New Benchmark Casts Shadow Over Paris Alignment

    Stockholm (NordSIP) – Climate Action 100+ released its first-ever benchmark evaluating the corporate ambition and actions of the largest greenhouse gas emitters. The Climate Action 100+ Net-Zero Company Benchmark assessment surveys the performance of 167 companies that account for over 80% of corporate industrial greenhouse gas emissions. It reviews whether the companies are aligned with the net-zero emissions future and the Paris Agreement goal to limit global temperature rises to 1.5°C. The study suggests companies still have much to do to contribute to the desired targets.

    A Cooperative Methodology

    The new tool and its indicators were developed in partnership with Transition Pathway Initiative (TPI), Carbon Tracker Initiative (CTI), 2° Investing Initiative (2DII) and InfluenceMap (IM). TPI conducted the company disclosure research and analysis, supported by its research and data partners the Grantham Research Institute on Climate Change and the Environment at the London School of Economics (LSE) and FTSE RussellThe Benchmark was undertaken through the leadership and support of the Climate Action 100+ Steering Committee, and the collaboration of investor signatories and experts from AIGCCCeresIIGCCIGCC, and PRI.

    “The Net Zero Company Benchmark is exacting but this is what’s required,” Stephanie Pfeifer, CEO, Institutional Investors Group on Climate Change and Climate Action 100+ Steering Committee member, added. “Investors involved in the initiative expect the world’s largest carbon-emitting companies to demonstrate a genuine commitment to rapidly transforming their business model if they are to maintain shareholder support. This requires robust and ambitious short, medium and long-term targets, with net-zero 2050 as the North Star. Whilst ambitious targets are critical, they are not enough on their own and be underpinned by credible strategies to achieve them.”

    Companies are assessed against ten indicators: (1) Net-zero GHG Emissions by 2050 (or sooner) ambition, (2) Long-term (2036-2050) GHG reduction target(s), (3) Medium-term (2026-2035) GHG reduction target(s), (4) Short-term (up to 2025) GHG reduction target(s), (5) Decarbonisation strategy, (6) Capital allocation alignment, (7) Climate policy engagement, (8) Climate Governance, (9) Just Transition (not assessed for 2021), and (10) TCFD disclosure.

    Much Still Left To Do

    The benchmark’s goal is to provide a mechanism for tracking corporate progress. Climate Action 100+’s assessments are publicly accessible. The assessments organise the aforementioned disclosures in a user-friendly manner to provide increased transparency about the corporates.

    In aggregate terms, the Benchmark assessments suggest that most of the world’largest companies are still in the early stages of the shift to a net-zero economy. A majority of companies still have no discernible ambition to reach net-zero emission by 2025, the indicator for which most companies have met the criteria. “Overall, 83 of the focus companies (52 % of the total) assessed have announced an ambition to achieve net-zero by 2050 or sooner. However, roughly half of these commitments (44) 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,” Climate Action 1000+ explains.

    Of all the benchmark indicators, capital allocation alignment was the worse performing, followed by the decarbonization strategy. “Future investments need to be more clearly aligned with the net-zero transition. Only six companies explicitly commit to aligning their future capital expenditures with their long-term emissions reduction target(s), and none of these companies has committed to aligning future capital expenditure with the goal of limiting temperature rise to 1.5 degrees Celsius,” the initiative says.

    “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,” Mindy Lubber, Ceres CEO and President and Climate Action 100+ Steering Committee member, said. “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.”

    Image by JDubya59 from Pixabay

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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