Climate Action 100+ latest benchmark shows an increase in company net zero commitments but suggests more urgent action is needed

Climate Action 100+ (which now includes 700 signatories responsible for USD $68 trillion in assets under management) has published its second Net Zero Company Benchmark (see press release).

The Benchmark aims to define key elements of a robust ‘net zero aligned’ business strategy, to give investors’ confidence that companies are developing comprehensive net zero transition plans.

The results of the latest Net Zero Company Benchmark indicate that:

• 69% of focus companies have now committed to achieve net zero emissions by 2050 or sooner across all or some of their emissions footprint, a 17% year-on-year increase;
• 90% of focus companies have some level of board oversight of climate change;
• 89% of focus companies have aligned with TCFD recommendations either by supporting the TCFD principles or by employing climate-scenario planning;
• however, the vast majority of companies have not yet set medium-term emissions reduction targets aligned with 1.5°C or fully aligned their future capital expenditures with the goals of the Paris Agreement, despite the increase in net zero commitments.

In particular, the CA 100+ commentary notes:

• An absence of medium-term emissions reductions targets aligned with 1.5°C. Only 17% of focus companies have set medium-term targets which are aligned with the IEA’s 1.5°C scenario and cover all material emissions.
• Continued absence of Scope 3 emissions. Just 42% of focus companies have comprehensive net zero by 2050 or sooner commitments that cover all material GHG emissions, including material Scope 3 emissions.
• Alignment of capex strategies with net zero transition goals remains almost non-existent. Only 5% of focus companies explicitly commit to align their capex plans with their long-term GHG reduction targets.
• Companies are setting emissions reduction targets but don't yet have the strategies to deliver them. Only 17% of focus companies have robust quantified decarbonisation strategies in place to reduce their GHG emissions.
• A failure to integrate climate risk into accounting and audit practices. No company has demonstrated that its financial statements are drawn up using assumptions consistent with net zero by 2050, as per a new indicator on climate accounting and audit assessed by CTI and CAP.

The CA 100+ is calling on all focus companies to step up climate ambition before a third round of Benchmark assessments is released later this year.

Investors are also expected to maintain pressure on companies and boards during the upcoming AGM/proxy season in Europe and the US. According to the CA 100+, the next several months will be a critical time for investors to support key climate shareholder resolutions that are aligned with the goals of the initiative and the Paris Agreement.

Stephanie Maier, Global Head of Sustainable and Impact Investment at GAM Investments and current chair of the global Climate Action 100+ Steering Committee:

“…we should expect a ratcheting of investor-led shareholder resolutions as well as increased scrutiny on transition plans brought to the vote, starting with the imminent AGM season”.