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Oct 10, 2023

Firms’ climate failings may lead to alienation of financial institutions

Tracker finds climate issues the main reason for companies being blacklisted

New research compiled by a network of non-governmental organizations (NGOs) finds that there have been 4,842 companies blacklisted by 87 financial portfolios in 16 countries due to climate and social failings.

Of all the excluded companies placed on a global tracker, the top cause for omission by financial institutions is climate-related issues, with 40 percent of firms finding themselves on the list for this reason. A further 17 percent of companies are excluded for being in the controversial weapons industry.

‘Public exclusion is a very important way for investors to exercise influence when companies do not listen to their sustainability demands,’ says Jakob König, leader of NGO Fair Finance Sweden, which helped put the tracker together. ‘This tool helps to amplify investor positions and increases the pressure on companies to act.’

Engagement is crucial

Those in the tobacco industry account for 12 percent of portfolio exclusions while 7 percent of companies are excluded for human rights problems.

Kees Kodde, project lead at Fair Finance International, another NGO involved in the creation of the tracker, adds that extra due diligence is required for companies that appear in this database. ‘Engagement by banks and investors is an important tool, but the line should be drawn at expansion of fossil fuels, this should be a clear no go for banks and investors,’ he says.

Banks and other investors are well advised to carefully consult on the tracker as part of their overall due diligence procedures, adds Johan Frijns, executive director of the international tracking, campaigning and civil society support organization, BankTrack. ‘Exclusions by other institutions have brought to light unacceptable aspects of those companies’ performance,’ he says.