Corporate climate pledges amount to little, says investor group

25 Mar 2021

Company climate initiatives are all words and no action, asserts the Climate Action 100+ group.

Corporate statements expressing a commitment to the climate appear regularly, yet such pledges are failing to channel into meaningful action, a damning report by the Climate Action 100+ investor group says.

The report, the Net Zero Company Benchmark, reveals that only a handful of the 159 companies responsible for more than 80% of global industrial emissions have set adequate targets.

In its analysis, the group, which is made up of 575 institutions that collectively manages $54trn (£39.4trn) in assets, found that less than 1% of the companies studied had a short-term greenhouse gas emissions reduction target for 2025 covering the bulk of their emissions.

Although this number increased to more than half (52%) when the promise to achieve net zero emissions was stretched to the year 2050. Yet, even among this number, roughly half of these commitments (44%) do not cover the full scope of the companies’ most material emissions.  

The system developed by CA100+ monitors a range of metrics related to the three key topics: emissions, governance and disclosures, criteria the group identifies as being key to “robust” net zero-aligned business strategies.

Not one company performed well across all the indicators. The benchmark does not rank companies or use numeric ratings, but indicates whether corporates have fully, partially or not at all met specific indicators.

Long-term emissions

The companies that came out worst in the analysis included Warren Buffett’s Berkshire Hathaway, along with two Chinese state-owned companies: energy group PetroChina and carmaker Saic Motor.

This comes after Berkshire Hathaway urged shareholders last week to reject a call for greater climate-related disclosures, saying it did not believe an analysis of its risks was “necessary”.

The analysis also revealed that only six companies had committed to aligning their future capital spending with long-term emissions reduction targets.

The benchmark uncovered that each of the major oil companies – Exxon, Gazprom and Petrobras – had more than $10bn (£7.2bn) in 2019 capital expenditure – or a total of $35.5bn (£25.9bn) in allocated spending – which is incompatible with the International Energy Agency’s Paris-aligned decarbonisation goals.

A group of companies, including BP and Unilever, have committed to aligning spending with their decarbonisation goals, but none disclosed their methodologies for doing so, nor how they would measure progress.

And only 18 companies, including Eni and Rio Tinto, had committed to ensuring the lobbying by trade associations that they supported were in line with the Paris Agreement.

Urgent need

Mindy Lubber, Ceres’ chief executive and president and a Climate Action 100+ steering committee member, said much work was needed by corporates to address these issues. “The Climate Action 100+ Net Zero Company 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. 

“Investors, companies and all stakeholders now have a clear marker of progress that can drive transformational change at the necessary speed and scale. Right now, the world’s largest corporate emitters have an opportunity to act quickly to distinguish themselves from their peers and move forward with plans to become net zero businesses.” 

Laetitia Tankwe, the chair of the Climate Action 100+ Steering Committee, added: “The Net Zero Company Benchmark is proving the adage: ‘What gets measured gets managed’.

“We have seen corporate commitments to address climate risk accelerate after announcing we would publish company scores on a wide range of indicators. We are eager to build on this momentum leading up to the critical work to be done in Glasgow at COP 26.”

Adam Matthews, chair of the Transition Pathway Initiative, an asset owner initiative promoting a route to a low carbon economy, and chief responsible investment officer at the Church of England Pensions Board, noted: “As we enter the transition decade – the decade during which the key decisions on the transition will be taken by companies and investors – this benchmark provides a sharp focus on the distance to be travelled before we can be confident the response to engagement matches the challenge of the Paris Climate Agreement.” 

The next iteration of the benchmark will be published next year, giving companies time to ensure that their corporate climate commitments have more teeth.

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