Disparate views held by investors and companies on influence, expenditure and medium-term Scope 3 emissions targets.
Listed companies and their institutional investors hold widely divergent views on the relevance of lobbying activities to their net-zero strategies, according to a new global climate survey published by Institutional Shareholder Services (ISS).
Almost two thirds (65%) of investors said alignment of corporate and trade association lobbying with the goals of the Paris Agreement is a minimum expectation of firms which strongly contribute to climate change, contrasting with just 15% of corporate respondents.
Similarly, 60% of investors said lobbying by investee firms in contradiction of the Paris Agreement would be a ‘dealbreaker’ for shareholder support for any management-proposed climate transition plan, versus just 16% of corporates.
There were also sharp differences between shareholders and directors on the importance of Paris-aligned capital expenditure. A total of 63% of investors consider it a minimum expectation that carbon-intensive companies disclose a strategy and capex programme in line with greenhouse gas (GHG) reductions targets consistent with the goals of the Paris Agreement. Just over a fifth (22%) of corporate respondents concurred that this should be regarded as a significant indicator of a board’s successful management of climate risk.
There was more consensus between investors and investee firms on the importance of reporting in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures, and of demonstrating improvement in disclosure and performance.
But only a fifth of corporates (22%) said heavy-emitting firms should be expected to set and disclose medium-term (through to 2035) emissions reduction targets across their entire operations and supply chains (Scope 1, 2 and 3) in line with the Paris goals, contrasting with more than half (54%) of investors.
The report was based on responses from 164 responses from asset managers, asset owners and investor-affiliated organisations, a third of which has more than US$100 billion in assets under management, and 152 responses from companies and companies and corporate-affiliated organisations as well as around a dozen academic and non-profit entities.
Rising tide of concern
Investor concerns over anti-climate change lobbying have grown steady in recent years. According to the US SIF Foundation’s ‘Report on US Sustainable and Impact Investing Trends’, corporate political activity was the most frequent topic for shareholder proposals over the 2018-2020 period, with 270 filed by institutional investors and investment managers.
According to UK-based think tank InfluenceMap, 90% of the world’s largest industrial companies retain links to trade groups opposing climate policy. Investor-led engagement initiative Climate Action 100+ requires companies to adopt Paris-aligned climate lobbying positions and implement enhanced governance and disclosure processes to ensure their industry associations are also aligned.
UK-based sustainability solutions provider Chronos Sustainability has started to develop a lobbying assessment framework in association with asset managers and owners AP7, BNP Paribas Asset Management and The Church of England Pensions Board.
This week, large US corporates including Apple, Amazon, Microsoft and Disney have been accused of backing business groups which have lobbied against US$3.5 trillion budget bill, which includes a number of measures to tackle climate change.
ISS’s climate survey was accompanied by the firm’s annual global benchmark policy survey, which covers topics including use of non-financial ESG performance metrics in executive compensation, racial equity audits and the continued use of virtual-only shareholder meetings.