2020 had been a “real watershed moment in terms of companies committing to net zero”, as noted by Rebecca Myatt, a portfolio manager in First Sentier’s global listed infrastructure division.
A number of superannuation funds and investment managers such as IFM Investors, Aware Super and UBS also joined the trend, taking the oath for carbon neutrality last year.
It is an ambitious commitment that will last beyond the current executive management team, Ms Myatt said, with some plans for the later 2030s and 2040s decades being predicated on technology that is either not yet cost-effective or available.
“I think what’s really important is to take that ambition and to turn it into short or medium-term targets so that we can visibly see how a company is looking at achieving that,” the portfolio manager told a media briefing on Tuesday.
“And I think it’s even more powerful when some of those short-term targets get put into remuneration structures because then, it means that people are more focused on it because they’re incentivised in that way.”
A number of energy providers have also made the commitment, including coal and natural gas generator Southern Company and oil and gas giant BP. But others such as renewable provider NextEra Energy Resources, one of the largest onshore wind developers in the US, have held back on making the same pledge.
The company has signalled it is unsure of which technologies will come to the fore and that it is uncomfortable in making the net-zero commitment, Ms Myatt said.
“Now that doesn’t mean as investors, we should just stand back and say ‘okay’. I think there’s lots of things they can do around scenario analysis, around communicating to the market, how they think about net zero,” she added.
“But I think what is meaningful is one, longer term ambitions, but two, shorter term targets that we can really hold companies accountable to.
“And as active investors that’s part of our job, is to hold the current management teams accountable to these targets that they’re setting.”
The COVID-19 crisis has made responsible investing increasingly pertinent, First Sentier stated in a new report, with both investors and companies to face greater scrutiny over their environmental, social and governance credentials.
There were three key issues for the fund manager through 2020: climate change and biodiversity; human rights and modern slavery and workplace diversity, health and wellbeing.
The economic crisis had thrown millions of people into poverty and unemployment, increasing risks for modern slavery.
Kate Turner, responsible investment specialist at First Sentier commented: “Another issue is that some factories and warehouses face high demand and tight production times, making unsafe and unfair working conditions more likely.
“It’s something that should be on the minds of all investors when looking at supply chains.”
