L’Oreal and Electrolux today (17 April) joined the likes of McDonald’s and Sony in aligning their emission goals with the 2°C target of the Paris Agreement on climate change.
103 global companies have now signed up to emission reduction goals in line with what climate scientists say is required to prevent dangerous global warming, said the Science Based Targets initiative (SBTi), a collaboration between CDP, the United Nations Global Compact, the World Resources Institute (WRI) and the World Wide Fund for Nature (WWF).
The 100+ companies’ combined emissions are equal to the annual CO2 emissions from 100 coal-fired power plants, representing US$3.4 trillion in market value, roughly equivalent to the London Stock Exchange, the SBTi said in a statement.
European companies form the majority of signatories, with 57 of them coming from the old continent.
“Science-based targets align our business strategy with the goals of the Paris Agreement,” said Uday Gupta, Managing Director at Mahindra Sanyo Special Steel, which today became the first Indian as well as the first steel company to join the SBTi.
“While we are responsible for playing our part in preventing dangerous climate change, we also future-proof our growth and profitability by taking climate action in collaboration with our partners in the value chain. Science-based targets provide us with a clear road map for such an action plan,” Gupta said.
The targets were officially validated by SBTi using a methodology developed in collaboration with the CDP, WRI and WWF, with support from consulting firm Ecofys. Companies can either use a sector-specific decarbonisation approach or absolute emissions reduction goals.
Emissions reductions are considered “science-based” if they are in line with the level of decarbonisation required to keep global temperature increase below 2°C compared to pre-industrial levels, as described by the United Nation’s Intergovernmental Panel on Climate Change (IPCC).
“Science-based targets are fast becoming the new normal for businesses looking to gain a competitive advantage in the transition to a low-carbon economy,” said Lila Karbassi, from the United Nations Global Compact. “Their action sends a strong signal to governments around the world that they can be confident in raising their own ambition,” she said in a statement.
In total, more than 370 companies have now joined the SBTi since its launch in mid-2015 in the run-up to the Paris climate conference.
The announcement by SBTi was echoed by an appeal from global investors with more than $1 trillion of assets under management, who called today on major companies to step up their climate action and protect their investments from the risks of global warming.
The investors in the group, called the Investor Decarbonisation Initiative, sent letters to the chief executives of 15 companies, urging them to reduce their emissions in line with the Paris Agreement, and to commit to cleaner energy like renewable electricity.
In the letters, investors say they want “to invest in environmentally and financially sustainable companies that are prepared for and contributing to the low-carbon economy.” The letters were sent to the CEOs of big brands like Netflix, The Walt Disney Company, and high carbon emitters from the power generation and cement sectors.
“Climate risk is now seen as a mainstream risk to financial stability by investors and regulators around the world,” said Isabelle Cabie from Candriam Investors Group, which manages £97 billion in assets. “It is crucial that this translates into pressure on the most high-carbon sectors who are critical in delivering the low-carbon transition,” she said.
EU action plan on green finance
Companies are coming under increasing pressure to disclose and manage climate-related risks following the 2015 Paris Agreement and the work of the Task Force on Climate-related Financial Disclosures (TCFD), set up under the G20.
At EU level, a high-level group on sustainable finance issued its final recommendations earlier this year, calling on the 28-country bloc to stop pouring public money into polluting fossil fuels and focus spending on clean energies instead.
The European Commission took a first step last month with an action plan on sustainable finance, aiming to clarify what can be labelled as “green” investment.