Soapbox Snippets March 2025

  • Climate records broken

  • Building emissions stabilising

  • Diversity Divide: Companies at the decision point

  • £28bn pension fund goes green

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Article Type
Sustainability Soapbox
Topic
Responsible Investing
Published
April 11, 2025
Read time
4 mins
Author
Aegon AM Responsible Investment Specialists
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Environmental

Climate Crisis: 2024 - A record-breaking year for the wrong reasons…

The concentration of carbon dioxide in the atmosphere has reached its highest levels in 800,000 years, according to the UN’s World Meteorological Organisation. Their State of Global Climate 2024 report, released in March, highlights several alarming findings.

 

2024 was likely the hottest year on record, with global temperatures averaging 1.55°C above pre-industrial levels (1850-1900). This marks the first calendar year to surpass the 1.5°C threshold. The report states that “in every month between June 2023 and December 2024, monthly average global temperatures exceeded all monthly records prior to 2023”.

 

While this latest temperature milestone does not technically breach the Paris Agreement’s goal of limiting long-term temperature rise to 1.5°C, the report indicates that long-term warming has accelerated. Current estimates place long-term warming between 1.34-1.41°C above pre-industrial levels, compared to 1.1°C in 2020.

 

In recent years, record levels of greenhouse gases, coupled with the El Niño phenomenon, have intensified storms and weather-related disasters. In 2024 alone, at least 151 extreme weather events were recorded. These severe events, including typhoons, heatwaves, and flooding, resulted in the largest displacement of people since 2008. Ocean temperatures hit record highs for the eighth consecutive year, and the rate of sea-level rise has doubled over the past three decades.

 

Building Sector Breakthrough: Emissions plateau after years of growth

The building sector is a significant contributor to climate change, consuming 32% of global energy and accounting for 34% of global CO2 emissions. This sector relies on heavy materials like cement and steel, which are responsible for 18% of global emissions and generate substantial construction waste.

 

Historically, emissions in the building sector have increased alongside its growth, except for a brief dip in 2020 due to COVID-19. However, the UN Environment Programme (UNEP) and the Global Alliance for Buildings and Construction’s Global Status for Building and Construction report highlights a pivotal change in 2024: for the first time, building construction growth was decoupled from greenhouse gas emissions.

 

This decoupling was achieved through the implementation of net-zero aligned building energy codes, mandatory performance standards, and significant investments in energy efficiency. These measures collectively reduced the sector’s energy intensity by almost 10% compared to the previous year.

 

Despite this progress, the UN report emphasises that to meet the 2030 targets, the pace of annual improvements must accelerate. Policy interventions and increased government funding will be key to unlocking private investment and driving further advancements.  

 

Social

Companies split between retreating from or defending diversity initiatives

We’ve heard significant concerns about the rollback of Diversity and Inclusion programs in the US due to political pressure. Major companies like Amazon, Google, Pepsi, and Walmart have scaled back or cancelled initiatives that had made significant progress following the Black Lives Matter protests. Unfortunately, this trend is now crossing the Atlantic, affecting British and European companies with US government contracts, such as GSK.

 

However, it's worth noting that some companies are standing firm against this political pressure. For instance, Costco's board robustly defended their Diversity and Inclusion policy in response to a shareholder resolution to reduce it at the AGM in January. Other companies are also staying the course, recognising that a diverse workforce leads to better decision-making that reflects the customer base.

 

£28bn Green Shift: UK pension giant commits to sustainable future

The People's Pension, one of the UK's largest pension funds with more than £30bn in assets, has reduced its investments with US manager State Street and reallocated to Amundi and Invesco. They reference misalignment on climate stewardship as one of the factors influencing the decision. Their Chair of Trustees stated that the new appointments highlight The People’s Pension’s broader mission to balance strong financial performance with responsible investment principles, "By selecting Amundi and Invesco, we have chosen to prioritise sustainability, active stewardship and long-term value creation for our near seven million members.”

 

This move follows a recent coalition of 26 asset owners, representing more than $1.5trn in assets, issuing new guidelines on stewardship alignment. They stressed that as long-term investors, they continue to identify climate change as a financially material factor and expressed concern over managers publicly backtracking from their climate pledges. Despite the rollback on ESG investing in the US, it is encouraging to see that stewardship and climate change remain top priorities for many long-term investors

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Author

Aegon AM Responsible Investment Specialists
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