$18 trillion investor group calls out industry giants on climate

New research reveals just one-fifth of cement, aluminium, steel and paper firms are in line with Paris climate goals.

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    Steel workers at ThyssenKrupp are pictured next to the rolling mills of the company's factory in Duisburg, Germany [Wolfgang Rattay/Reuters]
    Steel workers at ThyssenKrupp are pictured next to the rolling mills of the company's factory in Duisburg, Germany [Wolfgang Rattay/Reuters]

    Research published on Monday shows high-emitting industries are making slow progress towards keeping global warming below two degrees Celsius.

    A report from the United Kingdom-based Transition Pathway Initiative (TPI) examining the steel, aluminium, cement and paper sectors found that only 19 percent of the largest, listed firms are aligned with 2015 Paris climate agreement pledges.

    But in a sign of some improvement, 29 percent of companies in these heavy-emitting industries are set to line up their emissions targets with national commitments under the Paris Agreement by 2030, up from 24 percent two years ago.

    Representing investors with $18 trillion under management, TPI analysed both the carbon performance and management quality of 72 companies across the four subsectors that represent the bulk of direct industrial carbon dioxide emissions.

    The study was conducted at the London School of Economics by the Grantham Research Institute on Climate Change and the Environment.

    'Very poorest performers'

    Edward Mason, the head of responsible investment at the Church Commissioners for England, supports TPI and uses its findings to influence financial markets.

    Mason told Al Jazeera that "the sectors covered are some of the hardest to decarbonise".

    He described the "depressing" reality of many companies "not even beginning to grapple with climate change after all these years" and noted "that's what really concerns us".

    The Church Commissioners for England has "set the threshold that companies need to meet to stay in our investment portfolio" said Mason, who explained that his fund will jettison firms that do not comply during a round of divestments later this year. 

    Cement plant is seen by the Yangtze river near Fuling county in Chongqing
    In China, a higher percentage of companies are now disclosing their emissions, even in the high-emitting cement sector [David Stanway/Reuters]

    "We will be looking at the companies with the lowest TPI ratings," said Mason. "Our trustees will be evaluating which ones should go on our list of exclusions."

    Mason hopes that companies in divestment danger improve, and he suggested the TPI report could encourage corporations to respond more quickly to what their stakeholders are demanding for climate disclosures.

    "They can improve things in their annual reports for 2019," he added. "This is really the last chance for the very poorest performers."

    The Church Commissioners for England also belongs to the United Nations-convened Net-Zero Asset Owner Alliance, an international group of investors with over $4 trillion that is working towards carbon neutrality by 2050.

    'Abdication of corporate risk'

    Faith Ward, co-chair of TPI and chief responsible investment officer at Brunel Pension Partnership in the UK, said: "Industrial sectors like steel and cement face tough challenges to decouple emissions from production".

    "But make no mistake, these industries must transform themselves if they are to survive the low-carbon transition," Ward added. "Most industrial companies are significantly off-track on climate and that is an abdication of corporate risk management."

    Ward told Al Jazeera that she hoped the new findings would "put pressure on [asset managers] to create, innovate and get better".

    The TPI report also found that the share of industrial firms that disclose their emissions has increased from 61 percent in 2018 to 76 percent - largely driven by greater participation by firms in China and Russia.

    More companies are setting long-range reduction targets, particularly in the cement and paper sectors.

    In the steel industry, says TPI, companies have increased climate management quality - the way they assess and address financial risks and opportunities arising from the low-carbon transition. But when it comes to carbon performance - bringing down their bottom-line emissions numbers - there is much work to be done.   

    "Responding to the climate emergency is an urgent priority for us as long-term investors," said Craig Martin, chief pensions officer at the Environment Agency Pension Fund.

    "The latest [TPI] research shows that within the industrial sector there are clear winners and losers emerging on climate, which will guide our investment decisions and engagements in the years to come," Martin added.

    Steel and cement sectors

    Cement and steel are by far the biggest industrial subsectors that contribute to carbon emissions.

    Of steel companies, ArcelorMittal, Posco and ThyssenKrupp were among those given the highest rating for climate management quality, meaning that their strategic assessments and operational decision-making have integrated full awareness and capacity to face the crisis.

    But in terms of performance, Tenaris and SSAB are leading the pack, while Nippon Steel Corp and Tata Steel are among the worst performers.

    TPI report steel companies
    Carbon performance by steel makers is shown with companies colour-coded according to alignment with Paris goals and scaled by market capitalisation [TPI]

    For aluminium firms, Alcoa Corp and Rio Tinto are among the best for climate management quality level, but Norsk Hydro is the only one with good carbon performance.

    TPI says that cement firms are below average in climate management quality, but at least all cement companies have acknowledged that climate change is a business issue.

    Ambuja Cements, Asia Cement Corp, Boral Limited, LafargeHolcim Ltd and Shree Cement received the top mark for management quality, whereas China National Building Material and Taiwan Cement Corp were among those with the lowest level-one rating.

    With carbon performance, cement producers have watched their grades rise over the last year as companies have upped their ambition and disclosure. Alignment with Paris benchmarks rose from 10 percent to 23 percent in this subsector.

    TPI report cement companies
    Of cement producers, Cemex and UltraTech Cement are among those not aligned with Paris goals, while Martin Marietta Materials and Fletcher Building have failed to disclose [TPI]

    Paper companies largely perform poorly on management quality, and less than 40 percent of paper producers even have their operational emissions verified.

    But with carbon performance, paper companies have fared better: more than half the firms are aligned with Paris pledges for 2030. Suzano, Stora Enso and DS Smith are among the top-rated.

    Chemical companies were rated on management quality but not carbon performance. Only 19 percent of them undertake any sort of climate scenario planning.

    The largest chemical firm by market capitalisation, DowDuPont, rated only a level one, whereas BASF Corp and Ecolab were among those to receive top marks.

    SOURCE: Al Jazeera News


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