Huge investor coalition demands chemical companies set credible strategy to align with 1.5°C

by | Mar 23, 2023

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Investors controlling over $4 US trillion issue statement to Europe’s chemical company giants urging action on greenhouse gas emissions

 A multi-trillion-dollar coalition of investors co-ordinated by responsible investment NGO ShareAction has today issued a joint statement targeting the 13 biggest chemical companies in Europe, insisting that they set a path to transition away from their reliance on fossil fuels in order to live up to the climate policies many have publicly committed to.

The 15 investors, with over $4.07 US trillion of assets under management, directed the statement towards companies covered by ShareAction’s chemicals campaign, including BASF and EMS Chemie Holdings, among others. While not household names, these companies make many of the products that are essential for modern living, including paint, clothes and smart phones.

The investors, including Legal and General Investment Management, KBI Global Investors, Amundi and EFG Asset Management, agreed that there are clear steps these companies can take to decarbonise their operations. They set out a list of requests and asks that those companies in the sector, which currently accounts for more than six per cent of greenhouse gas emissions, must meet, noting that a net-zero future is the only way to protect people and planet for future generations.

Penny Fowler, Head of Corporate Climate Campaigns, said: “With a globally significant carbon footprint, the chemicals industry’s huge reliance on fossil fuels is often overlooked as a major contributor to global warming.

“It is time Europe’s chemicals industry turned high-level commitments into practical deeds and set out a clear path of how they will transition and transform the industry from reliance on climate damaging fossil fuels to cleaner and greener energy sources.

“The case for decarbonising the chemicals industry is economic as well as moral. The soaring cost of gas is showing how dependent this industry is on fossil fuels. As the world pivots towards a greener future the risks of this business model are clear, and they will only keep growing. The evidence is there: green chemicals are essential for long-term profits, people and planet.”

The statement notes that time is seriously running out to make sure the earth’s temperature stays within safe boundaries. Citing research by Carbon Brief, investors warn that any hope of staying within 1.5C of warming could vanish within six years if the world sticks to current rates of carbon consumption.

The chemicals industry has historically not had the same level of attention and scrutiny over its fossil fuel use as some other major sectors, such as travel or agriculture. Investors are increasingly recognising the risk that is posed by the industry, which is underprepared for a 1.5C-aligned transition.

The good news is that chemicals companies still have time to set out robust decarbonisation plans over the short, medium and long term, the investors said. They asked for this plan to include a drive to electrify chemical production processes and switch to renewable energy sources.

The statement also recommends that companies change the make-up of their feedstocks (raw materials used in chemical production processes) so that they are made of emissions-neutral materials, instead of fossil fuels. There are other, targeted asks: eliminating woody biomass as an energy source, and aligning CapEx, the term for ‘capital expenditure’ which means the money these companies spend on their plants and processes, with 1.5C pathways.

Chemicals companies have made significant strides in certain areas, partly thanks to ShareAction’s campaigning and investors’ engagement. In December last year, LyondellBasell introduced a target to reduce scope 3 emissions by 2030, which is key for addressing all of the emissions chemical companies create indirectly. The announcement followed sustained pressure from ShareAction and CA100+, including with the publication of November’s benchmarking report analysing the chemicals company and more than a year of investor engagement convened by the charity.

Vincent Kaufmann, CEO, Ethos Foundation, said: “Europe’s chemical companies need to know that action on decarbonisation isn’t optional. The progress we have seen over the past 18 months, with some companies setting increasingly ambitious targets and transition plans, indicates that sustained investor engagement is important and effective. Investors will continue to engage these companies to set credible 1.5°C-aligned strategies. This is the only way to ensure long-term profitability and competitiveness, as well as a liveable planet for the future.”

Claire Berthier, CEO, Trusteam Finance, told us: “It’s becoming increasingly technically feasible and financially viable for chemical production to become emissions-neutral, especially with customers looking for solutions, but the chemicals industry is still slow to act. The long life of industrial assets means the sector is now just one investment cycle away from 2050. For the industry to align with a 1.5°C world, companies in the sector must make critical decisions now. Time is starting to run out.”

 

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