Funds managing $2 trillion urge cement makers to act on climate impact https://t.co/ebLSbrLmjX pic.twitter.com/6clnCXOtQC— Reuters Commodities (@ReutersCommods) July 22, 2019
As the FT reports:
Oil and gas companies have been the front line for investors concerned about the potential impact of global warming on returns. Now shareholders have a new sector in sight: cement makers.
LafargeHolcim – parent company of Aggregate Industries – is the world’s largest cement maker. Last week, Extinction Rebellion climate protesters targeted London Concrete – part of Aggregate Industries. The company trotted out the statement:
We are cognisant of the carbon footprint of cement and concrete and we are at the forefront of efforts to mitigate climate change.
As we wrote, being at the forefront of those efforts has resulted in:
AI emitting nearly 1.3 million tonnes of CO2 each year, more than 5x the amount in 1999.
LafargeHolcim’s net CO2 emissions increased in 2018 to 121,000,000 tonnes*, up from 118,000,000 tonnes in 2017, up from 115,000,000 tonnes in 2016.
This week, shareholders overseeing $2 trillion in assets have urged cement makers – including LafargeHolcim – to cut emissions. Vincent Kaufmann, chief executive of the Ethos Foundation, a group of Swiss pension funds, said:
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.
Stephanie Pfeifer, chief executive of the Institutional Investors Group on Climate Change said:
The cement sector needs to dramatically reduce the contribution it makes to climate change. Delaying or avoiding this challenge is not an option. This is ultimately a business-critical issue.
Business critical? Bloomberg reports: Cement companies are starting to get a $33 trillion headache:
Cement companies are also exposed to prices in the European carbon market, which have quadrupled in value since the start of last year. Besides facing higher costs if they don’t cut emissions quickly enough, the firms can also lose potential revenue from the sale of excess allowances as regulators tighten allocation of allowances in the program, said Stephanie Pfeifer, CEO at IIGCC and a member of the Climate Action 100+ steering committee.
Deutsche Bank, as cited by IIGCC, estimated that cement prices will need to rise by as much as 5% in 2020 to compensate for the gain in carbon costs. The surge will have a negative impact of between 1.3% and 5.1% by 2020 on earnings before interest, tax, depreciation and amortization by 2020 for European cement producers, according to the bank.
CNN reports: The cement industry produces more CO2 emissions than most countries. It may not survive. LafargeHolcim’s response to all this? It issued a statement, the same one trotted out last week:
We are cognisant of the carbon footprint of cement and concrete and we are at the forefront of mitigating climate change.
Whilst for LafargeHolcim it may be business as usual, some companies are stepping up their efforts – just yesterday, 20 global companies with a combined market value of $1.2 trillion have pledged to set more ambitious climate targets:
"Climate leadership has never been more important than it is right now, and it is inspiring to see so many diverse companies and brands boldly raising their ambitions," said Lise Kingo, chief executive and executive director of the UN Global Compact
And she's right. Climate leadership has never been more important. Even the UK construction press see the risks. As this article, Extinction Rebellion targets concrete works, says:
Not since the days of Swampy and his friends held up construction of the M3 through Twyford Down has direct action presented such a risk to construction companies.
As one campaigner, a structural engineer by profession and member of Extinction Rebellion, puts it:
I’m taking part in this action to disrupt concrete production because we have to pause and recognise the harm it is causing both locally and globally; locally with the dust in the air our children breathe and globally with the inextricable CO2 emissions involved which are destroying the world.
Obviously, the boss of the Mineral Products Association has a different spin:
The UK cement and concrete industry takes its environmental obligations extremely seriously and is committed to contributing to a net zero carbon society. Whilst global cement production is responsible for 7% of global CO2 emissions, UK cement emissions are amongst the lowest in the world at less than 1.5% of UK emissions.
Which may, of course, have something to do with the fact that the UK is a net importer of cement. In fact, a couple of years ago, AI was "one of the largest importers of cement in the UK."
* Net CEM CO2 emissions. Total gross direct CO2 emissions 135Mt. Total indirect CO2 emissions 30Mt. Source: LafargeHolcim Sustainability Report 2018
