Investors must insist on decarbonisation – before it’s too late

BASF is the biggest chemicals company in Europe, producing chemicals for ubiquitous products like plastics, car components and furniture.

It also has a carbon footprint to match its size. Based in Germany, its largest site consumes 4% of the country’s gas.

In 2020 it was responsible for one tenth of all the direct emissions from Europe’s chemicals sector combined, according to a report released this month by ShareAction. 

BASF is among the three worst companies in the world for anti-climate lobbying activities. It is beaten to the ignoble top spot only by fossil fuel producers Exxon Mobil and Chevron

Lydia Darby, ShareAction

Stop fighting the science

As with most highly emitting industries, companies in the chemicals sector have made commitments to decarbonise. BASF publicly supports the goals of Paris Agreement, which saw countries pledge to cut emissions to limit warming to 2ºC, pursuing efforts to hold it at 1.5ºC. 

But when it comes to supporting regulation designed to accelerate decarbonisation, BASF changed its tune. A recent report from think tank InfluenceMap revealed that BASF is among the three worst companies in the world for anti-climate lobbying activities. It is beaten to the ignoble top spot only by fossil fuel producers Exxon Mobil and Chevron. 

At its AGM, ShareAction asked BASF to stop lobbying against the interests of the planet and future generations and instead align its lobbying activities with the science.

Currently, the chemical sector generates over 6% of global emissions and BASF is a loyal customer to oil and gas majors – 94% of its raw materials are fossil fuels.

This is not a business model for the future. If BASF and its peers are serious about keeping to the goals of the Paris Agreement, they must fundamentally change how they operate.  

Last chance saloon for 1.5ºC

Although no doubt familiar to many, the high stakes of the climate crisis bear repeating. The latest report from the UN’s Intergovernmental Panel on Climate Change which was released last month gave a ‘final warning’, saying we need rapid and sustained cuts in emissions if we want to keep global warming within 1.5ºC.

Anything above 1.5ºC of warming will compound the crises that we are beginning to see the seeds of today: lethal heatwaves, forest fires, rising sea levels, biodiversity collapse, and other natural phenomena unprecedented in modern times. 

It's long been clear that delaying climate action is not a safe path for the planet. But as the world moves to net zero and the cost of carbon creeps up, the risks to investors are clearer too. 

Consider the case for fast action to decarbonise, and today's hot ticket chemical companies start to look different. An industry anchored to fossil fuels and decades-old processes cannot reinvent itself overnight – it will take years. 

In the meantime, the cost of carbon will keep rising. That's why starting early and frontloading low-carbon investments is a smart play for value creation.

There is a role for investors

Just as the cause of the chemicals industry’s current climate problem is plain to see, there is a path forwards. Replacing fossil fuels with renewable energy and alternative chemical building blocks, like renewable hydrogen and captured CO2, is the way to go. These solutions exist, as do big challenges to adopting them at scale. It's with bold action by companies like BASF that these will be overcome.   

Investors are key to ensuring that this change happens. They have the power and influence to engage with chemical companies like BASF. 

Investors can also become shareholder activists, posing questions at AGMs and stewarding companies. They can push for greater transparency and disclosure in the industry. They can also question companies on their preparedness to meet net-zero targets. 

ShareAction has a multitude of collaborative shareholder initiatives, including a Chemicals Decarbonisation Working Group, which offer guidance and roadmaps to engaging successfully. 

What is clear about the climate crisis is that every industry needs to play its part. The science is clear that there is no room for exceptions, nor laggards and heel-draggers. We will continue to work with investors to ensure that the chemicals industry is on track for a future in which we inhabit a healthy and functional planet. 

Lydia Darby is campaign manager at ShareAction