Climate Action 100+ measured the climate progress of more than 100 companies. The findings: more needs to be done to achieve these goals.
Climate Action 100+ is the largest investor engagement initiative globally focused on the climate. Its Net Zero Company Benchmark assessments measured the progress of 166 focus companies against three engagement goals, as well as several key indicators of business alignment with the goals of the Paris Agreement.
The benchmark assesses companies’ year-over-year progress in reducing greenhouse gas emissions, advancing climate governance, and improving related disclosures. While the study showed some corporate progress against key indicators, it also highlighted that more action needs to be taken to limit the impact on changing global temperatures to 1.5 degrees Celsius by 2050.
Positive findings include a 17% year-over-year increase in the number of companies that have committed to net-zero goals by 2050 or sooner, 90% of firms have some level of board oversight on environmental initiatives, and 89% are in line with recommendations set forth by The Task Force on Climate-Related Financial Disclosures (TCFD).
However, the benchmark also highlighted that most firms have not set short and medium-term emission reduction goals to meet their longer-term commitments of limiting temperature increases of 1.5 degrees Celsius.
The report pointed out five areas where companies fell short: only 17% of firms have set medium-term targets in line with the 1.5 degrees Celsius scenario and cover all material emissions; just 42% have made total commitments that include Scope 3 emissions; only 5% have aligned their CAPEX strategies with their net-zero goals; just 17% have quantified decarbonization strategies to achieve their long-term goals, and no company has integrated climate risk into their accounting and audit practices.
“Overall the Net Zero Company Benchmark clearly shows that focus companies are not making the progress required to align with achieving the 1.5°C climate goal agreed in Paris and reaffirmed in Glasgow last year,” said Stephanie Maier, global head of sustainable and impact investment at GAM Investments and current chair of the global Climate Action 100+ Steering Committee. “Given that these companies represent the world’s largest corporate greenhouse gas emitters, their ambition and pace of change is critical to a successful transition and needs to accelerate.”
This second round of Climate Action 100+ Net Zero Company Benchmark arrives in time to empower investors to put pressure on company boards in the upcoming proxy voting season.
“The next several months will be a critical time for investors to support key climate shareholder resolutions, including those flagged by the initiative, that are aligned with the goals of the initiative and the Paris Agreement,” noted the report.
The report also pointed out additional sector and issue-specific problems. For example, less than one-third of electric utility focus companies had a coal phaseout plan; nearly two-thirds of oil and gas firms were still approving projects that are inconsistent with limiting global warming; there was a large gap between what companies were saying publicly and doing in practice; and nearly no steel, cement and aviation firms were aligned with emissions goals.
“We will continue to use the power of collaborative engagements and proxy voting to drive action at our portfolio companies to align their climate ambitions with their long-term strategies and capital allocation decisions,” said Simiso Nzima, managing investment director of global equity at CalPERS and a member of the global Steering Committee. “As a long-term investor, we want our portfolio companies to execute sustainable business models and thrive in a low carbon economy.”
Climate Action 100+ is the world’s largest investor engagement initiative, with 700 investors representing over $68 trillion in assets under management.
“Climate Action 100+ will give focus companies another opportunity to step up and demonstrate progress with a further round of assessments to be released later this year,” noted the initiative.
“Companies will be given the opportunity to provide additional disclosures or commitments, announced between 1st January 2022 and 13th May, to improve their Benchmark results.”