Governance

CA100+ benchmark reveals ‘painful’ progress on climate as investors turn attention to pay, accounting, Just Transition

Despite net zero commitments, few companies have strategies to get there, finds new framework

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Climate Action 100+ has unveiled its inaugural ‘benchmark’, revealing that the world’s largest greenhouse gas emitters still have a long way to go in delivering a net zero transition.

Despite a number of high profile victories by the $54tn shareholder initiative, whose members engage with the world’s largest polluters to push them towards Net Zero, the benchmark shows that none of its 159 focus companies have scored top marks. 

The new framework aims to provide “the first detailed, comparative assessments of individual focus company performance against three high-level commitment goals: reducing greenhouse gas emissions, improving governance, and strengthening climate-related financial disclosures.”

“We know that some of this benchmark news is painful, but we won't make progress unless we're honest about where we're starting from” – Anne Simpson

Companies were evaluated as either Yes, No, Partial, or Not Assessed across nine indicators (see end of article for full list) based on publicly-disclosed information. The assessments are supported by research partners including the Transition Pathway Initiative, Carbon Tracker Initiative, 2° Investing Initiative and InfluenceMap. 

The research found that, despite 83 of the focus companies announcing Net Zero ambitions, none have fully disclosed strategies to achieve such goals. Likewise, none have committed to aligning future capital expenditure with the goal of limiting temperature rise to 1.5 degrees Celsius.

“We know that some of this benchmark news is painful, but we won't make progress unless we're honest about where we're starting from”, said Anne Simpson, Managing Investment Director of board governance and sustainability at CalPERS and one of the founders of CA100+, during a webinar on Friday. 

Brynn O’Brien, Executive Director, Australasian Centre for Corporate Responsibility, said the results of the benchmark were “cast iron proof that the world’s largest emitters are failing to materially rein in their impact on the planet, and that investor strategies to engage them have not yet risen to the challenge”. 

“It is a reality check for global institutional capital’s engagement strategies with large emitters. There is no longer room for praising company posturing and losing sight of material progress,” she added.

The benchmark will be updated annually to reflect company progress, and will be used to inform engagement by CA100+ members and to influence voting decisions at AGMs. 

Mark van Baal, the Founder of climate campaign group Follow This, said: “We hope CA100+ investors will follow this up with votes in favour of climate resolutions at annual meetings, as that is the only thing boards listen to. We expect that in 2021, CA100+ will endorse its members to use all tools in the investors’ toolbox, including voting. We don’t have time for another round of discussions.”

“In recent years, voting has proven to be a crucial tool in compelling Shell, BP, and Equinor to set and advance climate ambitions, despite companies’ claims – backed by CA100+ lead investors – that they were doing enough. Oil majors can no longer use CA100+ statements as a fig leaf to hide inaction.”

Pay will be a particular focus of voting on the back of the benchmark, according to Stephanie Maier, Global Head of Sustainable and Impact Investment at Gam Investments, who was also speaking on Friday’s webinar. She referred to “a critical gap in the number [of companies] linking delivery of net zero targets with remuneration”. Commitments and targets, the quantification of decarbonisation strategies, and 1.5 degree scenario analysis will be other areas of focus. 

CA100+ and its research partners will now develop sector-specific analysis and will begin work on the 2022 benchmark, which will assess companies against the International Energy Agency’s forthcoming 1.5C scenario and address climate accounting, the Just Transition and expanded green revenues.

The next iteration will also include the eight companies (Grupo Argos, Grupo México, Incitec Pivot, Oil Search, Orica, PEMEX, Saudi Aramco and UltraTech Cement) that were not assessed in this benchmark because they added to the focus list too late.  

Full list of indicators:

  1. Net-zero greenhouse gas (GHG) emissions by 2050 (or sooner) ambition
  2. Long-term (2036-2050) GHG reduction target(s)
  3. Medium-term (2026-2035) GHG reduction target(s)
  4. Short-term (up to 2025) GHG reduction target(s)
  5. Decarbonisation strategy
  6. Capital allocation alignment
  7. Climate policy engagement 9 (includes InfluenceMap’s detailed corporate climate lobbying analysis)
  8. Climate Governance
  9. Task Force for Climate-related Financial Disclosure (TCFD) recommendations
  10. Just Transition (TBC)