This time around, it is not the oil and gas sector that finds itself on investors' radar. A coalition of asset managers representing $2 trillion in assets under management has decided to challenge the cement industry about their greenhouse gas emissions. And it is no coincidence that they have chosen to target this industry, which is the second largest emitter of greenhouse gases.
Cement, which accounts for only 7 to 20 percent of the concrete industry, is responsible for 95% of the building material’s carbon footprint. According to the International Energy Agency (IEA), the cement industry is responsible for 7% of man-made CO2 emissions worldwide.
Four multinationals targeted by investors
Signatories to the letter, all members of Climate Action 100+ and the Institutional Investors Group on Climate Change (IIGCC), are asking cement companies to present a road map to achieving neutrality by 2050. Four multinational companies involved in construction materials have been particularly targeted: Irish CRH, French-Swiss LafargeHolcim, German HeidelbergCement and the French Saint-Gobain.
The call to action is urgent for cement manufacturers. Strengthening regulations pose a significant risk to its business model. This is the case in Europe. A report by the IIGCC on investors' expectations for the construction sector, notes that the carbon market has long been favorable to cement companies. Considered a sector at risk of relocation, it has received more emissions permits than any other sector, allowing these companies to be sold to other manufacturers. But this hasn’t been enough to change things. Phase 4 of the European carbon trading system could upset this pattern starting in 2021.
An urgent need to act
“Major economies such as the UK and France are increasingly adopting economy-wide net zero emission targets,” said Stephanie Pfeifer, CEO of the IIGCC, "The cement sector needs to get ahead of the profound transformation their sector faces by addressing barriers to decarbonization in the short to medium-term if companies are to secure their future.''
Substitute materials for Clinker (raw cement material), new energy-efficient equipment, use of renewable energies, all these solutions already exist to reduce the carbon footprint of these manufacturers. It remains to be seen what solutions are actually implemented, and that is what the coalition wants to check.
In its document on investor expectations, the IIGCC requires companies to ensure good governance on climate risk, to set science-based short, medium and long-term targets for reducing emissions, and to be transparent about their climate-related lobbying activities and the impact of climate risk on their organization.
Arnaud Dumas @ADumas5