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CA100+ unveils Net Zero assessment tool as investors warn “unresponsive” firms to prepare for pushback next AGM season

$47trn investor engagement initiative writes to CEOs and chairs of 161 companies on transition planning

Multi-trillion-dollar engagement group Climate Action 100+ (CA100+) has written to the chairs and CEOs of the world’s 161 dirtiest listed companies calling on them to develop net-zero strategies backed by science-based targets.

The investor group warned “unresponsive” firms that they may be targeted at their next AGM, stating: “Outcomes of the analysis and responses of CEOs will also inform investor engagement strategies through CA100+, particularly for unresponsive or poorly performing companies. Where relevant, this will include shareholder activity for the 2021 annual general meeting season.”

To support its engagement, CA100+ has created a method for assessing “which companies are leading the transition to net-zero emissions”.

The Climate Action 100+ Net-Zero Company Benchmark uses 30 indicators, including the setting of science-based targets and capital expenditure plans (see below for the full list), to make a judgement on the credibility of corporate climate strategy and help “standardise what constitutes a ‘net-zero aligned’ business strategy and how to measure alignment with a 1.5°C transition pathway”.

Developed by EY Consulting with input from CA100+ signatories and NGOs including the Transition Pathway Initiative, Carbon Tracker and 2 Degrees Investing Initiative, the results of the assessment will be published sector-by-sector starting next spring. FTSE Russell is conducting company research and analysis.  

CEOs have been invited to collaborate with investors in developing “transition pathway action plans”, which will provide guidance on how specific sectors can achieve net-zero emissions. 

On a plenary panel at RI DigiFest earlier this year, Spanish oil giant Repsol agreed to work with CA100+ to “define a standard for the Oil & Gas sector on net zero” when asked by Adam Matthews, Director of Ethics & Engagement at the Church of England Pensions Board. This would address the role of offsetting in strategies, among other things.  

The 161 companies targeted for engagement by CA100+ are estimated to be responsible for up to 80% of global greenhouse gas emissions. 

‘Outcomes of the analysis and responses of CEOs will also inform investor engagement strategies through Climate Action 100+, particularly for unresponsive or poorly performing companies. Where relevant, this will include shareholder activity for the 2021 annual general meeting season’ – CA100+

Last month, Norway’s largest private asset manager and CA100+ member, Storebrand lost patience with five of those companies over their alleged lobbying activities against climate action, divesting US oil & gas giants Exxon and Chevron along with Anglo-Australian miner Rio Tinto, US gas utility Southern Company and German chemical firm BASF.

To date, 50 CA100+ companies have indicated that they will “aim” to achieve net-zero emissions by 2050 or sooner, but letter makes clear that those strategies must “cover emissions across the full value chain” and that targets and goals around emissions reductions are “in line with the science on limiting global warming to 1.5°C”. 

It also stresses the need for CEOs to set “medium-term objectives”, which it says are needed by investors to ensure “companies demonstrate sufficient ambition”. 

The Climate Action 100+ Net-Zero Company Benchmark contains the following indicators:

  • Ambition: Whether the company has set an ambition to achieve net-zero GHG emissions by 2050 (or sooner);
  • Targets and goals: If clear short-, medium- and long-term GHG reduction targets or goals covering all material scope 1, 2 and 3 GHG emissions are in place and aligned to a 1.5°C global warming trajectory;
  • Decarbonisation strategy: Whether the company has a robust decarbonisation strategy to deliver these GHG reduction targets, goals and ambitions;
  • Capital alignment: Whether an assessment has been carried out of the extent to which a company’s capital investment in carbon-intensive assets or business lines are consistent with the goals of the Paris Agreement;
  • Climate policy support: If a clear commitment and set of disclosures, clarifying intent to support climate policy, has been developed by the company, together with a demonstration of how direct and indirect lobbying is consistent with this intent;
  • Governance: Whether the company has effective board oversight of, and remuneration linked to, delivery of GHG targets and goals (as described in point 2 above);
  • Just transition: Whether the company has disclosed information on how a ‘just transition’ can be achieved – taking account of the impact on employees, communities and other stakeholders – and has been incorporated into the company’s transition planning;
  • Reporting: Whether the company’s overall climate risk reporting is consistent with the recommendations of the TCFD.

These indicators are supported by 22 additional sub-indicators.