Industry

Companies Fall Short Against CA100+ Net Zero Benchmark

Investor initiative identifies room for improvement as global corporates failed to log consistent performance across nine key indicators.

A quarter of global companies’ have made net-zero pledges that don’t cover the full scope of their most material emissions, according to Climate Action 100+ (CA100+), a US$54 trillion investor engagement initiative working with global corporates to drive faster corporate climate action.

The Climate Action 100+ Net-Zero Company Benchmark, launched today, offers detailed comparative assessments of almost 160 global corporates’ performance against the three key commitment goals: reducing greenhouse gas (GHG) emissions, improving governance and strengthening climate-related financial disclosures.

Measured across nine key indicators – such as establishing short- and medium-term emissions reduction targets – none of the 159 assessed firms performed at a consistently high level across every single indicator. For example, while 107 companies set medium-term emissions reduction targets from 2026-2035, only 20 met all the benchmark’s assessment criteria in this area. Forty firms did not include Scope 3 supply chain GHG emissions in their net-zero by 2050 or sooner commitments.

From 2021, a tenth indicator will be added, which assesses the extent to which companies are accommodating for a just transition.

Slightly more than half (52%) of companies have pledged to achieve net-zero by 2050 or sooner. Of those that have made net-zero pledges, Climate Action 100+ claimed that “no company has fully disclosed how it will achieve its goals to become a net-zero enterprise by 2050 or sooner”.

Just six companies have “explicitly” committed to aligning their future capital expenditures with their long-term reduction targets. None of these companies have outlined plans to align their future capital expenditure with the express goal of limiting the global temperature rise to 1.5°C.

However, 72% of companies assessed have committed to disclosing in line with the Task Force on Climate-related Financial Disclosures (TCFD) guidelines, or at the very least supporting the recommendations.

These results reflect the fact that “most of the world’s largest companies are still in the early stages of the shift to a net-zero economy”, CA100+ noted.

The initiative will now build on these company assessments and further publish sector-by-sector analyses in the coming months. CA100+ members engage with 167 firms globally, including the ‘systematically important emitters’ which account for 80% of annual global industrial emissions. Eight of these were not included in the initial benchmark assessment as they were included in the CA100+ focus list last November.

“The Net Zero Company Benchmark is exacting, but this is what’s required. 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,” said Stephanie Pfeifer, CEO of the Institutional Investors Group on Climate Change (IIGCC) and member of the CA100+ Steering Committee.

“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 must be underpinned by credible strategies to achieve them,” she said.

The Transition Pathway Initiative (TPI) conducted the company disclosure research and analysis, supported by FTSE Russell and the Grantham Research Institute on Climate Change and the Environment at the London School of Economics (LSE).

“As we enter the Transition Decade – the decade during which the key decision on the transition will be taken by companies and investors – this benchmark provides a sharp focus on the distance to be travelled before we can be confident the response to engagement matches the challenge of the Paris Climate Agreement. This benchmark captures where we are at the beginning of the Transition Decade and it shows the distance we still need to travel,” said Adam Matthews, TPI Chair and Chief Responsible Investment Officer for the Church of England Pensions Board.

The formation of the Benchmark was further supported by the CA100+ Steering Committee, including investor signatories such as the Principles for Responsible Investment (PRI), Ceres, IIGCC, Asia Investor Group of Climate Change (AIGCC) and Investor Group of Climate Change (IGCC).

The next iteration of the Benchmark will be published in 2022.

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