Within EOS at Federated Hermes, we have devoted significant resource to engaging on the climate crisis, particularly in the last few years, as our clients have made it clear they see it as the most important issue for our engagement.
Many companies have begun to take action to reduce their own emissions and to explain how they plan to manage the risks and opportunities that climate change poses to their businesses.
However, the urgency of the climate emergency requires companies to do more. Inevitably, we and long-term investors have focused our efforts on the suppliers of fossil fuels and the largest greenhouse gas emitters. However, for the energy transition to be as smooth as possible, investors also need to address the demand for energy.
Business as usual now requires a climate dimension, which means reducing energy use and committing to net-zero emissions, including within the company’s value chain, as soon as possible. Often this will be easier for less energy-intensive businesses and so these should be at the forefront of such efforts.
We recently congratulated Microsoft on its ground-breaking commitment not only to aim for net-zero but also to remove from the atmosphere all the greenhouse gases that it has ever released. We acknowledge that this is easier for Microsoft than for many other companies, but we should applaud leaders and encourage others to follow their lead. By doing this, we help to create a business environment where climate responsibility is the new normal. We can no longer wait for the more timid companies to make up their minds on climate: bold action is needed, and Microsoft has shown that it is possible.
We note that some Microsoft employees and other stakeholders are concerned that the company continues to offer its cloud and other services to the oil and gas industry. We think that the positive action indicated by the recent announcement is a more effective way to combat climate change. However, we acknowledge that if urgent action is not taken across the global economy to combat climate change, these calls will understandably grow louder. We urge other companies to follow Microsoft’s lead to minimise the disorderliness of the energy transition.