The commitments to net-zero targets in recent years have been impressive in their velocity and scope on the surface. In the wake of COP26, a climate conference of nations held in Glasgow in 2021, around 87% of the world’s greenhouse gas emissions and 89% of its economy are now covered by net-zero targets. This should be cause for celebration, even a tentative toasting to significant progress on meeting climate change goals. But that’s not happening. At least not yet.

According to a recent research report developed by Create-Research and authored by Amin Rajan, Paradigm Consulting’s Special Advisor, getting to net-zero carbon emissions is “one of the most urgent tasks of our time.” The report, based on a survey of 50 large pension plans from North America, Europe and Australasia, sought to understand how institutional investors are thinking at this point in time about net-zero. Significantly it also explored what their plans are for contributing to its realisation.

One of the most startling findings is that 60% of respondents believe net-zero is unlikely to be achieved. That’s not to say action is not being taken. 58% of institutional investors have already either fully embedded a net-zero goal into their asset allocation or begun the process of doing so. So what is driving the pessimism amidst investors’ commitment to moving the needle on climate change?

Climate investing is evolving

Certain phenomena are slowing down the progress in climate investment. These include:

• Greenwashing, particularly the selective disclosure of data for ESG to only report favourable results.

• Differing ESG frameworks and standards causing a lack of clarity on what data needs to be provided.

The challenges are facing off against ongoing trends that are providing a direction of travel for change:

• Stewardship is growing into a lynchpin of climate investing. 78% of institutional investors see stewardship as vital, and 64% have embraced their role as an active owner of assets with responsibility for the environmental impacts of their investments.

• Regulators and policymakers around the globe are taking action to improve disclosure rules and promote climate indices.

What role can communications play?

With the rise of net-zero and the broader sustainability agenda increasing the focus on climate investing, the need for clear ESG communications has also risen. Taking care to communicate in concrete terms one’s commitments and progress has become an essential aspect of accountability and exercising leadership in the ESG space. Some of the key elements include:

• Transparency – how is an organisation going to achieve its climate objectives? What data should be provided and how can it be communicated with clarity?

• Accountability – Are there clear performance targets and interim goals that show progress in the nearer term? How can reporting and communications be structured so that stakeholders and the media have a clear picture?

We hope you found this article insightful. If you need help with your ESG communications, please contact us.