pressure led to them setting a target.

Globally, over 1775 companies are already part of the SBTi, among which over 550 have approved targets in line with 1.5°C. Analysis has shown that the typical company with a target has cut emissions by 6.4 percent per year — well above the 4.2 percent linear reduction rate required to meet the Paris agreement’s 1.5°C goal.

“Money talks, and this call from global financiers is loud and clear. A decarbonized business model is the only sensible business choice for a climate-safe and prosperous economy,” says SBTi Managing Director and co-founder Alberto Carrillo Pineda. “The call for rapid decarbonization is clear, not only from the scientific community, but also, from the financial community. We are calling now on all companies to set science-based decarbonization targets and for financial institutions to build on the leadership shown in these campaign and to also set science-based climate targets for their investment and lending portfolios. This is essential if we are to halve emissions by 2030 and achieve net-zero before 2050 – and vital for the future of humankind.”

While companies can set science-based targets at any point throughout the year, CDP will be engaging these companies to join the SBTi before September 2022, when the impact of this campaign will be evaluated.