Finance

Investors with $3tn target BASF in net zero push against big chemical firms

Investors overseeing more than $3tn in assets plan to increase engagement with some of the world’s biggest chemical companies over their climate change plans, as shareholders shift attention to an overlooked sector responsible for greenhouse gas emissions.

Asset managers including EdenTree Investment Management, NN Investment Partners and Sarasin & Partners, plan to target chemical firms such as BASF SE, Covestro AG and Croda International as part of an initiative to kick-start decarbonisation across the sector.

Responsible investment charity ShareAction, which has convened the investors, said the chemicals sector is responsible for more than 5.8% of global greenhouse gas emissions but has been “largely untouched by shareholder engagement”.

ShareAction points to CA100+, the world’s largest investor initiative on climate change, which lists just seven chemical companies in its list of 167 names it intends to engage with regarding their transition to net-zero emissions.

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Just two of these — Air Liquide and LyondellBasell Industries — saw any public discussion of climate change at their annual shareholder meetings this year, according to ShareAction.

Investors have so far focused most of their attention on the energy and transport sectors regarding their plans to reduce carbon emissions. However, ShareAction claims petrochemicals are responsible for more than two thirds of the chemical sector’s energy use.

For example, fossil fuels are used by chemical companies to produce heat, steam and power for compression, cooling and other processes. They are also a so-called feedstock used in chemical reactions.

ShareAction claims it is possible to fully decarbonise the production of chemicals by 2050, such as electrifying processes using renewable energy and replacing fossil fuel feedstock with more sustainable sources such as green hydrogen.

The group has published research that it said will help investors to challenge chemical companies that have inadequate plans to transition away from fossil fuels.

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Its report claims that credible transition plans in the chemicals sector remain scarce, with just two out of the 21 Stoxx Europe 600 chemicals companies having approved targets.

ShareAction has urged investor to be wary of companies with transition plans that do not include green hydrogen, which is expected to be a cheaper and lower emitting energy source by 2050 than some solutions proposed by the chemicals sector.

Joanne Beatty, engager and chemicals sector lead at EOS at Federated Hermes, which is also a member of the investor group, said: “In our view 2021 will be seen as a tipping point for investor engagement on climate action, with greater focus shifting towards neglected sectors such as chemicals, which is vital to accelerate company progress on the climate transition.”

To contact the author of this story with feedback or news, email David Ricketts

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