Investors set new carbon expectations for the steel industry

Aug 04, 2021
Investor groups plan a sector-specific approach to emissions reductions

A leading investor coalition focused on climate change has released new expectations for steel companies, part of a sector-specific strategy to lower carbon emissions and meet net zero goals.

The Institutional Investors Group on Climate Change (IIGCC), which has more than 300 European members managing around $44 tn in assets, says there is currently ‘little evidence’ of the actions needed to bring industry emissions in line with the net-zero roadmap set out by the International Energy Agency (IEA).

The new expectations call on companies to set short, medium and long-term decarbonization targets that align with IEA scenario planning, publish reports on the potential of ‘emerging technologies’ such as carbon capture, align capital expenditure with net-zero goals and explain their policies on areas like carbon pricing and R&D funding.

Emissions from the steel industry account for 9 percent of the global total, according to IIGCC. The group says Scope 1 emissions need to fall by 29 percent by 2030 and 91 percent by 2050 to meet the targets set by the IEA. ‘The sector is currently not on track to meet these targets by some margin,’ it says.

The IIGCC notes there is support for shifting towards a low-carbon future within the sector, with the five largest steel producers having set net-zero pledges. European and Asian companies are currently leading the way, it notes, a fact which reflects national goals and regulation in those regions.

The research is intended to support engagement between investors and companies via Climate Action 100+ (CA 100), an initiative that targets the world’s largest emissions producers.

In January, CA 100 released a progress report that says 43 percent of focus companies have now set ‘a clear ambition’ to achieve net-zero emissions by 2050, but ‘clear gaps’ remain in their plans, especially over Scope 3 emissions.

'Investors recognise that climate change is a financial risk to their portfolios, but also that the transition to net zero provides tremendous opportunity,' says Anne Simpson, managing investment director, board governance and sustainability at CalPERS, and chair of the CA 100's steering committee, in a statement.

'It is our fiduciary duty to address that risk and opportunity. This means bringing down demand for carbon intensive energy across sectors, including steel, so that we track emissions across the full value chain of the global economy.'

CA 100 is developing strategies for a number of ‘key’ sectors and plans to release more targeted engagement advice in the coming months. The report on the steel industry follows the publication of a strategy for the aviation sector in January.

In a separate initiative, sustainable non-profit Ceres published an analysis of the Scope 3 emissions of 50 food and agriculture companies last week and called for more engagement over their carbon reduction plans.

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