Climate Action 100+, the world’s largest investor engagement initiative, has tightened up requirements for signatories and company engagements as it launches its highly anticipated second phase.
The project was originally slated to conclude after five years, but it had long been expected that the deadline would be extended. Phase 2 will now run until 2030.
Investors leading engagement with a company will now be subject to minimum annual requirements. They will be required to prepare objectives, a schedule of engagement activities, appropriate escalation options, and how supporting networks or other investors in the group can support them.
They will also be required to disclose the initiative key outcomes over the previous year, as well as whether objectives have been delivered and what escalations have been made.
When key votes are “flagged” to the initiative, it will encourage investors to disclose their votes and rationales after meetings.
Lead investors on a company and any investors engaging with the company on their own will now be “expected” to disclose their actions in such cases, provided this is “allowable by jurisdiction, if practical and in line with signatories’ own internal policies”. Public statements will be required for lead investors who seek to flag key votes ahead of AGMs.
Investors who are already engaging with a company can now join thematic working groups covering areas such as state-owned enterprises, or sectoral working groups, which will look to address industry-wide barriers to the energy transition.
Lead investors will also be given the option to voluntarily disclose their identities on the Climate Action 100+ website, partially fulfilling a key transparency ask.
On the governance side, the steering committee has seen minor changes. The term length for chairs and vice-chairs has doubled to 12 months, and the number of investor representatives has doubled to 10, meaning they now outnumber representatives from coordinating investor networks.
Finally, the initiative’s signatory statement has been updated to make explicit reference to debt engagement, and companies on the focus list will now be asked to actually implement transition plans as well as disclosing them.
The changes are broadly in line with proposals made in a signatory consultation in the latter half of last year. However, the publication of a full list of lead engagers was watered down to voluntary disclosure after only half of respondents backed the measure, while the expansion of the steering committee was not in the initial consultation.
Capex critical
François Humbert, active ownership lead manager at Generali Insurance Asset Management and chair of the CA100+ steering committee, told Responsible Investor that the aim of Phase 2 was to scale up the achievements of the first five years from words to action.
“What we’re going to look at really now is the more difficult bit,” he said.
A key focus area will be capex alignment. “Capex is the reality check,” said Humbert. “It bridges the extra-financial with the financial, and you clearly see where the words are becoming actions.”
In the latest round of assessments against the CA100+ benchmark, only Italy’s Enel had achieved full alignment with the capex indicator. A further 14 firms had achieved partial alignment.
Investors will need to put more effort, knowledge and expertise into capex engagement, Humbert said, as it involves a shift in approach from issuers as well.
Asked whether CA100+ had addressed the criticisms of the initiative, Humbert said: “We’ve done the best we can given this is a world initiative. You have to manage internal policies of investors. They’re independent, and there are cultural challenges in different regions. There are many different perspectives.”
He added that CA100+ wanted to introduce an incentive for lead investors to be visible, and create a “virtuous circle” by showcasing engagement case studies and results.
While Humbert said he had been too focused on his role as chair to consider whether Generali might take part in the new sectoral or thematic working groups, he added it could be interested in the group looking at state-owned enterprises, or group engagements along a company’s value chain.
Generali is leading engagement with Polish state-controlled utility PGE, as well as Czech energy firm ČEZ Group.
‘Marginal’ reshuffle
Phase 2 of CA100+ will also see a small reshuffle of companies targeted by investors, as previously reported by RI. Ten companies have been dropped, while 14 have been added.
The removals include Coca-Cola, PepsiCo, US forestry company Weyerhaeuser, the Netherlands’ Koninklijke Phillips, and US oil and gas firm Devon Energy.
All three oil and gas infrastructure companies – Kinder Morgan, Enbridge and TC Energy – have been removed.
Additions include industrial and oil and gas firms including Tata Steel, EQT Corporation and Mitsubishi Heavy Industries, while JBS, Carrefour and Home Depot will also make an appearance.
The initial list of 100 companies consisted of the highest-emitting firms within the MSCI ACWI, with a further group added based on signatory suggestions. CA100+ said the latest tweaks had been made following analysis of recent CDP data, “to ensure we remain focused on the top emitters”.
Uniper, which is now 99.1 percent owned by the German government, and Oil Search, which merged with Santos, have also been dropped from the list.
The removal of Canadian pipeline companies Enbridge and TC Energy leaves a potential gap in engagement between CA100+ and national initiative Climate Engagement Canada (CEC), which picked up significant emitters not already covered by CA100+ when it announced its focus list last year.
A spokesperson for CEC told RI that it was considering adjustments to its focus list in light of the CA100+ decision but had yet to come to a conclusion.
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