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Dec 17, 2024

Why IROs need to get smart about the hidden health risk of air pollution

New consultation asks IR teams to share details about corporate contributions to toxic air

Air pollution has major impacts on human health, the environment and the economy. As a growing business risk, it’s an issue that IROs cannot afford to ignore.

Some 99 percent of people breathe air that exceeds World Health Organisation (WHO) limits and one in six deaths worldwide is caused by air pollution. The global cost of health damages from air pollution in 2019 was estimated to equal around 6 percent of the world's GDP.

Despite these impacts, air pollution is not given enough consideration as a business risk by companies. Compared to other risks that fall at the nexus of environment, health and the economy – such as climate change – there is a lack of awareness, understanding and action.

As a result, air pollution is underrepresented in corporate disclosure requirements, and a lack of data on business contributions to air pollution hinders the ability of investors to take meaningful action.

This is concerning, particularly considering incoming regulation and legislation aimed at improving air quality in various jurisdictions across the globe, and why we are calling on IROs to respond to a new consultation on corporate air pollution from CCLA Investment Management and Guy’s & St Thomas’ Foundation.

Air pollution has huge impacts on human health. It’s a major risk factor for cardiovascular and respiratory diseases, type 2 diabetes, cancers and neurological diseases. It is the second leading global risk factor for death, behind high blood pressure, surpassing tobacco use and poor diet.

When it comes to the environment, air pollution is an invisible and pervasive threat to biodiversity. Ground-level ozone damages vegetation and crop yields, while sulphur can lead to excess acid in lakes and streams, damaging trees and soils.

The economic impact of air pollution is substantial and rising. Air pollution-related ill health already results in 1.2 billion lost working days annually. This figure is projected to reach 3.7 billion by 2060.

Which companies are most exposed?

No business is immune to, or unaffected by the impacts of air pollution, however some companies are more exposed than others. For example, in the UK, road transport is the biggest source of air pollution – so any company using cars, HGVs or other vehicles will be affected. Businesses involved with industrial combustion, agriculture, waste and energy are also likely to be a significant cause of air pollution.

It’s especially important that companies working in – or exposed to – these sectors take action on the issue.  Greater transparency and quality data on corporate air pollution can unlock further business action, and more policy drivers and other incentives aimed at improving air quality.

Ignoring the issue, or failing to act, is no longer an option. Action on air pollution is slowly becoming inevitable, with tightening regulations such as the European Union’s CSRD requiring companies to report on their environmental impact, including pollution, and 2035 vehicle bans (initiatives to end the sale of new petrol and diesel cars, including liquid petroleum gas) in many countries. The imminent arrival of new Euro 7 standards in Europe next summer, with restrictions on NOx, carbon monoxide and particulate matter, present an even more immediate challenge for which many may not be ready.

How to get started

Like many complex issues that straddle the E and the S of ESG, and with limited data and guidance available, it can be difficult for IROs to know where to start.

The good news is that we can change this together. CCLA Investment Management and Guy’s & St Thomas’ Foundation have set up a new partnership aimed at tackling corporate air pollution. Led by scientific data, we have set out to accelerate corporate efforts to measure, disclose and reduce emissions of toxic pollutants into the air.

We plan to develop a global benchmark, which assesses and ranks a selection of listed businesses on their preparedness and resilience to the impacts of urban air pollution. The proposed benchmark will define investor expectations of companies involved in urban road transport, drive increased transparency and disclosure, and showcase examples of good practice in corporate management of air pollution for the benefit of investors and companies. This proposal is now out for public consultation and IR managers at companies with particular exposure to air pollution, and others that recognise its significance and impact, can get ahead by providing their insight.

We are also seeking feedback from public sector bodies, investors, academics, non-governmental organisations and others with an interest in urban air quality.

Reducing air pollution will bring about positive outcomes for people, the planet and will improve long-term business resilience. It's an issue at the heart of economy, health and the environment that companies can't ignore. We are calling readers to get involved and share the consultation.

Amy Browne is director of stewardship at CCLA Investment Management

Amy Browne

Amy Browne is director of stewardship and deputy head of sustainability at CCLA. She joined the investor coalition's sustainability team in 2020. She is responsible for leading and coordinating CCLA’s stewardship activity across all areas, from...

Director of stewardship and deputy head of sustainability
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