Investors should push corporates to adopt science-based targets to help drive “sustainable corporate action”.
The setting of targets based on scientific data is enabling companies to better deliver on their climate action pledges, according to Science Based Targets Initiative (SBTi) research. The organisation’s 2020 progress report says firms which have set science-based targets have reduced their combined large-scale emissions by 25% since 2015, equivalent of 302 million tonnes of CO2.
SBTi’s analysis of 338 firms with science-based targets in place showed that, on average, each company is reducing its annual emissions at a linear annual rate of 6.4%. This exceeds the 4.2% rate needed to restrict global warming to 1.5°C, and is also “set to generate US$25.9 billion of new investment into climate mitigation initiatives in the next decade”, the report noted.
Last year, 16 OECD countries reported 20% of their “high-emitting companies setting science-based targets”, although corporates based in North America and Asia are lagging behind, with 16% and 12% implementing science-based targets respectively.
Over 1,000 companies, making up 20% of global market capitalisation, have now set, or committed to set, a science-based target.
Emily Kreps, Global Director of Capital Markets at CDP and a partner of SBTi, emphasised the importance of investors continuing to push investee companies to adopt science-based targets to help drive emissions reductions.
“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,” Kreps told ESG Investor.
The investment industry is increasingly calling for science to inform ESG-data, to help investors assess risks and opportunities of current and future investments. This demand has been seen with the EU Taxonomy delegated acts, where corporates and the investment industry called for the delegated acts to be “rooted in climate and environmental science”.
“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,” Kreps added.
The Net Zero Asset Owner Alliance has recently announced its intentions to establish a Scientific Advisory Body. This is to ensure their net-zero by 2050 pledges are achieved by adhering to science-led advice and data.
“It is encouraging that, even in the midst of a global pandemic, corporate climate action soared in 2020. In many sectors and regions, we have reached a ‘critical mass’ of companies making meaningful commitments to reduce emissions, but this needs to be a global and sector-wide effort, supported by ambitious government policy, to truly build back better,” said Lila Karbassi, Chief of Programmes at the United Nations Global Compact.
The corporates analysed by SBTi that have science-based targets include Mastercard, Tesco and Enel.