Engagement standards essential to avoid CA100+ greenwashing, warns ShareAction

Stewardship reporting by the initiative’s largest signatories is often poor in quality, NGO warns in new report

Climate Action 100+ risks allowing investors to greenwash their activities by signing up to the initiative but failing to use their influence to drive real economy change, ShareAction has warned in a report highlighting the need to set clear engagement expectations.

The influential NGO analysed the stewardship and reporting activities of 60 of the largest CA100+ members, weighted to be representative of geography and investor type. Of these, 49 failed to specify any objectives for climate change engagement and did not specify their escalation steps, while 37 did not provide aggregate statistics for climate change engagement.

The report also criticised the quality of engagement case studies. While two-thirds of the investors covered by the report provided case studies, only 30 named the companies involved and the quality “varied significantly”. Some case studies presented outcomes “as if they were primarily attributable to the engagement undertaken, without clear acknowledgement of any other external pressures”.

While the majority of investors mentioned their membership of the initiative, just three named all of the companies that they led engagement for. BNP Paribas Asset Management was the only investor to disclose all the companies it was leading on and the number of engagements it was supporting.

ShareAction’s report also highlighted examples of best practice reporting and stewardship, including DWS’s step-by-step engagement approach and the disclosure of engagement statistics by PIMCO and UBS Asset Management.

However, it noted the poor progress made by companies targeted by the initiative. According to CA100+, just 12 percent of the 167 firms have adequate short-term emission reduction targets and no company has fully aligned its capex with a 1.5C future. Signatories are also performing poorly on voting at focus companies, with a previous ShareAction report finding that many were actively voting against environmental resolutions at AGMs.

Catherine Howarth, ShareAction’s chief executive, said that CA100+ had “the scale and focus required to make a meaningful impact on global carbon emissions”. However, she warned that success depended on action and real effort by all signatories. “So far, not all are stepping up,” she said.

The report warns that, without increased transparency and minimum engagement standards, investors will be able to greenwash their activities by taking part in the initiative without properly exercising their influence.

ShareAction makes five recommendations to CA100+ to raise minimum engagement standards: setting minimum transparency requirements on climate change policies; setting minimum escalation expectations; publishing a list of lead and supporting investors for each focus company; publishing a list of engagement objectives and milestones; and publishing aggregated statistics on engagement activities and outcomes as well as case studies on engagement.

With the initiative due to move into its second phase at the end of this year, the report says it is crucial that investors step up their engagement and reporting.

The call for CA100+ to publish a list of the investors assigned to lead engagement with each of its focus companies is not a new one. ShareAction was among a group of NGOs, also including ClientEarth and the ACCR, who wrote to the initiative in 2019 calling for greater transparency.

CA100+ has previously said that it leaves it up to members to decide whether to disclose their engagements “to allow investors to engage as effectively as possible and deliver the best possible outcomes”. It added: “The initiative includes signatories from across the globe, many of whom operate in different regulatory environments and have their own policies on disclosure of engagements, so their appetite for engaging publicly varies.” Responsible Investor maintains a partial list of lead and supporting investors based on voluntary disclosures and public reporting.

A spokesperson for Climate Action 100+ said that since the initiative launched “it has played a key role in bringing engagement and stewardship on climate issues into the mainstream”.

They added: “Engagement conducted as part of Climate Action 100+ has driven notable progress towards climate goals, with more than 110 focus companies having made net zero commitments today, compared to just five in 2017.

“Overall, there is no doubt that there is still urgent work to do if we are to meet the goals of the Paris Agreement and effectively tackle the climate crisis. As Climate Action 100+ moves into the final year of this phase and looks to the future, we intend to further develop and strengthen the initiative to ensure its continued success in addressing the issues at hand”.