UK corporates have a tendency to set less ambitious sustainability goals out of ‘fear’ they will fail to hit targets despite investor pressure, according to Lloyds Bank’s research.
In the study Reporting vs Reality, which surveyed UK-based sustainability executives and institutional investors, the bank found 47% of corporates feel unable to set bolder sustainability targets within their transition plans because they don’t want to “go too far and fail”.
This comes as investor pressure for bolder action is growing. Over a quarter (28%) of institutional investors surveyed are demanding greater ambition from corporates, as over half of investors (54%) suggest corporates with ambitious transition plans have a competitive edge. This competitiveness was most prevalent in harder-to-abate sectors, such as mining and extractives, oil and gas, and manufacturing.
Increasingly, investors are looking to credible transition plans as part of the investment process. More than four-fifths of institutional investors (82%) said discussions around transition plans are now frequent in their engagements with corporates.
The study comes at a time when publishing transition plans is expected to become mandatory for the UK’s largest companies as outlined in the Transition Plan Taskforce’s (TPT) framework. The TPT has an ambition to cut the UK’s greenhouse gas emissions to net zero by 2050.
Scott Barton, managing director at Lloyds Bank Corporate & Institutional Banking, said: “The drive to cut greenhouse gas emissions to net zero by 2050 will require an economic transformation on a scale that hasn’t been seen since the industrial revolution.
“To achieve this goal – and to ensure that the benefits are shared widely in the form of a just transition – credible transition plans will play a crucial role for corporates as they set their sustainability strategies and, most importantly, drive action.”
Tara Schmidt, managing director at Lloyds Bank Corporate & Institutional Banking, concluded: “It is encouraging that credible transition plans are becoming a core part of conversations between corporates and institutional investors.
“Companies face a number of competing challenges when developing and implementing their transition plans. It is only through open and transparent dialogue with stakeholders that leadership teams will be able to navigate the interplay between ambition and credibility.”
