Industry

Investors Demand Climate Lobbying Transparency

Failure to comply with 14-point standard may result in investors filing shareholder resolutions. 

Institutional investors have launched a new disclosure standard to ensure investee companies’ climate change lobbying aligns with the goals of the Paris Agreement.

The Global Standard on Responsible Climate Lobbying (RCLS) framework was developed by Swedish pension scheme AP7, the Church of England (CoE) Pensions Board and BNP Paris Asset Management. It’s supported by major investor groups interacting with companies on climate-related issues, with members managing a collective US$130 trillion, and specialist advisory firms such as Chronos Sustainability.

“Time must be called on negative climate lobbying,” said Charlotta Dawidowski Sydstrand, Sustainability Strategist at AP7. “Investors will no longer tolerate a glaring gap between a company’s words and its actions on climate.”

Drawing on the feedback of over 220 institutional investors to two public consultations, the standard introduces a 14-point plan for corporates to follow. These requirements include assigning responsibility at a board level for oversight of climate change lobbying, and publishing an annual review covering the company’s assessment of its lobbying activities and measures taken to ensure alignment with the standard.

Companies must further ensure they take action if any lobbying undertaken by them or their trade associations runs counter to the goals of the Paris Agreement.

The standard goes beyond existing state-level and regional transparency registers, Clare Richards, Senior Engagement Manager for the CoE Pensions Board, told ESG Investor. It aims “to understand what policies each company and sector views as being necessary to meet the Paris Goals and their transition strategies, and what they are doing to make those a reality”, she said.

“Enhanced disclosures by companies will aid wider stakeholder understanding of the policy positions and public sentiment campaigns that they support,” Richards added.

Rectifying past behaviour

The launch of the standard follows examples of companies engaging in anti-climate lobbying.

According to think tank InfluenceMap,  inclusion of gas in the EU taxonomy’s complementary climate delegated act is proof of effective lobbying efforts from some of the largest gas companies, including Shell and bp. InfluenceMap has also supported the development of the RCLS framework.

Research by the think tank has also showed a surge in online anti-climate lobbying by fossil fuel companies, using social media, paid search and third-party media outlets to promote climate denial content and make unsubstantiated claims about their efforts to transition to net zero.

Investors supporting the new standard have committed to engaging with companies that do not champion responsible climate change lobbying, and may resort to filing shareholder resolutions against companies if no changes are made.

“We recognise that corporate lobbying – directly and through organisations such as trade associations, industry alliances and industry coalitions – has frequently opposed policy measures that would support the goal of delivering net-zero emissions by 2050,” investors said in a statement of intent. “Equally, we recognise that responsible corporate lobbying has the potential to unlock action on climate transition initiatives.”

Last year, 65% of investors surveyed by the Institutional Shareholder Services (ISS) said alignment of corporate and trade association lobbying with the goals of the Paris Agreement is “a minimum expectation”.

Getting started

Companies in the automotive sector will be the first asked to align their climate change lobbying activities with the RCLS framework. They will be assessed against a pilot automotive sector benchmark developed by InfluenceMap.

“Road transport is a particular focus due to the sector as a whole being relatively behind other parts of the economy, e.g., several energy, mining and utilities companies have approached this constructively and published repeated annual disclosures already, whereas it was only in 2021 that Ford, GM, Toyota and Volvo made their first steps towards meeting investor expectations,” said Richards.

“Meanwhile, many European auto companies are still far off the pace of their international peers. This is a material risk for both their own transition strategies and investor portfolios, due to the demand that they drive for continued reliance on fossil fuels decades into the future.”

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