IEEFA – Universal Ownership: Decarbonisation in a Hostile Engagement Environment

Constrained by outdated tools and short-term focused product development, corporate engagement alone is insufficient to achieve widespread decarbonisation in markets. The recent use of aggressive tactics by investee companies highlights the need for universal owners to take a more pragmatic approach. Recommendations from IEEFA include collaborating with sovereign stakeholders, advocating for carbon markets, combating climate lobbying, leveraging relationships with banks, and integrating divestment into their stewardship strategies. IEEFA suggests that universal owners consider allocating more to "systemic funds" that prioritize decarbonisation over short-term returns, given their long-term investment horizons and broad economic exposures. As owners of a small but representative slice of the global economy, universal owners have a vested interest in the overall health of capital markets and reducing systemic risks, particularly those related to climate change. Without robust abatement policies, global equity values could decrease significantly, underscoring the urgency for action to mitigate climate-related risks.