Schroders, Pictet Among Investors Calling for Transition Plans

The group wants companies to clearly lay out how they intend to decarbonize their operations and how their capital expenditures will be used to support such efforts.

(Bloomberg) — A coalition of investors, including Pictet Group and Schroders Plc, are calling on companies from Ferrari NV to Tesco Plc to move beyond simply setting long-term net-zero commitments to detailing how they plan to deliver on their pledges.Those asset managers, along with Legal & General Investment Management and BNP Paribas Asset Management, are among 93 investors that wrote to 107 companies asking them to develop so-called transition programs. They want the companies to show how they intend to decarbonize. The plans must include short- and medium-term emissions-reductions goals and provide details about how their capital expenditures will be used to support such efforts.After several years of engaging with portfolio companies on climate issues, a growing number of investors are pushing for greater specificity on how targets for reaching carbon neutrality by 2050 will impact companies’ finances and operations. And momentum is building behind so-called transition plans with the UK government, the Glasgow Financial Alliance for Net Zero and major banks throwing their weight behind the idea.

The latest campaign, coordinated by the Institutional Investors Group on Climate Change, is intended to extend investor pressure to a wider group of companies. IIGCC helps oversee the Climate Action 100+ campaign, which focuses on the biggest corporate emitters, including big oil companies and miners, and its newest initiative on transition planning covers companies that can be considered the next tier down in terms of emissions.

It’s the “inevitable rolldown to a broader universe” of companies, said Adam Matthews, chief responsible investment officer of the Church of England Pensions Board and co-chair of the IIGCC corporate program, in an interview. And corporates should see it as a “constructive thing” that will make them more resilient in a world where investors and regulators are demanding climate action, he said.“It’s a way for companies to tell their story and build investor confidence in their ability to manage a complex transition,” said Matthews. “It also draws out elements of the strategy where support is needed.”In creating a transition plan, companies can get a clearer picture of where they will need financial support to deliver decarbonization and that’s where investors can help, Matthews said.

Other companies to receive the letter requesting transition plans include BAE Systems Plc, Deutsche Lufthansa AG and LVMH Moet Hennessy Louis Vuitton SE. Meanwhile, other investor signatories are Allianz Global Investors, Fidelity International and M&G Investments 

“We believe how a company responds to the challenges of climate change could ultimately in the future be key to its bottom line,” said Carol Storey, climate engagement lead at London-based Schroders.

At the United Nations climate summit in Sharm El-Sheikh, Egypt, late last year, HSBC Holdings Plc Chief Executive Officer Noel Quinn called for corporate transition plans that have a “science-based underpinning.” Companies should be forced to “make clear how they’re going to change their capital investment,” what that means for individual sectors, and how progress might be measured, he said.

(Adds recent comments from HSBC’s CEOin final paragraph.)

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