CA100+ companies show ‘poor performance’ on Just Transition

An overwhelming majority of companies targeted by Climate Action 100+ are failing to meet expectations on the Just Transition, according to the initiative’s first benchmark update since the launch of its second phase.

The benchmark assesses target companies across a series of indicators and is a widely used tool for assessing the alignment of company disclosures and targets with the net-zero transition.

As part of the second phase of CA100+, which began in June, the benchmark was updated and expanded to include public assessments on the Just Transition, board climate competencies and Paris-aligned lobbying, among other changes.

In the first round of public Just Transition assessments, firms targeted by the initiative perform poorly on aggregate. Just 1 percent fully meet the requirements on Just Transition commitments, while 31 percent are partially aligned. This falls to 1 percent and 9 percent respectively for the assessment on Just Transition planning and monitoring.

No company has received a fully aligned assessment on its Just Transition commitment and planning.

Austria’s OMV and Spain’s Repsol are the only firms to have committed to consult and seek consent from affected communities as part of projects associated with decarbonisation initiatives, while only Italy’s Eni and Enel have introduced Just Transition KPIs in their planning.

Poor performance

Francois Humbert, lead engagement manager at Generali Insurance Asset Management and chair of the CA100+ global steering committee, told Responsible Investor he was expecting a poor performance on Just Transition.

“From what I see in Central and Eastern Europe, and what we have heard in emerging markets, it’s one of the biggest hurdles we have,” he said. “I’m engaging in Poland, where there are two million people directly reliant on coal. It has to be managed extremely carefully, especially for state-owned companies.”

As an example of Generali’s Just Transition engagement, Humbert highlighted conversations with Czech utility ČEZ, where he is one of the CA100+ lead engagers. The firm and the Czech government wanted to model the social implications of the transition but lacked the capacity. Generali arranged a meeting between Imperial College and government ministers to discussing modelling.

“It requires a lot of effort and a lot of knowledge to actually bring value and be able to overcome the social considerations,” Humbert said.

Simonetta Spavieri, senior engagement analyst at Royal London Asset Management (RLAM), said she was also unsurprised at the results, given investor pressure has focused on emission accounting, target setting and technologies, “forgetting that people are key to the delivery of any plan“. For investors to best engage on the Just Transition, she recommended asking questions at AGMs on how firms are addressing social risks and opportunities of climate transition plans.

However, she said that RLAM expected this to rapidly improve. “Most companies we have been engaging with get it,” she said. “Companies we engage with agree with us in that planning for a Just Transition makes companies more likely to deliver on their commitments and contributes to building the social acceptability necessary to smoothen the path to net zero.”

Nick Robins, professor in practice for sustainable finance at the Grantham Research Institute, said the benchmark “confirms the growing importance of the Just Transition as a key factor to enable corporate decarbonisation”. 

He welcomed the progress made through “early stage pledges from pioneering companies”, but noted that three-quarters of the world’s most polluting firms have still not yet recognised the importance of responding to the social opportunities and risks of net zero.

“For investors, the Just Transition is not only vital to ensure that longstanding labour and human rights principles are at the heart of net-zero action,” he said. “It is also essential to build the public trust that’s needed to deliver transformational climate action.

“Stepped up engagement by shareholders and bondholders is now required, with a goal of getting 50 percent of CA100+ companies to make a Just Transition commitment by the time the next benchmark is out, along with much more granularity in terms of social dialogue and performance measurement.”

Steady progress

Elsewhere in the benchmark, CA100+ is slowly making progress on its original asks.

The proportion of companies committed to net zero across Scope 1 and 2 emissions rose 2 percentage points over the past 12 months to 77 percent. The proportion of firms disclosing medium-term targets has risen 6 percentage points to 87 percent and 93 percent of firms have board committee oversight of climate risk, up from 91 percent last year.

However, ambition is failing in other areas. Only 2 percent of focus companies have phased out or committed to phasing out CapEx in unabated carbon-intensive assets, and just 5 percent of company boards have sufficient capabilities and competencies to assess and manage climate risk and opportunity.

Not all firms have received an assessment. Companies that were added to the focus list in summer last year will only be assessed from 2024, while assessments have been suspended for the five Russian companies that were being targeted.

CA100+ characterised the results as “continued progress on ambition contrasted by a lack of detailed plans of action”, noting also that most long and medium-term targets set by companies are not sufficiently comprehensive or Paris-aligned.

“There has been steady progress with a steady pace,” Humbert said. “I wouldn’t say the headline is always lack of progress, but alignment with the Paris Agreement is extremely ambitious and we want to continue to push as much as we can.”

In order to drive better progress at companies, Humbert echoed calls for a shift by investors from quantity of engagements to quality.

“For each company I engage, I take one topic out of maybe 100 data points and I spend six months to a year on it to see progress,” he said. “We are not analysts, we are almost negotiators.

“It takes months to years to trigger change inside a company and the financial industry is driven by very short timeframes. I usually talk for years about the same company inside my institution, and people get bored because I always talk about this, but it’s how you achieve change.”