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Mar 25, 2021

Climate Action 100+ benchmarks companies on crisis response

Evaluations intended to aid investor expectations of companies’ progress and engagement strategies

Investor engagement initiative Climate Action 100+ (CA100) this week released its first benchmark assessing the ambitions and actions of the world’s largest greenhouse gas (GHG) emitters and other companies it says can help propel efforts to reach the net-zero emissions target.

According to CA100, its net-zero company benchmark provides what it calls the first detailed, comparative evaluations of specific companies’ performance against the initiative’s three high-level commitment goals: reducing GHG emissions, improving governance and strengthening climate-related financial disclosures.

The initiative, which is backed by more than 540 investors managing a total of around $52 tn in assets, engages with the 100 biggest GHG emitters and a further 60 companies it views as key to tackling climate change, seeking greater climate ambition and action from boards and executives. The benchmark is intended to aid investors’ expectations of companies’ progress and investors’ engagement strategies.

Specifically, the benchmark defines key indicators of success for business alignment with net-zero emissions and the goal of the Paris Agreement to limit global temperature rise to 1.5°C. CA100 reported recently that 43 percent of its focus companies have now set ‘a clear ambition’ to achieve net-zero emissions by the middle of the century. But ‘clear gaps’ remain as only 10 percent have included Scope 3 emissions in their 2050 targets, it said.

The first set of assessments looks at 159 companies. A further eight companies that were added to the CA100 focus list last November will be included in the next assessment cycle. The benchmark does not specifically score or rank companies and it does not use overall numeric or alphabetic ratings.

‘The [CA100 benchmark] moves us from ‘why’ to ‘how’ companies make the net-zero transition,’ says Anne Simpson, managing investment director for board governance and sustainability at CalPERS and a CA100 steering committee member. ‘It sets out the indicators that matter to investors, including [capital expenditure], board governance and climate reporting. We cannot manage what we cannot measure. The benchmark gives us the tool needed for engagement and to inform our proxy voting.’

In releasing the benchmark this week, CA100 says no company it evaluated performed at a high-level across all nine key indicators and metrics used. The assessments also find that no company has fully disclosed how it will achieve its goals to reach net-zero emissions by 2050, including setting targets to achieve ambitious emissions reductions within the next decade.

CA100’s findings across the companies evaluated include:

  • The alignment of value chain GHG (Scope 3) emissions often remain a ‘blind spot’. Fifty-two percent of companies covered have announced an ambition to achieve net-zero emissions by 2050 or sooner but roughly half of these commitments do not cover the full scope of the companies’ most material emissions 
  • ‘Long-term ambitions need to be backed by clearer strategies and robust short and medium-term targets.’ Although 107 companies have set medium-term targets for the period 2026 to 2035, only 21 meet all assessment criteria. Seventy-five companies have set short-term targets for the period to 2025, but only eight meet all assessment criteria
  • ‘Future investments need to be more clearly aligned with the net-zero transition.’ Only six companies commit to aligning their future capital expenditures with their long-term emissions reduction target(s), and none of these has committed to aligning future capital expenditure with the goal of limiting temperature rise to 1.5°C
  • ‘Corporate boards and executive management teams need to improve climate change governance.’ Eight-seven percent of companies assessed have board-level oversight of climate change but only a third of companies tie executive compensation to the company’s emissions reduction targets  
  • ‘Ambitious [1.5°C] pathways are often missing from climate-scenario planning.’ Almost three quarters of companies assessed commit to align their disclosures with the TCFD recommendations and/or support the recommendations. But just 10 percent use climate-scenario planning that includes the 1.5°C scenario and encompasses the entire company, according to CA100.

‘The [CA100 benchmark] shows there is an urgent need for greater corporate action and higher ambition in accelerating the net-zero economy and ensuring a safe and viable future,’ Mindy Lubber, Ceres CEO and president and a CA100 steering committee member, says in a release on the benchmark. ‘Investors, companies and all stakeholders now have a clear marker of progress that can drive transformational change at the necessary speed and scale.’

The benchmark has been developed in co-operation with climate research and data organizations such as Transition Pathway Initiative, Carbon Tracker Initiative, 2° Investing Initiative and InfluenceMap, and with investor signatories and experts from the Asia Investor Group on Climate Change, Ceres, the Institutional Investors Group on Climate Change, the Investor Group on Climate Change and the UN’s Principles for Responsible Investment.


Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...