Nestle commits to TCFD disclosure after CA100+ pressure

But negotiators say they will file shareholder resolutions if more is not done

Climate Action 100+ (CA100+) investors have convinced food & beverage giant Nestle to report in-line with the Taskforce on Climate-related Financial Disclosures (TCFD) in a move branded “indispensable but insufficient” by lead negotiators.
The developments were revealed in the annual report of Dutch pension fund manager APG, which has been co-leading the discussions alongside Ethos, the investment foundation composed of 218 Swiss pension funds. Nestle is one of the target companies for CA100+, the major investor initiative focused on engaging with ‘systematically important carbon emitters’ globally. The firm has also agreed to include the social impact of the environmental crisis in its climate scenarios.
Reporting climate-related financial disclosures was one of a series of requests Ethos’ CEO, Vincent Kaufman, put to Nestle at its 2018 AGM.
Lucian Peppelenbos, APG’s Senior Responsible Investment & Governance Specialist who is leading the engagement, said that acting as part of CA100+ had given the investors additional leverage.
“You speak on behalf of a really impressive group; but also, for the company, there’s many advantages to having a structured dialogue in a multi-year initiative with very clear investor expectations, so redundancies in individual engagements are minimised. We can develop a real rhythm in the engagements and in achieving progress. We can also transfer best practice from one company to another, even across sectors.”
Peppelenbos said Nestle’s activity feeding its climate scenario insights into the World Business Council for Sustainable Development’s sector-specific TCFD guidelines made it a “leading company”.
Meanwhile, other climate-related measures that APG and Ethos had proposed to Nestle in line with the CA100+ goals have yet to be adopted.
The investors have requested that Nestlé sets short-term targets linked to executive remuneration to reach what they call an “ambitious” 50% total emissions reduction target set for 2050.
Kaufmann said: ”We’ve asked them to make sure management is accountable to those targets. In 2050, there won’t be many current [management] who can be held accountable to what has been achieved, so it’s still very important to have those intermediate targets.”APG is “in talks” with Nestle about how the company can reduce its suppliers’ carbon footprint, while Kaufmann told RI that Ethos is “closely monitoring” Nestle’s progress. Nestle’s supply chain represents 90% of the group’s greenhouse gas emissions.
The investors say the work is “promising” and have welcomed Nestlé’s previous commitment to better control its supply chain, in particular through satellite monitoring of the sourcing of palm oil.

Ethos and APG are “not yet satisfied” on Nestle’s governance and competency in sustainability

Kaufmann said Ethos and APG are “not yet satisfied” on Nestle’s governance and competency in sustainability, and have called on the company to set up a separate and dedicated sustainability committee – rather than the joined sustainability and nomination committee that the board currently has.
He said Ethos was “convinced the company will continue to move on its climate strategy” but that Ethos was ready to escalate to filing shareholder resolutions in the event of dialogue being blocked.
APG is also leading conversations with Unilever, and coordinating the strategy for the food sector in Europe for CA100+. Peppelenbos said food had been a less visible sector in the climate debate. “Food and agriculture are 24% of global greenhouse gas. If you take land use related sectors they’re a very important part of investor portfolios, but somehow in the public debate it’s been less highlighted.”

For more on this topic…
TCFD reporting and climate engagement will both be discussed on dedicated panels at next week’s RI Europe. For the full agenda, see here