Asset management giant Amundi in February called on companies to commit to reducing their emissions in line with scientific targets under the Science Based Targets initiative (SBTi).
“Amundi will support resolutions calling for greater transparency on emissions reduction strategies, combined with specific targets,” the firm said in its 2021 engagement and voting policy. In addition, Amundi said it will engage with companies to ask them to commit to align with the Paris Agreement under the Science Based Targets framework.
The asset management giant is Europe’s largest and among the top 10 asset managers in the world when it comes to assets under management (AUM), managing EUR 1.7 trillion in assets.
The latest move highlights growing pressure from investors on companies over their emission-reduction plans, with a focus on short-term target setting. It follows recent calls from BlackRock, the world’s largest asset manager, for companies in carbon-intensive sectors to set rigorous short-, medium- and long-term targets. In a commentary paper, Blackrock pointed to the SBTi as a source of guidance and assurance processes for companies to set targets aligned with less than 2°C of warming and to track milestones.
An introduction to science-based targets
The SBTi is a partnership between the Carbon Disclosure Project (CDP), the United Nations Global Compact (UNGC), the World Resources Institute (WRI) and the World Wide Fund for Nature (WWF). Launched in 2015, the SBTi aims to increase corporate ambition on climate action by helping the private sector set science-based greenhouse gas (GHG) emission reduction targets.
Science-based targets are aligned with the latest climate science regarding what actions are needed to meet the goals of the Paris Agreement – to limit global warming to well below 2°C above pre-industrial levels and pursue efforts to limit warming to 1.5°C. The initiative aims to provide companies with clearly defined pathways to quickly reduce their emissions in line with the Paris Agreement.
To make this possible, all sectors, and especially the high-emitting ones, need to take action. As a part of its work, SBTi provides a wealth resources to support business on their journey towards the goals of the Paris Agreement, including technical assistance as well as sector-specific guidance, research and pathways.
The road to science-based targets
Companies from all sectors and of all sizes are encouraged to commit to science-based targets. There are 5 steps to setting science-based targets together with SBTi:
- Commit by sending a letter to SBTi, and you will be recognized as committed on the SBTi website. Once committed, you have 24 months to complete steps 2-4 below.
- Develop your targets in line with SBTi’s science-based criteria. SBTi provides extensive tools to assist in this process as well as sector-specific guidance and requirements for many sectors.
- Submit your targets for validation. The SBTi has a team of experts that validates companies’ targets against their science-based criteria to evaluate if they are truly science-based. They will then communicate their decision together with in-depth feedback.
- Announce your target and inform relevant stakeholders. The targets must be published within 6 months of approval or they will need to be revalidated.
- Disclose your progress. Companies should disclose emissions annually and monitor progress on reaching specified targets.
Over 1,200 companies working with the initiative
SBTi is gaining momentum, and there are currently over 1,200 companies working with the initiative to reduce their emissions to reach goals based on the latest climate science. As of October 2020, companies committed to the SBTi had a combined USD 20 trillion in market capitalisation and operational emissions amounting to 1.2 billion tonnes of CO2. These include ambitious companies in the highest-emitting sectors, such as cement, power generation and steel.
With just 10 years left to halve global emissions, science-based targets and the SBTi play an important role in driving businesses all over the world to set short-term targets and align their sustainability actions with the trajectories needed to limit global warming.
Businesses are critical players in the transition to a low carbon economy, and Amundi is showing how to use engagement to make a real impact. By calling for science-based targets, Amundi is both helping to limit the global temperature rise and future-proofing their investments.
What’s more, Amundi is not only pushing for science-based targets. The firm’s policy also states that it will vote for resolutions that strive to implement better reporting and transparency on companies’ climate-related strategies. Amundi also expects executive pay to be fully integrated with company-specific, material ESG objectives, regarding both long- and short-term incentive compensation. The firm also highlights that it will vote against management not making sufficient ESG efforts. This shows Amundi’s broad commitment to sustainability and a drive to make a real impact.
Jacob Michaelsen, Head of Nordea Sustainable Finance Advisory
oskar.hagman [at] nordea.com (Oskar Hagman), Nordea Sustainable Finance Advisory