trending Market Intelligence /marketintelligence/en/news-insights/trending/s_0doLj7ox3RqwWjraenYg2 content esgSubNav
In This List

Investors with $35 trillion say most target companies still short of Paris goal

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


Investors with $35 trillion say most target companies still short of Paris goal

Nearly two years into the investor-led Climate Action 100+ initiative, a number of companies targeted by the engagement strategy have improved their climate disclosures, set new emissions reductions targets and revisited their lobbying strategies.

But investors participating in the effort say they are far from convincing all of the companies in their cross-hairs to review and act on climate change, according to an Oct. 2 progress report on the initiative.

"While companies across many sectors have announced ambitious goals, the task of moving all 161 companies into alignment with the goals of the Paris Agreement [on climate change] has only just begun," the paper said.

Climate Action 100+ is a coordinated climate-focused engagement strategy among 370 global investors with more than $35 trillion in assets under management. Through letters, direct meetings with company officials and shareholder resolutions, the group is pressing some of the largest companies in the consumer, transportation, energy, and metals and mining sectors to align their emissions goals with the Paris agreement. It also wants the companies to assess and disclose climate risks in line with the recommendations of the Task Force on Climate-related Financial Disclosures, or TCFD, and implement a strong related governance framework.

SNL Image

Volunteer rescue boats make their way into a flooded subdivision to rescue stranded residents as floodwaters from Tropical Storm Harvey rise in August 2017 in Spring, Texas. Investors are worried that an uptick in climate-change exacerbated storms could put companies in their portfolio at risk.
Source: AP Photo

The initiative's investors said their primary goal is to ensure companies in their portfolios are aware of, and acting on, risks related to global warming-induced changes to the climate such as extreme weather events, droughts and flooding, and potential local and national climate-related regulations.

The report found that while 70% of the targeted companies have set long-term emissions targets, only 9% of those targets align or go beyond the goal of the Paris accord to curb the global emission of heat-trapping gases enough to limit global warming to 2 degrees Celsius from pre-industrial levels.

Moreover, the report said only 8% of the targeted companies have policies that ensure their lobbying activities and those of their trade associations support action on climate change. Drilling down into those figures, nearly all of the oil and gas companies on the Climate Action 100+ list hold memberships with industry associations that take positions on climate that are in conflict with those companies' internal positions, the report said.

Andrew Logan, senior director of oil and gas for shareholder advocacy group Ceres, specifically singled out American Fuel & Petrochemical Manufacturers. The group has actively lobbied to undermine vehicle fuel efficiency standards in the U.S., and while Shell dropped out of the trade group, a number of other oil companies have not. Logan also noted that the American Petroleum Institute has promoted the rollback of methane requirements despite some of its largest members supporting those requirements.

Turning to climate risk analysis and disclosures, the report said 40% of the targeted companies have done a climate scenario analysis and 30% have formally supported the recommended framework of the TCFD.

Identifying tangible links between engagement, action

Cynthia McHale, senior director of Ceres' Climate Action 100+ investor engagement, acknowledged challenges in identifying when the initiative was the primary reason a company acted and not other factors such as market dynamics and previously ongoing investor engagement.

"Credit for groundbreaking new company commitments can sometimes be contentious, especially given complex energy market dynamics and stakeholder actions over many years," McHale said. "In instances where investor signatories have had a long history of engagement with a particular focus company and are deeply familiar with its strategy, operations, and management team prior to the initiative's launch, Climate Action 100+ brought significant additional influence, capacity, and resources to these engagements."

McHale added that "we don't expect all focus companies to always attribute their recent climate commitments to Climate Action 100+." In particular, companies in the U.S. are "more likely to mention 'investor pressure' more broadly, or sometimes not comment" at all on the role investors played.

But some companies have indicated that engagement by Climate Action 100+ investors influenced their decisions.

Royal Dutch Shell PLC in a late 2018 joint statement with Climate Action 100+ announced new carbon reduction targets that included Scope 3 emissions — those produced up and down the supply chain, including by customers — and said it would review its lobbying activities. Shell subsequently cut ties with the American Fuel and Petrochemical Manufacturers Association in April. However, Shell said it would continue to engage with a number of other groups that do not fully align with Shell's stated climate goals, including the American Petroleum Institute and the U.S. Chamber of Commerce.

BP PLC this year backed a Climate Action 100+ resolution to report on its greenhouse gas emissions and climate goals. Glencore PLC announced in February that based on engagement with Climate Action 100+ investors, it would not expand its coal production beyond current levels and pledged to reconfigure its emissions targets and to disclose its longer-term projections for tackling Scope 3 emissions.

Equinor ASA said in an April joint statement with Climate Action 100+ that it would do a stress test related to the Paris Agreement's 2-degree global warming scenario and review its memberships in industry associations.

In a climate-change report in February, Rio Tinto noted its engagement with Climate Action 100+. "Rio Tinto's intent is to demonstrate that we are following through on our public commitments on climate change, aligning our disclosure with good practice and internationally accepted frameworks," it said in the report.

And following engagement by Climate Action 100+ investors, Nestlé SA agreed to report in line with the TCFD and to include social dimensions in its scenario analysis, such as impacts of climate change on crops and agricultural resources, the progress report said.