Why are investment funds targetting companies unable to meet climate goals?
Written by Kunal Sawhney, CEO, Kalkine Media
As natural disasters are increasing impact of climate change can be felt across the world. Businesses are asked to do their parts to reduce greenhouse emissions by following more green initiatives and focusing on their sustainability efforts as much of the Carbon emission comes from business-driven economic activities either directly or indirectly. However, Customers and investors are becoming more environmentally conscious and are willing to switch to more eco-friendly brands.
Investors target companies failing to tackle climate changes
The major UK investment fund, including Aviva and BlackRock investors, has recently said that they will hold accountable to directors and will vote to get them kicked out of the company if they fail on climate goals. Aviva Investors has set out its expectations in a letter that will be sent to 1,500 companies across 30 countries this week and want companies to clearly set up climate strategies and transition plans for both short and medium-term to adopt a net-zero emission target by 2050 and commit to the Science-based Target initiative (SBTi). The fund further added that it has broadened its definition of sustainability and will now focus on human rights and biodiversity issues along with climate change and executive pay that need to be linked to sustainability goals.
Similarly, the UK’s largest private pension fund has announced to move £5 billion of its investment in equities to a climate transition index developed by Solactive to avoid the worst polluters and to reduce carbon emissions related with the shareholdings by 30%. The initial 30% fall in emissions will ensure that the carbon emission falls by 7% each year.
Why it is now important to tackle Climate change
Various researchers and scientists have warned that immediate action is needed to avoid the environmental disaster caused by global warming emissions. Boris government has pledged to cut emissions by 78% by 2035 compared to 1990 levels to keep temperature 1.5C.
Temperature around the world is still recorded higher than pre-industrial levels of 1.1-1.2C, and emissions are continuously increasing to maintain the temperature at 1.5°C so that the global emissions can be reduced by 7% a year for this decade. Cutting greenhouse emissions can help the world in preventing 0.6°C of warming by 2050 and achieving the 2°C targets set by the Paris Agreement.
Reducing Carbon emissions offer significant benefits such as protecting vital ecosystems and ecosystem services, improving food security, reducing the risk of dangerous and irreversible climate tipping points, preventing millions of premature deaths annually, and making significant contributions to achieving the 2030 Agenda for Sustainable Development.
Why should businesses be more environment-conscious?
Over the last few years, customers have become more environmentally conscious and are demanding businesses to produce more eco-friendly products and services. So, more businesses are aiming to reduce their carbon footprint to satisfy their customers and more dedicated community of their customers who are concerned about the company’s mission. This not only sets the business apart from competitors but attracts new customers. Also, employees are also choosing to work with a company that is actively working on their Net Zero goals.
A sustainable business can help mitigate climate change on a local and global scale, reduce pollution and deliver a more sustainable future. Businesses can also reduce their costs by avoiding, reducing, reusing, and recycling.
