FIR statement on climate plans

We co-signed a letter calling for climate plans to ensure economic resilience.

The Institutional Investors Group on Climate Change (IIGCC) shared an open letter published this April by the Forum pour L’Investissement Responsible (FIR) when launching an initiative to support transition plans. The letter renews calls for improved shareholder dialogue and collaboration with companies to accelerate the environmental transition. We co-signed this statement alongside 40 other financial institutions, which in aggregate manage over €2.4 trillion in assets.

The letter highlights the importance of rigorous, ambitious and transparent climate transition plans, as well as the value of regular constructive dialogue with stakeholders in their development and implementation. Noting the financial implications of recent climatic events, the statement emphasises the rising costs of inaction. But it also points to the incentives for investment in adaptation: companies which comprehensively assess their risk exposure have estimated that ‘their current investments in adaptation and resilience could yield between $2 and $19 for every $1 invested.’

The letter also calls on public authorities to play their role in developing legal frameworks to extend the requirement for companies to disclose and justify executive remuneration practices to various stakeholders (say on Climate disclosures).

In line with the EU’s Corporate Sustainability Reporting Directive (CSRD), the information in a climate transition plan should include six key points.

  1. Past, present and future greenhouse gas emissions for Scopes 1, 2 and 3
  2. Short, medium and long-term absolute emissions reduction targets for Scopes 1, 2 and 3, as well as actions to achieve them
  3. The scientific reference scenarios (SBTi, ACT, IEA) which make it possible to set targets aligned with a warming scenario limited to 1.5°C with little or no overshoot
  4. Details on the allocation of investment expenditure and financing for the implementation of the transition plan, making it possible to measure, for example, the energy sector’s efforts to support the development of low-carbon solutions and the gradual reduction of fossil fuels in the energy mix
  5. The role of captured or negative emissions in the overall strategy by demonstrating the priority given to reducing induced emissions (although captured emissions must be presented separately from induced emissions in the decarbonisation objectives, offsetting measures have no place there and must be considered as contributions to the effort to mitigate climate change)
  6. Qualitative information on governance, the process for approving the transition plan, lobbying and advocacy activities on climate issues and consideration of potential impacts on stakeholders and other environmental issues

Ruffer decided to sign the letter as we believe the statement aligns with our view on climate-related disclosure, outlined in our climate strategy and competitive advantage position paper. Further, with the EU pulling back on initiatives such as its Omnibus package – which included the Corporate Sustainability Due Diligence Directive and Carbon Border Adjustment Mechanism – we wanted to highlight investors’ continued interest in this issue.

We actively encourage investee companies to provide comprehensive, timely disclosure so we can integrate potentially material information into our assessments. In our view, this letter is a call to action for the alignment of government policy with investors’ need to manage climate risk effectively, which may contribute to long-term financial resilience. We believe policymakers have a decisive role in creating climate-aligned investment conditions. By ensuring regulatory consistency whilst integrating climate resilience into economic planning, they can create greater certainty and thus increase investor confidence.