The climate crisis reached a critical juncture in 2024, with global temperatures surpassing the 1.5°C threshold for the first time, signalling a strong warning about the accelerating pace of climate change. Greenhouse gas emissions continued to climb, reflecting the gap between climate pledges and tangible action from different stakeholders. This year also saw significant setbacks in global climate initiatives: key companies scaled back their targets, the Glasgow Financial Alliance for Net Zero (GFANZ), a financial association of investors, softened its ambitions, and major banks withdrew from climate coalitions. Furthermore, the increasing scrutiny on carbon offsets and the lack of substantial progress at the recent COP 29 summit further underscored the urgent need for effective climate strategies. In this critical landscape, investors have a vital role to play, by engaging companies not just to set targets, but to deliver real-world reductions and transparency.

Triodos and net zero

Why we are no longer claiming net-zero, but are doubling down on real emissions reduction

Turning towards scope 3 emissions

Since 2020, our approach in the Impact Equities and Bond (IEB) portfolios has evolved from encouraging basic GHG reporting to driving comprehensive, science-based climate action. Initially, discussions focused on whether companies were reporting their scope 1 and 2 GHG emissions and setting reduction targets. Today, we challenge companies on data quality, the credibility of their strategies and their capacity to achieve net-zero goals - especially around the complex issue of scope 3 emissions.

What are scope emissions?

Scope emissions

Scope 1 are direct emissions owned or controlled by a company, such as emissions from vehicles or facilities.

Scope 2 are indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company. Although these emissions occur at the facility where the electricity is generated, they are attributed to the company using the energy.

Scope 3 are indirect emissions that occur in a company’s value chain, including both upstream and downstream emissions. This category is usually the most complex and includes emissions from the production of purchased goods and services, waste disposal, and employee commuting.

This shift reflects a growing expectation for companies to provide transparent and detailed plans regarding their climate actions. While many companies have already picked the low-hanging fruit of emission reductions, such as transitioning to renewable electricity and reducing scope 1 emissions, the real challenge now lies in addressing the harder-to-abate scope 3 emissions. Tackling scope 3 emissions requires a comprehensive approach that goes beyond a company’s direct operations. It involves engaging with suppliers, customers and other stakeholders across the value chain to drive meaningful reductions.

We encourage companies to set science-based targets that include scope 3 emissions, develop actionable roadmaps and provide a transparent progress report. By focusing on these deeper, systemic changes, we aim to support companies in achieving substantial and sustainable emissions reductions that align with global climate goals.

Ongoing SBTi alignment

By the end of 2024, 63% of the net asset value in our IEB portfolios was aligned with Science-Based Targets initiative (SBTi) standards. While in the overall market some companies are stepping back from their targets, especially in the US, our funds continue to grow the rate of alignment. As the bar chart shows, nearly all our listed equity and bond holdings outperformed their respective benchmarks on setting science-based targets, underscoring our investment strategy of selecting companies with robust sustainability practices. We actively encourage companies to set targets consistent with SBTi guidelines, including rigorous treatment of scope 3 emissions. These frameworks not only provide consistency and comparability but also enhance investor confidence.

Engagement highlights

The dicsussions with three of our portfolio companies are exemplary for our engagement efforts in 2024.

Evonik Industries

A major specialty chemicals producer and a significant emitter, the company made a milestone move by shutting down its coal-fired power plant in Marl, Germany, in March 2024. Although delayed due to geopolitical disruptions - including the war in Ukraine - this step will materially cut its scope 1 emissions, as the plant represented over 24% of these emissions in 2023. We have consistently pushed for the decommissioning of their coal-fired plants.

Evonik Industries – Transitioning beyond coal

As an impact investor, we have a clear position against coal use due to its incompatibility with climate change mitigation. Coal is the most carbon-intensive fossil fuel and its continued use significantly undermines global efforts to reduce greenhouse gas emissions. This principle is reflected in our engagement with Evonik, where we have consistently pushed for the decommissioning of their coal-fired plants, as these facilities contradict both global climate objectives and the company's own climate commitments. We have continued to closely monitor and engage with Evonik regarding their progress on plant decommissioning to ensure alignment with climate goals.

