Climate change: energy transition to become a panic unless regulators, companies, investors move faster, LGIM says

The world is at a critical juncture in its efforts to transition to cleaner energy sources, warns an asset manager. Policymakers, corporations, and investors have been procrastinating on implementing stringent policies and action plans to mitigate global warming. They have also been lax in accurately pricing climate risks in asset markets, according to Nick Stansbury, head of climate solutions at Legal & General Investment Management (LGIM).

This lack of urgency not only exacerbates the impacts of climate change but also puts governments at risk of facing greater disruption in the future. Companies, too, are missing out on the opportunity to be rewarded for being proactive in their approach to climate change. Stansbury points out that the world is not on track to limit warming to 1. 5 degrees Celsius, and probably not even 2 degrees, unless there is a significant shift in policy. He also notes that emissions from listed companies should have been decreasing by 4 to 7 per cent annually over the past decade to keep global warming within 2 degrees or 1. 5 degrees, respectively. However, data shows that their emissions have remained stagnant.

A study by LGIM reveals that the combined carbon emissions of 3,665 companies, which accounted for approximately 75 per cent of the emissions of all listed firms globally in 2021, have not shown a convincing downward trend. Instead, they have fluctuated between 21 billion tonnes in 2012 and 25 billion tonnes in 2019. These companies' combined emissions dropped to 22 billion tonnes in 2020 and 2021 due to the Covid-19 pandemic. Collectively, these companies contributed to around half of global carbon emissions.