annual review indst 2024 public - Flipbook - Side 15
Annual Review 2024
Environmental
Investor scrutiny
of transition plans
heats up
As physical climate risks escalate, investor engagement on climate change is
increasingly vital to steward companies through the transition. Will Farrell and
Hannah Heuser explain how our engagement has continued to advance action
on climate risks and opportunities.
2024 was the first full year where average global
temperatures surpassed the 1.5°C mark, making it the
hottest year on record. While the El Niño phenomenon
contributed to high global temperatures in early 2024,
record temperatures persisted throughout the year.
Extreme weather events increased in scale and
frequency, with floods in Spain, hurricanes in the US,
and droughts in Brazil.
By 2050, damage caused by climate change is projected to cost
global economies up to US$3tn every year.1 As transition risks
and physical climate risks become more pronounced, investor
engagement on climate change is increasingly vital to steward
companies through the major transformation required. This is
in line with investor fiduciary duties to enhance the long-term
shareholder value of each company we engage.
Through its extended coverage, the Institutional Investors
Group on Climate Change (IIGCC)-initiated Net Zero
Engagement Initiative (NZEI), facilitates EOS in engaging
the ‘long tail’ of companies exposed to climate-related risks
and opportunities. The IIGCC banks engagement group
also allows for systematic engagement around how banks
are managing the systemic transition and physical climate
risks building on their balance sheets.2
The Climate Action 100+ (CA100+) initiative also supports
intensive engagement on companies’ decarbonisation
strategies, capital allocation alignment, climate governance, and
emissions performance. In October 2024, the CA100+ Net Zero
Benchmark (NZB) tracked further progress with 81% of the
largest corporate greenhouse gas emitters now having
committed to net zero by 2050 covering at least Scope 1 and 2
emissions. This is an increase of four percentage points on 2023.
1
2
Will Farrell
Theme co-lead: Climate Change
Hannah Heuser
Theme co-lead: Climate Change
Some 59% of companies assessed under the benchmark have
identified a set of actions they will take to achieve emissions
reductions in line with their targets, but only 26% have
quantified these individual levers. Similarly, 81% of the banks
captured by the Transition Pathway Initiative’s banking
assessment have set sector-level financed emissions targets,
with 77% of these banks identifying climate-related financial
risks as a material risk in annual reporting.
As transition risks and physical climate
risks become more pronounced,
investor engagement on climate change
is increasingly vital.
As many companies are moving from ambition to action,
investors generally want to see emissions being reduced in
line with targets, and capital allocated towards climate
solutions and away from unabated carbon-intensive assets
and products. Although only 3% of companies have made a
commitment to shift capex away from emissions-intensive
Climate change is costing the world $16 million per hour | World Economic Forum; The global costs of extreme weather that are attributable to climate change |
Nature Communications.
Any collaboration is done in line with applicable rules on antitrust, conflicts of interest and acting in concert. Indeed, each party will exercise unilateral decisionmaking principles in deciding how to act while engaging in any collaboration.
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