Asset AllocationOctober 9, 2019

Majority of Companies Not in Line with Paris Agreement Goals

Only 9% of 161 companies on Climate Action 100+ watch list meet minimum climate change requirements.

Reported by Steffan Navedo-Perez

About 160 companies found to collectively hold responsibility for about two-thirds of the world’s greenhouse gas emissions are receiving stiff pressure to decarbonize from an organization representing $35 trillion in assets under management across more than 370 global investors.

Climate Action 100+ is a five-year initiative launched in December 2017 that is out to ensure the world’s largest corporate greenhouse gas emitters take “critical action” to align with the goal of the Paris Agreement to ensure the rise in global temperatures remains below 2 degrees Celsius.

The group issued an initial progress report that found only 9% of the 161 companies they’re focusing on have emissions targets that are in line with (or go beyond) the minimum goal set forth in the Paris Agreement, “highlighting a crucial ambition gap to be addressed,” the group said in a statement.

Other findings in the report are that 70% of these 161 companies have set long-term emissions reduction targets, 8% ensure their lobbying activities are aligned with necessary steps to address climate change, 40% undertake and disclose climate scenario analysis, and 77% have defined board-level responsibility for climate change.

The analysis also identified sector-specific trends and best practices, such as identifying companies who nominated a board member or committee with clear responsibility for climate change policy. Mining and metals were found to be the weakest in this category, followed by utilities and power producers, and industrials. Consumer products lead the way in this metric, with over 93% of companies in their assessment found to have delegated such responsibilities.

Those sectors also exhibited the same order of prioritization with regard to setting long-term quantitative targets for reducing greenhouse gas emissions.

The report also identified a few major instances where companies made stellar commitments to green initiatives in recent years. One such example was Volkswagen’s commitment to launch nearly 70 electric vehicle models by 2028, and

Nestlé’s commitment to net zero emissions by 2050. Duke Energy, HeldelbergCement, and Xcel Energy made similar commitments to have net-zero carbons emissions by 2050.

“Climate Action 100+ is the most ambitious investor engagement initiative launched to date—and rightly so given the scale and urgency of the challenge we face,” said Anne Simpson, director of board governance and strategy at the California Public Employees’ Retirement System (CalPERS). The group was initially convened by CalPERS in 2016 during a meeting at the United Nations.

Action on climate change initiatives is running at full speed, as awareness of the issue has now become mainstream and a number of investors are giving the attention real action. Recently a host of high-profile institutions in the UK pledged to determine an investment’s impact on the climate before executing their deals. A proposed bill in the US would mandate companies to disclose climate risk guidelines.