Beyond scope 1 reductions, we continue to engage with the company on its SBTi-aligned Scope 3 target - a planned 11% reduction by 2030 - to ensure accountability and progress throughout its supply chain. The company is part of several of our IEB portfolios.

Atlas Copco

A leading industrial company based in Sweden and one of the top five greenhouse gas emitters in our IEB portfolios, the company specialises in compressed air, vacuum technology, industrial tools, and construction equipment. We engaged with the company to discuss its sustainability targets for 2025-2027.

Atlas Copco – Aligning targets with execution

In 2024, we engaged with Atlas Copco to discuss its sustainability targets for 2025-2027, exploring challenges in enhancing energy efficiency during product usage. The company is actively working with clients to identify energy-saving opportunities while implementing internal measures to reduce energy consumption. Although it lacks a net-zero target, Atlas Copco has achieved a 33% reduction in GHG emissions from its operations since 2019. Additionally, the company is addressing other environmental concerns, such as water and soil pollution, and shared its risk and opportunity assessments for the coming years.

Our ongoing engagement aims to monitor the company's progress in translating its targets into actionable plans, highlighting the importance of addressing practical challenges in achieving sustainability goals. This engagement also underscores the shift from simply setting sustainability targets to focusing on the practical challenges companies face in achieving them. Through our engagement, we are addressing the realities of implementing sustainable practices and ensuring that the company has a clear plan to meet its environmental goals.

Signify

A global leader in smart lighting solutions, the company has already cut its absolute GHG emissions by over 50% since 2019 and aims for net-zero by 2040. Part of our IEB Pioneer Impact portfolio, Signify is one of our largest emitters when all its GHG emissions are accounted for.

Signify – Partnering for transparency and impact

The vast majority (+99%) of the company's GHG emissions come from its Scope 3, which is mainly caused by its customers using its long-lasting, energy-efficient solutions. In 2024, in collaboration with other shareholders and Dutch corporate governance organisation Eumedion, we engaged with Signify’s Sustainability Leadership team to provide feedback on the company’s draft Climate Transition Plan. This engagement moved beyond discussing target-setting to evaluating the feasibility of the plan itself. Among the key recommendations, we emphasised the importance of including historical emissions trajectory data to ensure transparency and allow stakeholders to comprehensively assess Signify’s progress. We find it positive that Signify has set a net zero 2040 target, as well as near-term SBTi approved targets for scope 1, 2 and 3, having already achieved over 50% absolute reduction in GHG emissions since 2019.  

Another key focus was the feasibility of Signify’s Scope 3 emissions reduction targets, particularly those tied to emissions from product use. Since a significant portion of these reductions relies on customers adopting green energy, we discussed the company’s strategy for mitigating this risk.

This engagement highlights how investors can go beyond target-setting discussions, contributing to practical, strategic improvements that enhance corporate climate action. It also underscores the power of collaborative dialogue, where shareholders and companies work together to create more transparent, and actionable sustainability strategies.

From target setting to transparent and accountable action plans

Looking ahead, we know that climate change won’t stop and that the challenges will intensify, not only through temperature rises, but especially through extreme weather events and other concerning changes in our ecosystems. Climate physical risks are therefore a topic of growing importance in conversations with companies. We seek to understand what measures they have in place to mitigate these risks and drive transparency and accountability within companies’ reporting and sustainability strategies. We will focus on whether companies are actually meeting their targets that they have set in the past few years and whether Scope 3 emissions are under control. By fostering resilience and sustainable practices, we aim to ensure companies are well-prepared for a changing world while contributing to a more sustainable future.

Active stewardship

Stewardship is an integral part of our investment management process, with engagement, voting and advocacy as the key pillars. Find out more about our Stewardship activities.