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    Investors Steel Themselves for a Challenging Transition

    Stockholm (NordSIP) – On August 4th, the Climate Action 100+ corporate engagement investor initiative announced the Global Sector Strategies series’ launch. The reports will provide clear recommendations on how to align the industry with the goals of the Paris agreement by taking a deep dive into several specific sectors’ decarbonisation paths, including research and extensive consultations with experts within each field.

    First out was steel. After twelve months of intensive discussions between various stakeholders, last week, the Institutional Investors Group on Climate Change (IIGCC) published Global Sector Strategies: Investor interventions to accelerate net zero steel. The report focuses on the challenges that the steel sector faces in closing the gap to net-zero and proposes actions that companies, the industry collectively, and investors can take to address these.

    IIGCC, alongside Principles for Responsible Investment (PRI), the Asia Investor Group on Climate Change (AIGCC), Ceres and the Investor Group on Climate Change (IGCC), is one of the founding investors’ networks of the Climate Action 100+ initiative, collectively representing over USD 55 trillion in assets.

    The line-up of sectors to get under the loupe in the next few months is impressive, ranging from food and beverage to electric utilities, trucks, and diversified mining. Each of the coming strategy reports will be spearheaded by the network with the best sector knowledge.

    Choosing steel to kick off the series is commendable, given that companies in this sector account for 9% of global greenhouse gas emissions. Moreover, the sector is far from being on track to meet the necessary emission reduction targets. “Steel companies face a challenging transition, and the prize will be investors that not only remain as shareholders but also provide the needed transition finance,” commented Adam Matthews, Chair, Transition Pathway Initiative and Chief Responsible Investment Officer (CRIO), Church of England Pensions Board, in the press release.

    Investors have undoubtedly a vital role to play in incentivising the low carbon transition within the steel industry. The actions outlined in IIGCC’s report include obtaining public commitments from the largest global purchasers of steel to buy “green steel” and providing capital explicitly to finance low carbon steelmaking capacity.

    The onus is, however, on the steel companies themselves. Investors expect them to take concrete action, such as setting ambitious decarbonisation targets and committing to align capital expenditure with a net-zero strategy. They also need to demonstrate the feasibility of emerging technologies like carbon capture and storage and hydrogen-based DRI-EAF. Last but not least, investors expect full transparency on each company’s transition plan and policy.

    While acknowledging the multiple challenges ahead, the report also points out that there is willingness from the steel industry to start transitioning towards net zero. Providing guidance and specific solutions as well as focusing on collaboration between all stakeholders involved might just be the right approach to get there.

    Image by yasin hm on Unsplash

     

    Julia Axelsson
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.
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