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Investors with more than $26tn under management have pledged to push 100 of the highest-emitting companies worldwide to do more to tackle the threat of climate change.
About 225 institutions, led by funds including HSBC Global Asset Management and Calpers, the California state employees’ pension system, have joined the Climate Action 100+ initiative, intended to co-ordinate pressure on companies to cut greenhouse gas emissions, and improve disclosure and oversight of climate-related risks.
The companies being targeted include fossil fuel producers such as ExxonMobil, Royal Dutch Shell and Coal India, but also groups linked to greenhouse gas emissions when their products are made or used, including Toyota, United Technologies and Korea Electric Power.
Together, the 100 companies are linked to about two-thirds of all emissions from industry worldwide, according to CDP, the charity that runs a system for businesses to report their environmental impacts.
The funds involved, which also include Pimco, Amundi and Legal & General Asset Management, control significant proportions of the shares in the 100 high-emitting companies. At Exxon, they are likely to control about 25 per cent of the shares, according to Anne Simpson, investment director for sustainability at Calpers. The initiative is expected to bring in more large investors over the coming months.
Stephanie Maier, director of responsible investment at HSBC Global Asset Management, said investors had a fiduciary duty to work with companies to achieve better outcomes as the world moved to cut emissions from fossil fuels.
“We’re trying to ensure that the transition is one that benefits the company and its investors,” she said.
Regional organisations including the Institutional Investors’ Group on Climate Change in Europe and Ceres in North America will be monitoring the progress of the initiative, and have written to the companies to tell them to expect increased engagement from shareholders.
In recent years, investors in Europe and the US have been stepping up their efforts to persuade companies to address climate risks, both by submitting resolutions for shareholder meetings and by talking to boards behind the scenes.
They have had some high-profile successes: on Monday Exxon said it would start disclosing more about possible impacts of climate policies, including a worldwide move to limit the rise in global temperatures to 2C. But the investors joining the initiative are seeking better co-ordination of their efforts and more comprehensive global reach to bring in emerging economies, including China and India.
They are also urging companies to adopt the voluntary standards for reporting on climate risks that were recommended in June by the Task Force on Climate-related Financial Disclosures, chaired by Michael Bloomberg, the media billionaire.
Ms Simpson said engagement with boards was particularly important for index-following funds that were unable simply to sell shares in companies that were making rash decisions with climate risk.
“You’re tied to the railroad tracks with this threat hurtling towards you,” she said. “There is nowhere for Calpers to hide.”