An influential climate investment group has called on the world’s largest greenhouse gas (GHG) emitting companies to set “net-zero” business strategies.
Climate Action 100+, an initiative involving 518 global investors with more than $47tn in assets, has written to the CEO’s of 161 firms informing them that their companies will be assessed on progress made in becoming “net-zero businesses”.
The group said it will release a new “Climate Action 100+ Net-Zero Company Benchmark” in 2021 that will provide comprehensive analysis on which companies are leading the transition to net-zero emissions, alongside a range of other indicators used by investors to inform investment and corporate engagement strategies.
Mindy Lubber, Ceres CEO and president and Climate Action 100+ Steering Committee member, said the benchmark is a “critical investor engagement tool” to make further progress at speed and scale with the world’s largest corporate emitters on climate change.
“It will send a strong message to corporate boards and management that companies across sectors have already begun to make the shift to a net-zero emissions business, and it is time for the rest to follow,” she added.
“Investors are ready to engage the initiative’s focus companies to raise their climate ambition in order to accelerate the global transition to a net-zero emissions economy.”
‘Significant progress’ made by some focus companies
Since its launch in December 2017, Climate Action 100+ has been looking to support the 161 “focus companies”, that are “systemically important” to the global transition to net-zero emissions, in their efforts to align their business strategies with the goals of the Paris Agreement.
The companies engaged through the initiative — which includes British oil major BP, as well as Anglo Australian miners BHP and Rio Tinto — are collectively responsible for up to 80% of global industrial GHG emissions.
But the investment groups claims “significant progress” has already been made by some of the firms in line with investor expectations and engagement.
Up to 120 companies have now nominated a board member or board committee with explicit responsibility for oversight of climate change.
In aligning value chain GHG emissions with the Paris Agreement goals, 50 companies have indicated they will aim to achieve net-zero emissions by 2050 or sooner.
Meanwhile, recommendations put forward by the Task Force for Climate-related Disclosure (TCFD) — which was created in 2015 by the Financial Stability Board to develop consistent climate-related financial risk disclosures — has been supported by 59 companies.
Letter highlights the ‘importance of greater action’
Although the letter shared with executives acknowledges and underscores the progress from companies, it also highlights the “importance of greater action”, in accelerating emissions reductions in achieving net-zero emissions and preventing the “devastating impacts of otherwise avoidable climate change”.
The group said this is reflected in the call for companies to come forward with net-zero business strategies, where they are yet to do so.
The letter highlights the need for companies to ensure their strategies aim to achieve net-zero emissions by 2050 or sooner, cover emissions across the full value chain — inclusive of scope 3 emissions covering end-use of products — and define related targets and goals to deliver emission reductions in line with the science on limiting global warming to 1.5C.
There is also a focus placed on ensuring CEOs set related medium-term objectives that are consistent with a global reduction in emissions of 45% by 2030 relative to 2010 levels.
It notes there is an importance amongst investors to ensure companies “demonstrate sufficient ambition and material targets”, while substantiating their net-zero ambitions will be achieved and relevant changes are made to the company’s core business strategy.
Aims of the net-zero company benchmark
The group said the net-zero company benchmark has been “designed to clarify investor expectations” and will be used to evaluate company action and ambition demonstrated in tackling climate change.
Despite the significance of the shift to net-zero emissions, it believes there is a need to standardise what constitutes a “net-zero aligned” business strategy and how to measure that alignment with a 1.5C transition pathway.
It added that the benchmarking provided through the initiative provides guidance for companies to identify the path that is needed to address this issue in their respective sectors and regions.
