Companies are making progress on their net zero commitments, but it is more hot air when compared to credible decarbonisation strategies.
That is the verdict from Climate Action 100+ as the investor-led group released its latest benchmark figures analysing 159 companies on their progress related to business alignment with the goals of the Paris Agreement. This number is down from 166, largely due to Russian companies with ‘whom investors have paused active engagement’ and represents 100 companies identified with the highest combined direct and indirect greenhouse gas (GHG) emissions.
The group released interim figures only six months after previous publication, with the reason explained as ‘improv[ing] alignment with corporate reporting and better support[ing] investor engagement with focus companies.’
The good news: three quarters (75%) of focus companies analysed had now committed to achieve net zero emissions by 2050 or sooner across at least some of their emissions footprint. This is an increase of six percentage points from March. 92% of companies have at least some level of board oversight on climate change, while 91% have aligned with TCFD (Task Force on Climate-Related Financial Disclosures) recommendations, up from 90% and 89% respectively.
Compared with the launch of Climate Action 100+ in 2017 where only five focus companies had set net zero commitments, it is a clear up tick. Yet, the assessments showed a gap between words and actions.
Scope 3 emissions, by and large, remain absent. Just over half (51%) of companies analysed had comprehensive commitments for net zero by 2050 or sooner which cover all material GHG emissions, including material scope 3, across a company’s entire value chain. Further, only 10% of companies assessed have committed to fully align their capex plans with GHG targets or the Paris Agreement. This is by far the slowest-moving marker analysed by Climate Action 100+.
The figures also assess companies against data from the Carbon Tracker Initiative (CTI), an independent financial think tank. From this, Climate Action 100+ concluded only a quarter (25%) of electric utility companies analysed have a coal phase-out plan consistent with limiting global warming to below 2 °C, while three in five (61%) oil and gas companies sanctioned projects that were inconsistent with 2 °C goals. Both of these stats remained unchanged from March.
“Despite requirements to do so, the financial impacts of climate risk have not been integrated into financial reporting,” said Barbara Davidson of the CTI in a statement. “As a result, investors do not have all the resources needed to push companies to confront the realities of the coming low carbon economy.
“If companies are serious about meeting net zero targets now is the time to step up and show us not only the extent of their progress but the current financial impacts of achieving these goals,” Davidson added.
While Climate Action 100+ is looking towards a public consultation to enhance the benchmark process, not everyone sees their cause as honourable. The group has been accused of violating antitrust law by encouraging signatory firms to engage with organisations on decarbonisation strategies. One US senator wrote to the CEO of one such investor, BlackRock, in July ‘demanding answers about the firm’s involvement in a scheme to reduce drilling for oil and gas.’ The issue will be a target area for Republican lawmakers amid the US midterm elections, according to analysts.
View the full Climate Action 100+ findings (presentation, pdf).
