Investors must not back down on climate action

Amid intensifying political headwinds, devastating natural disasters and temperatures that continue to break records around the globe, the need for climate action could hardly be more clear, or more pressing. Yet political and corporate ambition appear to be heading in the opposite direction.

Ahead of COP 30, now drawing to a close in Belem, conference president André Corrêa do Lago pointed to a “reduction in enthusiasm” among wealthy countries for climate mitigation. An assessment by the UN of Nationally Determined Contributions (NDCs) submitted ahead of the conference underscores this concern, showing that current plans would cut greenhouse gas emissions by just 10% by 2035 – not even close to the 60% cut needed to keep global temperatures within the 1.5°C set out by the Paris Agreement.

This is a trend all too clearly reflected in the investor community. At the end of last month, the Net Zero Asset Managers (NZAM) initiative proposed a major overhaul of its framework, significantly rolling back signatory commitments, removing all references to the aim of achieving net zero by 2050 and eliminating any requirements for interim emissions targets.

See more: PA Future coverage of COP30 so far

For governments, companies and investors alike, the message is clear: it is no longer fashionable to speak out on climate.

Portfolio action matters

But as the adage goes: what is right is not always popular, and what is popular is not always right. In the face of retrenchment and prevarication it is more important than ever to take a long-term view. This isn’t the first time the industry has faced a backlash against climate action, and it likely won’t be the last.

At EdenTree we believe that the scientific evidence is unequivocal: we are already living in a climate emergency and must rapidly reduce greenhouse gas emissions. Climate change poses a growing threat to both people and planet, making it a clear and financially material investment risk. We believe it is the fiduciary duty of all responsible stewards of capital to address this risk in order to protect and grow long-term value for clients.

Climate risk underpins our investment approach. Every one of our funds is assigned both long- and short-term targets, we are actively working to decarbonise portfolios while investing in businesses that demonstrate robust climate risk management and credible strategies aligned with a 1.5-degree pathway. Within this, we place a particular emphasis on science-based targets (SBTs), which we view as the gold standard for climate ambition. Across our fund range, our aim is for 60-80% of financed emissions to be covered by an SBT.

Decarbonisation alone is not enough

Important though operational emission reductions are, decarbonisation alone is not enough to meet the goals of the Paris Agreement. It must be paired with significant increases in investment in climate mitigation and adaptation. As detailed in our recently published Climate Stewardship Report, we continue to work across our funds to identify compelling investment prospects that not only support and accelerate the transition to net zero, but also deliver affordable, rapid energy solutions in response to a growing demand for clean energy.

The importance of active engagement

Portfolio action alone cannot solve climate challenge. Investors have a unique opportunity to influence company behaviour, and targeted engagement and voting are essential to accelerating corporate climate action.

Our proprietary Climate Stewardship Plan, launched in 2023, sets out to identify the companies that contribute the most to our Scope 1 and 2 financed emissions. We assess each of these companies against 13 best practice expectations across disclosure, targets, emissions performance, decarbonisation strategy and governance, to inform the development of tailored engagement objectives and track progress over time. This approach has been invaluable in helping us identify which companies are falling behind their peers, and what escalation is needed.

Collective action is critical

The imperative for climate action has never been clearer, and now is the time for like-minded investors to step up. Securing an orderly net zero transition is not just about enabling a safe and liveable future for all—it is also an essential part of our fiduciary responsibility.

As COP30 draws to a close, it’s easy to focus on what didn’t happen or the ambitions that fell short. Yet, while COP conferences may not always deliver immediate breakthroughs, their role in sustaining global momentum should not be underestimated.

Across the industry, it feels like a fitting time to reaffirm that our commitment to driving the low-carbon transition, especially in the face of headwinds that threaten to push us off course.