International cement companies - including Dublin-based CRH - have been urged by European-based investment funds to significantly cut their greenhouse gas emissions or risk losing access to capital.
A representative group for the funds - which manage a combined $2 trillion worth of assets - warned that failure to slash emissions could put cement companies' business models at risk, as funds could divest their investments and access to capital could dry up.
With the extreme weather and natural disasters associated with climate change intensifying around the world, some asset managers are ramping up engagement with heavy polluters to demand a faster transition to a cleaner economy.
“The cement sector needs to dramatically reduce the contribution it makes to climate change,” said Stephanie Pfeifer, chief executive of the Institutional Investors Group on Climate Change, which has more than 170 members, mainly European pension funds and asset managers.
“This is ultimately a business-critical issue for the sector,” Ms Pfeifer said.
The group said investors had written to cement or construction materials companies including CRH; Franco-Swiss group LafargeHolcim and France’s St Gobain to demand they achieve net zero carbon emissions by 2050.
They also noted that Germany’s HeidelbergCement had already adopted the target.
The funds urged all cement companies to align themselves with the 2015 Paris agreement to combat global warming, engage with policymakers to ensure an orderly transition to a low carbon economy, and increase their reporting of climate risk.
“Construction materials companies may ultimately risk divestment and lack of access to capital as an increasing number of investors seek to exclude highly carbon-intensive sectors from their portfolios,” said Vincent Kaufmann, chief executive of the Ethos Foundation, a group of Swiss pension funds, which signed the letters.
For its part, CRH - which counts Europe's largest activist investor Cevian Capital as a shareholder - said, earlier this year, that it is "well on course" to meet its 2020 climate commitments, which are in accordance with the Kyoto Protocol and is now working on its post-2020 targets.
CRH is targeting a 25% reduction in its carbon dioxide emissions by next year and a 22% drop in nitrogen oxide emissions.
It said it is currently working to identify its post-2020 targets and is preparing an "emissions reduction roadmap" by reviewing the potential future emissions profile of all its production facilities.
"One of our top priorities is to continually improve our production processes to reduce our carbon footprint," the company said.
The cement industry produces 7% of the world’s carbon dioxide emissions, according to the International Energy Agency, meaning that if it were a country, it would be the third largest emitter, behind the US and China.
In June last year, a report from think-tank Chatham House concluded that although there was no ‘silver bullet’ to reduce emissions from cement, it should be possible to deploy a range of policies and technologies to achieve deep decarbonisation.
- Additional reporting Reuters