Heavy industry sectors present $856bn climate risk

The world's heavy industry sectors are failing to align their CO2 emissions with the Paris Agreement, presenting a $856bn (£619bn) market risk for investors, the Transition Pathway Initiative (TPI) has revealed.

After analysing 111 large publicly-listed industrial companies, the TPI found that just 16 are aligned with an emissions reduction pathway that is compatible with keeping global warming at 2°C or below.

These firms are from the aluminium, cement, diversified mining, steel and paper sectors – which account for roughly 25% of total energy emissions – and are deemed ‘hard to decarbonise’ as there is no straightforward low-carbon replacement technology for their products or processes.

The findings show that just one company in the aluminium and paper sectors is aligned with a 2°C or below pathway by 2050, compared with six steel firms.

“A stark $856bn market risk jumps out at investors, with only 14% of heavy industry companies on a path to keep global warming at 2°C,” said Adam Matthews, co-chair of the TPI.

“From recycling systems to technological innovations, the solutions are now there, and investors are ready to push for much bolder action from these sectors in the run up to COP26.”

The outlook for the heavy industry sector is marginally more encouraging for climate-conscious investors from a 2030 point of view, with 22% of companies aligned with 2°C or below before then.

The reason fewer are aligned with 2°C or below after 2030 is because the pace of decarbonisation required in the industrial sector really picks up next decade, requiring drastic falls in emissions between 2030 and 2050 to meet Paris Agreement goals.

The TPI said that more industrial companies need to set longer-term targets to 2050 that require greater levels of decarbonisation, and that the circular economy can help address the challenges by using new processes to design out waste and pollution and recycle more products and materials.

“Industrial sectors like mining and steel form the building blocks of the global economy and are some of the hardest sectors to decarbonise,” Matthews continued.

“But they account for more than nine gigatons of greenhouse gases, and key decisions will be taken by companies and investors over this coming decade that will determine the role they will play in societies achievement of the Paris Agreement.”

Image credit: iStock

Author: Chris Seekings