Stephanie Pfeifer describes the first two-and-a-half years of Climate Action 100+ (CA100+) as “exhausting”, but she seems far from fatigued when she talks about the next two-and-a-half.
“I think, before, much of the engagement was focused on disclosure,” says the Chief Executive of Europe’s Institutional Investor Group on Climate Change (IIGCC) and the region’s CA100+ representative. “But now we have got to the point where we’re asking for real action – changes in strategies and changes in business models.”
Although there is still work to do on transparency, she concedes – particularly in Eastern Europe and Russia – “about 80% of [CA100+ target] companies in Western Europe are now committed to reporting in line with the Task Force on Climate-related Financial Disclosures (TCFD), so that part of our demands has been more-or-less completely normalised”.
Beyond disclosure, 16 of CA100+’s 46 target companies in Europe have made “some kind of Net Zero commitments”, she continues. These don’t necessarily include a credible game plan for getting there, yet, but all 16 have stated their intention to reach Net Zero by 2050 across all ’material’ GHG emissions.
While energy and utilities dominate the 16 companies – CEZ, BP, E.ON, EDF, Enel, Iberdrola, Naturgy, Repsol, Shell and Total – Pfeifer points out that the “really difficult sectors like cement and steel are also making commitments”.
Indeed, of the four cement companies on the European list, CRH, St Gobain and HeidelbergCement have made Net Zero pledges, with LafargeHolcim setting a Science Based Target aligned with below 2°C. All three steel companies on the European list – SSAB, Thyssenkrupp and ArcelorMittal – have made commitments too.
The remaining company is autos giant Volkswagen.
“So we have now reached consensus that these sectors need to transition,” says Pfiefer. “The next part is working out how they do it.”
Net Zero doesn’t look the same for every company, and the first step towards developing appropriate transition plans will be to understand what will be required from different businesses to meet the objectives.
“There's a real sense that we need detailed sector strategies now, and we need different partnerships between investors, researchers, sectors, companies, policymakers and other stakeholders,” says Pfeifer.
These collaborations are already underway in certain areas, including work around sector strategies.
“We’ve been working with our research partners to really unpick the information that companies have provided to investors so far, and to work out the pathways that they should be going down,” says Pfeiffer.
One research partner, the Transition Pathway Initiative, recently published a report on the Oil & Gas sector, listing the different targets companies have set themselves and exploring the need for goals based on absolute emissions vs. emissions intensity. Another, 2 Degrees Investing Initiative, has just released a report taking a deep dive into the decarbonisation efforts of the autos industry; while a third, Carbon Tracker, has produced a series of profiles on utilities, looking at the viability of their assets in a climate transition.
“All that research feeds into the next round of engagement,” says Pfeifer.
Capex is also going to be a factor that CA100+ signatories begin to consider in their engagement, she says. Mirroring the experts behind the EU green taxonomy – who have insisted that capex should be taken into account when assessing how companies are positioning their businesses on the climate transition – Pfeifer says her colleagues “are looking at capex in detail, and looking at what can be built into the benchmark in terms of a metric for capex to make sure company capex matches up with their [climate] objectives”.
Seiji Kawazoe, CA100+’s Asia lead, told RI this week that company R&D allocation would also come under more scrutiny from the initiative’s signatories.
But when it comes to transition, it isn’t just a matter of companies spending the right money, Pfeifer points out: “We need the right policies to make these technologies happen too, and to make these transitions happen.”
“We are lucky in Europe, because we have a lot of Net Zero commitments from governments, which is not the case in many other jurisdictions.”
Just this week, the European Commission announced sweeping plans to make “clean hydrogen” a central pillar of Europe’s decarbonisation strategy, calling it “one of the enablers in the context of the Green Deal for decarbonising sectors like the chemical industry, steel industry and transport”.
And to ensure policy keeps on moving in the right direction, CA100+ signatories have been pushing hard on lobbying.
Yesterday, NGO InfluenceMap released research suggesting that – despite all the big statements about decarbonisation – the Oil & Gas industry has been riding roughshod over climate-related policy in the fall out from COVID-19, “drowning out pro-climate interventions from the non-fossil corporate sector” in the push for deregulation and support in the pandemic recovery packages being rolled out around the world.
Other sectors, including automotives, aviation, coal and gas, are also identified as being involved in lobbying global governments to ensure the recovery from COVID-19, and its interplay with climate policy, works in their favour.
“It's really important to us that companies stop their negative lobbying,” says Pfeifer. “And there has been huge progress on this, from some surprising companies that we know well on the lobbying side.”
Thirteen European companies on the CA100+ list have publicly agreed to stop negative lobbying and actively support the Paris Agreement: ArcelorMittal, Anglo American, BASF, BHP Billiton, BP, Equinor, Glencore, HeidelbergCement, Repsol, Rio Tinto, RWE, Shell and Total.
Pfeifer has headed up IIGCC for 15 years, and describes CA100+ as “one of the most, if not the most, significant initiatives” she has ever been involved in. “The attention that this has attracted from investors, and the huge shift in the nature of the dialogue we are having with companies – we had nothing like that before 2017.” But, she says, the next two-and-a-half years will see the biggest challenges, as efforts continue to move from disclosure to changes in the real economy.
“It’s going to be really hard work,” she reflects. “How do you rethink entire business models so that they respond to the climate emergency?”