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Global investors with $54 trillion tell companies pledging net zero emissions to show their work

Rachel Koning Beals

No company in the new Climate Action 100+ benchmark has fully disclosed how it will achieve its goals to become a net zero enterprise by 2050 or sooner

There is growing global momentum around companies making ambitious climate-change commitments, including the now-popular net zero emissions pledges, but companies have a long way to go in delivering on these promises.

Climate Action 100+, a major global investor engagement initiative of 575 members responsible for $54 trillion, has released its first-ever benchmark (link) evaluating the corporate ambition and action of the world's largest greenhouse gas emitters and other companies with significant opportunity to slow manmade climate change.

The investors found that none of the 159 companies in the Transition Pathway Initiative has fully disclosed how they will eliminate their net emissions. Some 83 of them have said they plan to reach net zero by 2050, but only half of those commitments include emissions generated by customers using their products.

The companies targeted by Climate Action, which was formed in 2017, are responsible for more than 80% of global industrial greenhouse-gas emissions. Scientists have said emissions will need to drop by about 50% by 2030 and reach net zero by the middle of the century to avoid the most catastrophic impacts of climate change.

Investors have increasingly pushed the companies they hold to disclose their risk to warming temperatures and to prove they might be ahead of the curve in slowing broad-based warming.

The benchmark "sets out the indicators that matter to investors, including [capital expenditures], board governance and climate reporting. We cannot manage what we cannot measure," said Anne Simpson, managing investor director, board governance and sustainability with CalPERS, the largest U.S. public pension at about $444 billion.

"The benchmark gives us the tool needed for engagement and to inform our proxy voting," she said. "The first assessments show the scale of ambition, where we are and where we need to get to, with measures along the way. We're in the foothills of a long climb. This is tough, but necessary."

Each of the tracked companies can be seen here (link), but the list varies from shipping giant A. P. Moller Maersk to Airbus Group to Berkshire Hathaway(BRKA). BP, Toyota Motor, Unilever(ULVR.LN), United Airlines(UAL) and Walmart(WMT) are included as well. Of the 167 companies tracked, just 54 are in North America, which has tended to lag the more ambitious embrace of combating climate change in Europe and parts of Asia. The benchmark tool announced Monday does not rank the companies relative to others included in the tracker.

Only six companies, among them RWE AG, Total SE(FP.FR) and Repsol SA, have explicitly committed to align their future capital expenditures with their long-term emissions reduction targets.

Read:Major New York pension, PIMCO among the 110 investors with $33 trillion joining Paris-aligned climate change goals (link)

No focus company assessed performed at a high-level across all of the nine key indicators and metrics that were used to evaluate each company. The assessments show that no company has fully disclosed how it will achieve its goals to become a net zero enterprise by 2050 or sooner. This includes establishing short and medium-related targets to deliver ambitious emissions reductions within the next decade.

Among the findings, 83 of the focus companies (52 % of the total) assessed have announced an ambition to achieve net-zero by 2050 or sooner. However, roughly half of these commitments (44) do not cover the full scope of the companies' most material emissions.

Further, many companies may have offered long-term pledges but are showing little commitment to short- or medium-term targets; of the 107 companies within the research that have set medium-term targets (2026-2035), only 21 meet all assessment criteria; 75 companies have set short-term targets (up to 2025), but only eight meet all assessment criteria.

Read:Starbucks aims to cut water usage in the coffee supply by 2030 (link)

""Are companies truly planning for a low carbon future? A key indicator of this whether the forward-looking assumptions in their financial statements suggest they are," said Rob Schuwerk. executive director of Carbon Tracker North America. " You cannot plan for a wind down of fossil fuel use whilst assuming oil, gas and coal commodity prices will remain unaffected. Similarly, going 'net zero', as will be examined in Climate Action 100+'s Net Zero Benchmark, means shutting emissions producing assets. These will have to be reflected in accelerated retirement schedules."

Companies generally aren't clearly aligned with net zero carbon initiatives laid out by the U.S., the European Union and other leading nations or regions. Only six companies explicitly commit to aligning their future capital expenditures with their long-term emissions reduction target(s), and none of these companies has committed to aligning future capital expenditure with the goal of limiting temperature rise to 1.5 degrees Celsius.

Almost three quarters (72% of the total) of companies assessed commit to align their disclosures with the Task Force for Climate-related Financial Disclosures (TCFD) recommendations (link) and/or support the recommendations. However, only 10% use climate-scenario planning that includes the 1.5-degrees Celsius scenario and encompasses the entire company.

Read: Ignore climate change at your own risk, says BlackRock -- green-energy transition will drive 25% output growth by 2040 (link)

-Rachel Koning Beals; 415-439-6400; AskNewswires@dowjones.com

 

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03-22-21 1515ET

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