Ethos and the members of the Ethos Engagement Pool International (EEP International) are launching a multi-year engagement program urging eight European electric utilities to develop ambitious climate strategies to facilitate the transition to a low-carbon economy. Several institutional investors across the globe have decided to support these efforts, in total the investor group represents approximately EUR 100 billion.
The Paris Agreement asks for massive greenhouse gases (GHG) emission reductions that must translate into concrete policies. Arrangements to tax or cap GHG emissions such as the European Emissions Trading Scheme and similar schemes in China, South Korea and California are becoming increasingly prevalent. This development is compounded by continuous progress on the technology side. The cost of renewable energy sources such as wind and solar continues to fall, making them even more competitive in comparison to fossil energies.
These policy developments and technological advances fundamentally change the power system, transforming it from a centralized system of major power plants burning fossil fuels to a decentralized system based on locally installed renewable energy sources. Against this backdrop the business model of electric utilities has to change rapidly and significantly. For these reasons, Ethos and the EEP International launch a multi-year engagement program urging eight European electric utilities to prepare themselves to a low-carbon future. Ethos and the EEP International have defined five concrete demands for the utilities, namely:
- Set GHG emission reduction targets in line with the level of decarbonization required to keep global temperature increase below 2 degrees (Science-based targets)
- Decarbonize their power generation mix shifting from coal to gas to renewables
- Commit to responsible advocacy on climate policies
- Rethink the business model e.g. by moving downstream the value chain and look at Smart Home solutions and energy services
- Provide corporate disclosure in line with the final recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
The engagement program has been launched today with formal letters to each chairman of the board of the eight targeted electric utilities.
