In a surprising twist, European investors seem less optimistic than their peers around the world in their businesses meeting net-zero obligations by 2030.
ESG Analyst Survey 2023: Mind the Gap, a report from Fidelity International, asked respondents what proportion of their companies they believed were allocating enough capital expenditure to achieve net zero by 2030, 2040, and 2050.
It found European investors had lower confidence that this would be achieved by 2030 than those in China or Japan, but were slightly ahead of other Asia-Pacific countries and those in North America and the EMEA/Latin American regions. They did, however, register the most confidence of all respondants that their firms would hit net zero by 2050.
“Currently, fewer than 60% of companies are on track to cut their carbon emissions to net zero by the UN agreed target of 2050, according to our analysts’ assessments of the companies they cover,” said Fiona O’Neill, head of global cross-asset research capabilities at Fidelity International. “And only one in four will do so by the more ambitious target of 2030.”
She added: “That shouldn’t detract from the progress that has been made. The world’s big companies have, and are, listening and the survey shows that most developed-world multinationals have committed to net zero targets, with 69% of European companies allocating the funds needed to hit those targets by 2050.”
Key to meaningful change
One of the messages of the report is that meaningful change will only come about through government regulation. “Our analysts have identified a range of both ‘push’ and ‘pull’ policies that they think will ensure companies improve their practices,” said Gita Bal, global head of fixed income research at Fidelity international. “Other suggestions from our analysts across industries range eclectically from enforcing the recycling of mattresses to offering rebates on the installation of heat pumps.
She added: “One common theme that emerges is that the alignment of standards across different jurisdictions is critical, with repeated calls from our analysts for carbon to be priced effectively. Pricing in carbon markets is inefficient: companies are able to tap into artificially cheap sources that do not necessarily offset their emissions, and there is little standardisation in the way the market operates across different regions.
“The EU is leading the way on clarity, and better language has been included in the US’s Inflation Reduction Act, but leadership is still needed to create a productive level playing field across the world.”
