Global investors worth $60 trillion push utilities to decarbonize by 2035
Some of the biggest shareholders in the world’s largest energy companies are finally trying to hold their investments accountable for climate inaction.
The bet from the 615 investment firms that make up the Institutional Investors Group on Climate Change is that they can finally force these companies to make plans to end fossil fuel use.
The group, which manages roughly $60 trillion of the world’s wealth is pushing for utilities to finalize and accelerate net-zero plans in order to remain on a pathway to keep the world’s warming within a 1.5 degree Celsius band.
Responsible for about 40% of the world’s emissions, the global power and electricity sector is responsible for more emissions than any other industry, and other businesses depend on the decarbonization of electricity to meet their own plans.
As power demand increases, with the group estimating that electricity needs will soar by 166% in the next thirty years, rapid acceleration of decarbonization plans is the only option.
Right now there’s only one energy company (Ørsted) among the 68 that are publicly traded that has a plan which aligns with the pathway to maintain that 1.5 degree warming point established by the International Energy Agency.
As the investment group noted in a statement yesterday, “more companies need to set zero targets and existing targets need to be brought forward by 10–15 years.”
More than just a demand to take action, the report outlines the expectations that investors have for the companies that they’re financing.
These include:
A 2035 deadline for companies in advanced economies and a 2040 deadline for the power emerging economic operators.
Producing clear decarbonization strategies that reduce the use of carbon capture, utilization, and storage, and avoids the use of ofssets to reduce emissions generation to net zero.
An immediate halt to coal investments and a net zero target forcusing on natural gas generation.
“Electric utility companies need to lead the transition to net zero, with much of the technology and tools required to reach this available earlier than in other sectors. But we’re not seeing ambitious enough targets from companies to get there and the sector is urgently running out of time. The report’s actions will help inform investor engagement with companies, clearly and definitively outlining what business alignment with net zero transition goals looks like”, said Stephanie Pfeifer, IIGCC’s Chief Executive and current Climate Action 100+ Steering Committee Vice-Chair.
Basically investors need to triple their financing for renewable energy technologies, Pfeifer noted. And the companies in investors’ portfolio are nowhere close to hitting that target.
“This report highlights that overcoming barriers to achieve this level of investment is possible and provides clear actions for companies and investors to accelerate a rapid and just transition in the power sector,” Pfeifer said.
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