More action needed to support global decarbonisation efforts

Decarbonisation 1.5

New assessments released by Climate Action 100+, an investor engagement initiative on climate change, have shown some corporate climate progress against key climate indicators, but find much more action is urgently needed from focus companies to support global decarbonisation efforts.

The second round of the Net-Zero Company Benchmark assessments to be released by Climate Action 100+ measures the progress of 166 companies against the initiative’s three engagement goals, and a set of key indicators related to business alignment with the goals of the Paris Agreement.

To reflect the pace of change required to limit global warming to 1.5 degrees Celsius, and to ensure it is aligned with the most recent science-based policy, Climate Action 100+ updated the Benchmark methodology in 2022, assessing companies against the IEA’s more challenging Net-Zero by 2050 scenario for available sectors. It also added new indicators and assessments focused on the just transition and climate accounting and audit to drive great company ambition and reflect evolving investor priorities.

The assessments indicate overall year-on-year improvements in cutting greenhouse gas emissions, improving climate governance, and strengthening climate-related financial disclosures. Driven by engagement from Climate Action 100+ investor signatories, the results show that 69 per cent of focus companies have now committed to achieving net-zero emissions by 2050 or sooner across all or some of their emissions footprint, and 17 per cent year-on-year increase; 90 per cent have some level of board oversight of climate change; and 89 per cent have aligned with TCFD recommendations either by supporting the TCFD principles or by employing climate-scenario planning.

However, the assessments show that the vast majority of companies have not set medium-term emissions reduction targets aligned with 1.5 degrees Celsius, or fully aligned their future capital expenditures with the goals of the Paris Agreement, despite the increase in net-zero commitments.

The assessments also show a continued absence of acknowledgment for Scope 3 emissions, almost non-existent alignment of CapEx strategies with net-zero goals, and a failure to integrate climate risk into accounting and audit practices.

Climate Action 100+, therefore, is calling on all focus companies to step up climate ambition before the third round of Benchmark assessments is released later this year.

Stephanie Maier, global head of sustainable and impact investment at GAM Investments, and current chair of the global Climate Action 100+ steering committee, said: “Overall the Net Zero Company Benchmark clearly shows that focus companies are not making the progress required to align with achieving the 1.5°C climate goal agreed in Paris and reaffirmed in Glasgow last year. Given that these companies represent the world’s largest corporate greenhouse gas emitters, their ambition and pace of change is critical to a successful transition and needs to accelerate. The latest IPCC report starkly outlined the social and economic imperative for this. As a consequence, we should expect a ratcheting of investor-led shareholder resolutions as well as increased scrutiny on transition plans brought to the vote, starting with the imminent AGM season.”

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