More than 60% of investors plan to start allocating money to companies with credible climate transitions plans by 2026, according to research from Robeco.

The Dutch asset manager surveyed 300 investors from across the world, and found that, while only 37% currently invest in strategies targeting firms with such strategies, 63% said they plan to do so in the next one or two years.

“Investors are currently allocating more funds to general climate strategies, rather than those focused specifically on ‘transitioning’ companies,” said Robeco, adding that around 45% of respondents are using active equity strategies for the latter, and 43% are buying labelled bonds.

Transition plans are on the rise

Corporate transition plans are expected to boom in coming years, with a number of governments and regulators making them mandatory for large firms.

The UK has developed guidance for the development of transition plans across different sectors, and Switzerland has said it will offer financial support to companies with credible plans to help the national economy align with its net-zero goals.

The European Union’s Corporate Sustainability Due Diligence Directive is the most ambitious set of rules so far. In the final stages of being signed into law, the directive will build on the Corporate Sustainability Reporting Directive’s requirement to disclose climate transition plans, by obliging companies to actually implement them.

The International Sustainability Standards Board and the Taskforce on Climate-related Financial Disclosures both expect entities to explain their transition strategies, although neither provide any granular guidance on what those strategies should look like.

To help investors, the Climate Bonds Initiative teamed up with the Institutional Investor Group on Climate Change and the Sustainable Markets Initiative last week to launch a rating system for corporate climate plans.

Firms are assigned a score of 1-5 based on how meaningful their commitments, targets, strategy and governance are. Those with plans to expand their activities in the fossil-fuel sector are automatically awarded the lowest grade.

Corporate progress

Today, shareholders will vote on the climate transition strategy of oil major Shell. The plan, which was watered down in March, has divided investors.

Nearly 98% of Unilever’s shareholders signed off on its latest climate transition plan at its annual geneeral meeting earlier this month, even though it had been scaled back.

In a statement last week, the consumer goods giant said: “We’re entering an era which rightfully places more scrutiny on how and when corporate climate action happens and we needed to evolve our strategy so that by 2030 we can achieve deep cuts in the emissions outside our direct control, while simultaneously growing our business.”

Microsoft, another stalwart of sustainable investment portfolios, announced last week that its Scope 3 emissions had sky-rocketed over the past three years, despite a pledge to become ‘carbon negative’ by 2030. It blamed much of the increase on emissions associated with its data centres.

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