ASI calls on Mena investors to embrace ESG

climate changeInvestors in the Mena region have an important role to play in helping local companies achieve net zero carbon emission targets by 2050, according to global fund manager Aberdeen Standard Investments (ASI).  A growing number of companies in the region have pledged to meet the main goal of the Paris agreement which is to be net zero by 2050. According to global estimates, such pledges represent nearly 25% of global emissions.  They also include some of Mena’s biggest corporates – energy company Saudi Aramco has pledged to reduce the carbon dioxide levels per barrel of crude by 13% by 2025 while airline Etihad has pledged to halve its 2019 emissions by 2035.  According to ASI, Mena investors must challenge these corporate pledges, not least because there is a technical complexity and prohibitive expense for certain industries to reduce emissions to zero.  “The concept of net zero means these residual emissions need to be removed from the atmosphere through negative-emission technologies, including carbon capture and storage, or natural carbon sinks such as forests,” said Eva Cairns, ESG investment analyst at ASI. “However, many negative-emission technologies cannot currently operate at scale, so companies may pledge net zero to signal their future intentions. This makes it difficult to hold companies to account for emission reductions.”  Furthermore, the pledges contain various assumptions about climate change scenarios, policies and technological developments, resulting in sizeable uncertainty as to how companies might attain net zero status.  “Active investors in Mena also have an important role in challenging the alignment of projects to net-zero pledges by asking how targets have been factored into capital investment decision-making,” said Edris Alrafi, head of Middle East & Africa for ASI. “All these pledges create the sense that much more is happening than there actually is, but we cannot limit global warming without credible action plans,” added Alrafi. “And, if we think targets are not credible, we must hold companies to account through active engagement and voting.” © 2020 funds global mena

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