Stockholm (NordSIP) – Launched in the wake of the Paris Agreement 2017, Climate Action 100+ was initially meant to live for only five years. Given the pressing nature of the challenge, there should be a deadline for meaningful action, reasoned the architects behind the ambitious project upon defining its duration. Fast forward to today, and even though CA100+ has grown into the world’s largest investor-led engagement initiative on climate change, boasting some 700 investor signatories responsible for USD 68 trillion in assets, many of the identified focus companies are still far from delivering in line with a net-zero economy.
And so, last year, rather than rounding up the initiative, CA100+ consulted its signatories on extending the deadline to 2030 and introducing enhancements to the strategy. As a result, on 8 June, the initiative announced the launch of a new phase, supposed to shift the focus from corporate climate-related disclosure to the implementation of climate transition plans.
“Climate Action 100+ has been transformative for corporate engagement and the role of investors in the context of climate change,” comments Stephanie Pfeifer, CEO of IIGCC and a member of the initiative’s Global Steering Committee. “However, there is no hiding from the fact that overall focus companies need to be more action-oriented if they are to support and capitalise on the transition of the global economy. Ultimately, the case for further and faster corporate action on climate change has never been more compelling – while investors alone cannot bring about this change, CA100+ remains well-positioned to support this ambitious global goal,” she adds.
A closer look at the revamp
Summarising the results of the consultation with its signatories, CA100+ reports that it has made some key changes, re-examining the core goals of the initiative and improving and expanding the ways investors can participate and enhance the engagement model in the ramp-up to 2030.
To start with, CA100+ has enhanced the three original goals, asking companies not only to disclose but also to implement robust transition plans and to take action with a broader set of stakeholders to address the sectoral barriers to the net-zero transition. The signatory statement now also includes an explicit reference to engaging with holders of both equity and debt to reflect a range of stewardship tools that investors can use to engage companies.
There are also enhancements to the lead investors’ terms of reference in Phase 2, including an opportunity for leads to disclose their organisation’s identities on the CA100+ website. Meanwhile, lead investors, as well as individual engagers, are expected to disclose votes and rationales. Whenever seeking to flag key votes, public statements will also be required in advance of AGMs.
New thematic engagements and an annual publication of regional engagement priorities should add further transparency. For Phase 2, the initiative will build on existing Global Sector Strategies to facilitate new sector engagements.
Following a review of the focus company list based on an analysis of recent CDP data, the initiative has decided to keep the current scope of the list, making only marginal changes. Fourteen new companies have been added to the list, and ten have been removed.
To help achieve the enhanced agenda, the Steering Committee has been expanded to fifteen members, including five investor network CEOs and ten investor representatives.
Frustration brewing
Hopefully, the enhanced goals and framework of CA100+ Phase 2 should deliver more tangible results than the ones reported by the initiative so far and counter the mounting disenchantment with the engagement method. Criticism abounds these days. Eli Kasargod-Staub, co-founder of shareholder advocacy group MajorityAction, for instance, claims that CA100+ investors “are abdicating their responsibility to hold directors accountable, given they have now been engaging with companies for five years”.
Even long-term supporters of the initiative have been looking for alternatives lately, especially with regard to the oil & gas sector. “We have engaged for nearly 10 years and intensely for 5 years as part of Climate Action 100+,” writes Adam Matthews, Chief Responsible Investment Officer (CRIO) Church of England Pensions Board, Chair Transition Pathway Initiative (TPI). “However, the change in direction by oil and gas companies over the past year chasing short-term profit maximisation has caused a fundamental break with the long-term interests of pension funds.”
According to Matthews, engagement with oil and gas should no longer be a top priority of CA100+. “We should focus on demand-side companies and how quickly they can exit their dependency on oil and gas. If big, listed oil & gas companies no longer believe they can make a business out of renewables, then the investor expectation should simply be they stop spending shareholder funds on the upstream and commit to wind down in line with the Net Zero Oil and Gas Standard,” he concludes.
Another investor to express disappointment with the CA100+ engagement tactics is Sandra Metoyer, CFA, Head of Sustainable Investments at Velliv. Announcing the company’s new approach to investing in the fossil fuel industry, she writes that, “going forward, we will only invest in oil and gas exploration and production companies that are on a clear path towards a green transition. That leaves none…”
“After 5 years of collective efforts through Climate Action 100+ to try to steer these companies in a greener direction, we think it’s time to focus our efforts elsewhere,” explains Metoyer. “We simply don’t believe these companies will shift their business model away from oil and gas. Shell’s disappointing announcement yesterday that they will not cut oil production over the next decade as previously promised further confirms that. The main focus going forward needs to be on the demand side and to reduce our dependency on fossil fuels. Here CA100+ efforts will be ever so important,” she adds.
It appears it is high time to demonstrate the additionality of the CA100+ initiative, and to show some real results, moving from corporate disclosure to implementing credible transition plans.
