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Jan 05, 2021

Climate Action 100+ sees rise in net-zero targets

‘Clear gaps’ in reporting remain, however

Close to half the companies monitored by a major investor initiative on climate change have announced a target to hit net-zero greenhouse gas emissions by 2050 as corporate action on global warming gathers pace. 

Climate Action 100+ (CA 100), which is backed by 545 investor signatories managing a total of around $52 trillion in assets, engages with the 100 biggest greenhouse gas emitters and a further 60 companies it views as key to tackling climate change.

It calls on companies to reduce emissions and align their business with the goals of the Paris Agreement, which aims to keep global warming well under 2°C compared with pre-industrial levels. 

CA 100’s 2020 progress report finds 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. 

Scope 3 emissions are created in a company’s value chain by other organizations it doesn’t control. For many companies, Scope 3 emissions are far larger than those created directly. 

CA 100 made significant progress in 2020, with the number of investor signatories rising by 46 percent. The initiative also attracted major names such as BlackRock, Invesco, State Street Global Advisors and JPMorgan Asset Management.

The recent backing of CA 100 by the world’s largest institutional investors has made its demands inescapable for companies, says Miguel Santisteve, founder and managing director at Leaders Arena, an ESG consultancy. ‘No management team can ignore the concerns from such a large proportion of a company’s institutional shareholder base,’ he says.

Of the focus companies, utilities lead the way with 69 percent committing to a 2050 target, followed by 54 percent of oil and gas companies, according to the progress report. Looking at Scope 3 emissions, the transportation sector is most likely to include these in its 2050 goals, while metals and mining firms are least likely. 

Businesses should also ‘do more to align their capital expenditure and strategies to their net-zero targets,’ the report states.

Oil and gas companies have come under some of the most intense pressure to realign their businesses to meet the Paris Agreement climate goals. 

In December 2019 Repsol became the first major oil and gas company to commit to net-zero goals by 2050 across all its emissions, including Scope 3. Over the following year, several other industry peers – such as BP, Shell and Total – also announced net-zero targets. 

‘Oil and gas growing net-zero commitments is a great example of progress CA 100 can take some credit for,’ Santisteve says. ‘This trend has recently reached the US where Occidental Petroleum announced operational net-zero goals for 2040 and [for use of products] by 2050.’

In the progress report, CA 100 provides case studies of some of its engagement efforts. For Repsol, it says ‘constructive dialogue’ has taken place since late 2017, led by BNP Paribas Asset Management, EOS at Federated Hermes and UBS Asset Management. In May 2020, the lead engagers released a statement congratulating Repsol on its commitments. 

Speaking to Corporate Secretary sister publication IR Magazine last year, Ramon Álvarez-Pedrosa, head of IR at the Spanish company, discussed the importance of showing investors the journey from now until the final net-zero goal. ‘Talking about 2050 is, let’s say, easy… It’s much more difficult to fill the gaps between today and then,’ he said.

CA 100 recently released a new tool to help investors engage with companies over their transition to net-zero emissions. The Climate Action 100+ Net-Zero Company Benchmark will assess several areas including a company’s ambition, targets, governance and climate reporting. 

The launch of the new benchmark reflects the rising expectations on companies, Santisteve says: ‘We expect investors and other companies to use this benchmark to measure progress on climate and these indicators to be a focal point in their conversations.’