Analysis-Company valuations and climate strategies are poles apart By

By Elizabeth Howcroft and Simon Jessop

LONDON (Reuters) – Companies in the most polluting sectors that have invested in climate action often find themselves valued below peers that have been slower to do so, highlighting the difficulty of getting shareholders to back sustainability.

Investors have poured more than $30 trillion https://www.reuters.com/business/sustainable-business/sustainable-investments-account-more-than-third-global-assets-2021-07-18 into environmental, social and corporate governance (ESG) strategies, data from the Global Sustainable Investment Alliance showed.

But the demand for sustainable investment has yet to remove the pressure to put profits first and pro-climate analysts are concerned the outcome of U.N. climate talks https://www.reuters.com/article/climate-un-idCNL1N2S405F earlier this month did too little to help.

Analyses of companies globally by management consultancy Kearney in November seen exclusively by Reuters, as well as data by Credit Suisse (SIX:) Group AG published in April, found that companies that lowered their emissions in sectors where doing so was expensive and government regulation was limited were valued less, on average, than more emitting peers.

Investors were only found to reward the most emitting companies, such as energy, mining and heavy industry, for taking action on climate change when the cost of doing so was relatively small and government support and regulations were relatively strong.

“Investors want climate leadership, they want tangible transition plans, but at the same time they are only willing to reward companies that can do so without sacrificing returns,” Betty Jiang, Credit Suisse’s head of U.S. ESG research, said.

Given changing attitudes as climate change becomes more extreme, some see an opportunity to invest in companies cheaply before the market values their climate action more highly.

Others worry the risk of losing value is making corporate boards reluctant to act to avoid catastrophic climate change, especially after governments at the United Nations talks in Glasgow this month failed to send a strong message that global warming can be capped at 1.5 degrees Celsius (2.7 Fahrenheit).

“There is currently no clear line of sight between climate investing and its impacts. Green (investment) portfolios have not yet equated to a green planet,” said Anthony Cowell, head of asset management at KPMG Islands Group.

EUROPEAN INVESTORS VALUE SUSTAINABILITY MORE

Kearney calculated the valuation of 481 companies globally as a function of their cash flows.

It then assessed their climate action using the Transition Pathways Initiative benchmark (TPI), an investor initiative launched in 2017 to assess companies’ response to climate change.

Where TPI scores were not available, Kearney looked at companies’ greenhouse gas…