Investors Issue Guide Rails for Steel’s Net Zero Future

CA100+ issues decarbonisation guidance for steel corporates; strategies for other carbon-intensive sectors to follow. 

As one of the world’s most carbon-intensive industries, steel is among the first sectors to be targeted by the Climate Action 100+ (CA100+) Global Sector Strategies workstream. The strategy, launched today, aims to coordinate sector-specific investor expectations on company transition plans, outlining interim actions and targets that will accelerate progress to net zero emissions.

All five sector-specific strategies are being developed by the investor networks supporting the CA100+ initiative: the Asia Investor Group on Climate Change (AIGCC), Investors Group of Climate Change (IGCC), Institutional Investors Group on Climate Change (IIGCC), Ceres and Principles for Responsible Investment (PRI). The IIGCC has issued guidance for the steel sector, following 12 months of multi-stakeholder dialogue with investors, consultants and steel companies engaged with the CA100+ platform.

The guidance recommends that steel companies commit to four requirements: set interim decarbonisation targets; produce reports by the end of 2022 that outline the company’s scope for deploying carbon capture and storage (CCS) or hydrogen-based technologies; align capital expenditure (capex) with the company’s net zero strategy; and specify which policy positions the company will adopt to accelerate its transition to net zero, e.g., the EU’s carbon border adjustment mechanism.

“We also need to see a number of cross-sector interventions, including enhancing material efficiency and improving recycling rates to improve the industry’s circularity. Investors need to see interim targets from companies and then detail on how they will deliver these in the short and mid-term, so they can accurately assess how prepared they are for the net zero transition,” said Stephanie Pfeifer, IIGCC CEO and CA100+ Steering Committee member.

So far, just nine steel companies, based across Europe and Asia and representing 20% of global steel production, have set net zero targets, the report noted. With the steel industry accounting for 9% of total global emissions, firms in the sector need to reduce net Scope 1 emissions by 29% by 2030 and 91% by 2050 to align with the International Energy Agency’s (IEA) 2050 roadmap scenario.

“The sector is currently not on track to meet these targets by some margin, with little evidence of the concerted actions needed to limit demand growth, and a lack of support for policies to decarbonise steel in the countries that currently dominate production,” the IIGCC said.

All Global Sector Strategies are building out from Indicator 5 of the CA100+ Net Zero Company Benchmark, which refers to the decarbonisation strategies of assessed companies. The benchmark defines 10 key indicators ranking a company’s degree of alignment with the Paris Agreement goals.

The performance of 159 global companies in relation to the benchmark was published in March, revealing that just 14 companies met the full benchmark criteria.

Sector-specific dialogue by CA100+ members has been facilitated through other organisations like the standards-setting Global Reporting Initiative and Sustainability Accounting Standards Board (SASB), wrote Adam Matthews, Co-chair of the Transition Pathway Initiative and Director of Ethics and Engagement for the Church of England Pensions Board, on LinkedIn. “[But] there is a very particular need for investors to understand what it means for a sector to transition, the technology needs, regulatory needs and ultimately the transition finance that will be required,” he said.

A pilot Global Sector Strategy was published by the PRI and CA100+ for the aviation sector in January. Following steel, the next series of sector strategies will cover electric utilities, trucks, diversified mining, and food and beverage.

Climate Action 100+ includes more than 615 investors with US$55 trillion in assets under management, making it one of the world’s largest investor engagement initiatives on climate change.

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