Ahead of COP26, New Guide Aims to Help Investors Evaluate and Strengthen Corporate Climate Commitments
At a time where it is more urgent than ever that companies act boldly on the climate crisis, a new guide released today by the sustainability nonprofit Ceres aims to shed light on the often-confusing array of corporate commitments, providing investors with clear and practical guidance on evaluating corporate greenhouse gas commitments and effectively engaging the largest companies to increase their climate ambition and action.
Ceres’ new Investor Guide to Corporate Greenhouse Gas Commitments is a user-friendly resource that offers an array of tools investors can use to engage with companies, including a series of easy-to-use fact sheets and an Ambition Spectrum designed to measure corporate commitments against a standardized set of criteria.The guide recommends that investors ensure companies are not only working to remove greenhouse emissions from their value chains, but are also moving to implement a net zero business strategy that will allow them to thrive in a fair and just decarbonized economy that supports an equitable transition for affected communities and workers.
As of March 2021, some 20% of the world's 2,000 largest publicly traded companies representing $14 trillion in sales have made climate commitments. Yet the majority of large, U.S.-based companies have yet to make commitments strong enough to meet the urgency of the moment. A Ceres analysis released with the guide found that more than 85% of Fortune 500 companies lacked robust climate goals, and just 9% had begun to include climate action transition plan elements in their sustainability reports.
“Companies have a critical role to play in limiting global temperature rise and reaching the goals of the Paris Agreement — not just because they generate large quantities of greenhouse gas emissions themselves, but because they are the ones able to drive new business models, create breakthrough technologies, and push for the policy changes we need to make this future a reality,” said Laura Draucker, senior manager of corporate greenhouse gas emissions at Ceres. “To lead on climate, companies must first set robust goals. This guide demystifies the growing array of corporate climate commitments and gives investors the critical tools and guidance they need to push for stronger ambition and action as they come to terms with the risks that carbon-intensive companies pose to their own portfolios and the broader economy.”
The guide arrives on the heels of a warning from the world’s leading scientists that without immediate, large-scale emissions reductions, previous targets of limiting temperature rise to 1.5 degrees Celsius will be out of reach. The guide states that every actor within the economy — companies, investors, policymakers, and regulators — must raise their ambition and take transparent action in order to prevent the worst impacts of the climate crisis. That message will be heard loud and clear at next month’s international conference of the parties (COP26).
Through its new Ambition 2030 initiative, Ceres is working to leverage large company commitments and investor action to move high-emitting sectors toward a net-zero future. The Investor Guide to Corporate Climate Commitments supports these efforts with clear, detailed information that provides a starting point for investors looking to engage companies on climate for the first time or be a meaningful, quick-reference guide for those with more experience. Other initiatives that support companies in making credible commitments, include the United Nations Framework Convention on Climate Change Race to Zero Campaign, and the Science Based Targets initiative.
“Not every climate commitment is aligned with what science tells us is needed to halve global emissions before 2030 and achieve net-zero before 2050,” said Alberto Carrillo Pineda, Co-Founder and Managing Director of the Science Based Targets initiative. “This guide is a very valuable resource to equip investors so that they can use their positions of influence to accelerate immediate transformation consistent with what science indicates is necessary to avoid catastrophic climate change.”
More investors than ever before are recognizing both the physical and the systemic financial risks of the climate crisis. As one example, over just the past four years, Climate Action 100+ has grown to be the world’s largest investor engagement initiative, with 615 members representing $55 trillion in assets under management that are calling on companies in their portfolios to take bold and urgent action on climate.
The guide comes at a critical time, as investors begin to prepare for shareholder engagement in the lead up to next year’s proxy season. This past season, a record number of climate-related shareholder proposals resulted in majority votes at some of the world’s largest corporations, including Chevron, General Electric, and Budge.
“Climate change creates risk throughout our portfolio, and we are committed to working with companies to reduce that risk through strong climate commitments and action,” said Kate Monahan, director of shareholder advocacy at Trillium Asset Management. “Ceres easy-to-use, well-sourced Investor Guide to Corporate Climate Commitments will help ensure we are targeted, informed and effective in our engagements with companies.”
The guide centers on a variety of Commitment and Issue Area Fact Sheets on the following topics that can be used to support company dialogues and other engagement tactics:
- Clean Energy Goals
- GHG Reduction Goals and Science-Based Targets
- Net Zero and Carbon Neutrality Goals/Carbon Credits
- Scope 3 and Transition Plans
- Just and Inclusive Economies
Each fact sheet includes detailed information on the topic area, red flags investors should watch for, examples of questions they can use to probe commitments, and recommendations for the next steps a company should be encouraged to take to advance through the Ambition Spectrum.
Ceres is a nonprofit organization working with the most influential capital market leaders to solve the world’s greatest sustainability challenges. Through our powerful networks and global collaborations of investors, companies and nonprofits, we drive action and inspire equitable market-based and policy solutions throughout the economy to build a just and sustainable future. For more information, visit ceres.org and follow @CeresNews.