As the Climate Action 100+ initiative comes to the end of its first five-year cycle, ShareAction argues that the initiative is falling short of delivering meaningful progress on climate. It said the initiative must set a higher bar for standards of engagement undertaken by signatories in its next phase if it is to achieve its stated goals.

Climate Action 100+ (CA100+) is the world’s largest investor initiative on climate change, with 700 investor signatories representing $68 trillion USD in assets between them. It was launched in 2017 with the goal of using investor influence to ensure that the world’s largest corporate greenhouse gas emitters take necessary action on climate change, including reducing greenhouse gas emissions in line with the goals of the Paris Agreement.

Five years on, ShareAction argues that there is little evidence that signatories have succeeded in realising this goal. Indeed, CA100+’s own Net Zero Company Benchmark shows that less than 12 per cent of the initiative’s focus companies have adequate short-term emissions reduction targets or decarbonisation strategies. No company has fully aligned their capital expenditure with a 1.5C future or produced financial statements that reflect climate risks and every single oil and gas focus company is planning capital expenditure on projects that are inconsistent with the goals of the Paris Climate Agreement.

CA100+’s approach is for investors to ‘engage’ with companies to encourage actions to reduce their contribution to climate change. Engagement can include everything from private meetings and letter-writing, to public statements at AGMs, to voting on director (re-)elections, or filing and voting for shareholder resolutions.

Engagement can be an effective tool in changing corporate behaviour. For example, last year a group of shareholders succeeded in forcing HSBC bank to set a deadline to phase out the provision of finance to the coal industry.

Whilst there are examples of effective engagement and impact within CA100+, ShareAction found that these are the exception. It said that, in general, engagement as practiced by CA100+ signatories lacks the ambition, transparency and accountability needed to drive the net zero transition at the pace required.

For example, in 2021, three CA100+ ‘Lead Investors’ of mining giant BHP welcomed the company’s Climate Transition Action Plan in a media statement. However, analysis of the plan found that it was not aligned with a 1.5C pathway and omitted the company’s largest sources of Scope 3 emissions. Indeed, influential proxy advisory firm Glass Lewis recommended that shareholders vote against the plan, saying that “it is unclear to what degree any of BHP’s current targets are aligned with the goals of the Paris Agreement.”

ShareAction’s new research assesses the climate engagement reporting of 60 of the largest CA100+ investor signatories and finds that:

• Climate engagement strategies are often inadequately articulated, or not at all; 
• Aggregate engagement reporting is inconsistent and vague; 
• Climate engagement case studies are of low quality; and 
• Signatories often highlight their involvement with CA100+, but rarely report details of activities and outcomes. 

For example:

• 49 investors (82%) did not specify any objectives for climate change engagement, or any escalation steps for unsuccessful engagement. Escalation strategies are essential to incentivise companies to meet investors’ asks and move engagement on from endless meetings to more impactful actions such as voting against directors.
  
• Only 10 (17%) signatories report on the progress of engagements. Clear objectives and reporting are essential to enable investors and external stakeholders to evaluate and determine whether – and when – engagements require escalation.   
• Forty-two investors (70%) provided engagement case studies on climate change. But twelve of these failed to name the company that was the subject of the engagement and none gave an indication of the next steps for engagement, besides generic statements such as “we will monitor the company” or “we will continue to engage”. 
• Forty-six signatories (77%) publicly stated that they are signatories of CA100+, but just three (5%) named all companies for which they are a Lead Investor .

ShareAction said this lack of transparency around objectives, accountability and outcomes risks allowing investors to greenwash their brands by signing up to the initiative, without using their influence to drive emissions reductions. 

As the CA100+ initiative prepares to move beyond its initial five-year period and into its second phase from 2023 onwards, ShareAction urged it to:

• Strengthen signatory requirements: Set minimum transparency requirements on climate change policies and require Investor Participants to commit to them. 
• Raise the bar on engagement: Set minimum escalation expectations for engagements undertaken via CA100+ and require Investor Participants to commit to them.  
• Improve signatory accountability: Publish and maintain a list of Lead and Collaborating Investors for each focus company and update the list annually. 
• Establish clear expectations for focus companies: Publish and maintain a list of engagement objectives and milestones for each focus company. 
• Report on activities and outcomes: Publish aggregated statistics on engagement activities and outcomes against the CA100+ Net Zero Company Benchmark accompanied by detailed case studies on engagement with each focus company in annual progress reporting. 

ShareAction said the ability of investors to continue participating in the initiative should be predicated on their adherence with these transparency requirements, while Lead Investors should be removed if they fail to raise the bar on engagement. 

Isobel Mitchell, Research and Engagement Manager at ShareAction said: “To avoid the risk of greenwashing, transparency is critical. Clear reporting on engagement objectives, outcomes and escalation activities is essential for stakeholders to monitor progress on climate action and hold both companies and investors to account when their actions fall short. This is key to strengthening the initiative and ensuring that signatories commit to meaningful action.” 

Catherine Howarth, Chief Executive of ShareAction, said: “CA100+ is the investor initiative on climate change many were waiting for. It has the scale and focus required to make a meaningful impact on global carbon emissions. But success depends on action and real effort by all signatory investors, and so far, not all are stepping up.” 

Notes to editors

Read the report, Power in Numbers? An assessment of CA100+ engagement on climate change