Stockholm (NordSIP) – On 18 October, Climate Action 100+ (CA100+), the world’s largest investor engagement initiative on climate change, released the latest round of company assessments (the fourth in a row) against its newly updated Net Zero Company Benchmark1. Despite some evidence of incremental improvement on several indicators, the overall results are not very encouraging, showing that most focus companies are not moving fast enough to align with the goals of the Paris Agreement.
“While there are clear signs of progress, particularly from a European perspective, it’s equally clear that companies need to move further and faster to fully play their part in the transition of the global economy,” comments Stephanie Pfeifer, CEO of IIGCC and a member of CA100+’s global Steering Committee. “Ahead of the critical milestone of 2030, the importance of constructive engagement between corporates and investors has never been greater,” she adds.
Not enough detail
On the bright side, more companies than ever have started to disclose at least some details on their net-zero transition plans, 59% this year, compared to 52% a year ago. However, much remains to be desired as to what they are willing to disclose. Only 21% quantify the proportion of their targeted emissions reductions that will be addressed through the actions they are planning to undertake. Also, just 3% of the focus companies are disclosing sufficient detail on how they plan to employ offsets and negative emissions technologies to meet their GHG reduction targets.
“No company is fully aligned with the new Benchmark 2.0 Disclosure Framework, with no company meeting all the criteria for the updated just transition and climate policy engagement indicators,” concludes the report.
Mind the short-term targets
A key finding in the CA100+ report is that the long-term targets disclosed by focus companies do not seem to be supported by sufficient progress on short-term targets, decarbonisation strategy and capital allocation.
Most of the assessed companies (82%) now set long-term GHG reduction targets for 2050, albeit just 59% have set targets covering all material scopes of emissions. Particularly alarming is that the oil and gas sector is currently lagging on Scope 3 target setting, with only 11 out of 34 assessed companies in this sector setting targets, including the emissions associated with the combustion of their products.
Meanwhile, a lack of credible short-term targets continues to be the most significant gap in corporate net-zero transition strategies. Less than half of focus companies have set a short-term GHG target, and only 16% have short-term targets covering at least the most relevant Scope 3 categories for their sectors. Moreover, most corporate short-term targets fail to align with a 1.5°C trajectory.
Other areas where companies fall short of expectations are disclosing capital expenditure (CapEx) allocation, climate policy engagement, incorporation of material impacts in financial statements, just transition and GHG emissions reductions. The necessary details to demonstrate that companies have credible plans to align with the goals of the Paris Agreement are often missing.
Supporting evidence
For climate accounting and audit, the Carbon Tracker Initiative (CTI) analysis, which considers both disclosure and alignment, shows that although there is still no focus company that meets all criteria of this assessment, 7% of assessed companies show real overall progress on climate accounting and audit disclosures compared to last year. CTI’s assessments show that the CapEx plans of oil and gas companies across the board are not aligned with the Paris Agreement goals.
InfluenceMap’s climate policy assessments show that most companies still do not align their real-world climate policy engagement activities with Paris Agreement goals. However, partial alignment is increasing. Only 4% of companies fully align their climate policy engagement with the goals of the Paris Agreement, while 66% are only partially aligned.
“Urgent action is needed to shift the weight of focus from mere commitments to implementation,” concludes François Humbert, Lead Engagement Manager at Generali Insurance Asset Management (Generali Group) and current chair of CA100+’s global Steering Committee. “Although it’s encouraging to see more companies disclose their net zero transition plans, there’s a missing link between how these can meet the Paris agreement goals.”
1 The benchmark was first launched in March 2021 to establish a high ambition for focus companies across all sectors and regions around the world to align their businesses with a net zero emissions future.
