Construction material companies warned they risk divestment and lack of access to capital as a growing number of investors shy away from carbon-intensive sectors

(Makes clear in paragraph that global cement industry accounts for 7% of carbon dioxide emissions, according to the International Energy Agency, not greenhouse gas emissions.)

By Matthew Green

LONDON, July 22 (Reuters) - European funds managing $2 trillion in assets called on cement companies to slash their greenhouse gas emissions on Monday, warning that a failure to do so could put their business models at risk.

With the extreme weather and natural disasters associated with climate change intensifying around the world, some asset managers are ramping up engagement with heavy polluters to demand a faster transition to a cleaner economy.

"The cement sector needs to dramatically reduce the contribution it makes to climate change," said Stephanie Pfeifer, chief executive of the Institutional Investors Group on Climate Change, which has more than 170 members, mainly European pension funds and asset managers.

"This is ultimately a business-critical issue for the sector," Pfeifer said in a statement.

The group said investors had written to cement or construction materials companies including Ireland's CRH , Franco-Swiss group LafargeHolcim and France's St Gobain to demand they achieve net zero carbon emissions by 2050. They also noted that Germany's HeidelbergCement had already adopted the target.

The funds urged all cement companies to align themselves with the 2015 Paris agreement to combat global warming, engage with policy-makers to ensure an orderly transition to a low carbon economy, and increase their reporting of climate risk.

"Construction materials companies may ultimately risk divestment and lack of access to capital as an increasing number of investors seek to exclude highly carbon-intensive sectors from their portfolios," said Vincent Kaufmann, chief executive of the Ethos Foundation, a group of Swiss pension funds, which signed the letters.

Signatories collectively manage assets worth $2 trillion and include Aberdeen Standard Investments, BNP Paribas Asset Management, Sarasin & Partners and Hermes EOS.

Although funds are increasingly engaging with companies from airlines to carmakers on emissions, few are calling for the systemic transformation of the global economic system that scientists increasingly argue is needed to prevent runaway climate breakdown.

The cement industry produces 7% of the world's carbon dioxide emissions, according to the International Energy Agency, meaning that if it were a country, it would be the third largest emitter, behind the United States and China.

With climate campaigners traditionally focused on fossil fuel companies, the European cement sector has received comparatively little scrutiny until recently.

On Tuesday, police arrested six climate activists from civil disobedience group Extinction Rebellion at a protest aimed at disrupting a site in east London belonging to London Concrete, a unit of LafargeHolcim.

In June last year, a report from think-tank Chatham House concluded that although there was no 'silver bullet' to reduce emissions from cement, it should be possible to deploy a range of policies and technologies to achieve deep decarbonisation. (Reporting by Matthew Green; editing by Clare Fallon)

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