Power in Numbers? An assessment of CA100+ engagement on climate change
Climate Action 100+ (CA100+) is the world’s largest investor initiative on climate change. It has a goal of using investor influence to ensure that the world’s largest corporate greenhouse gas emitters take action on climate change. Tracking and reporting on the effectiveness of these engagement activities will be key to monitoring the strength of the initiative. ShareAction’s latest report – ‘Power in Numbers? An assessment of CA100+ engagement on climate change’ - assesses the climate engagement reporting of 60 of the largest CA100+ signatories and provides leading practice examples. It found 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.
The report gives recommendations for how investors can strengthen climate change engagement and reporting practices. It also includes a Best Practice Engagement Reporting Template in its Annex to facilitate robust and comparative reporting on ESG-related engagement activities, including climate change.
Finally, this report also provides recommendations for the CA100+ secretariat on how to raise the bar on CA100+ engagement and reporting activities ahead of the initiative’s crucial second phase, which begins in 2023.
Why focus on CA100+?
CA100+ is the largest-ever global investor engagement initiative on climate change. It was launched in December 2017 with 25 initial signatories. As of April 2022, the CA100+ website reports that the initiative has 700 signatories representing US$68 trillion in assets between them. The initiative aims to ensure the world's largest corporate greenhouse gas emitters take the necessary action on climate change. It provides a platform for investor participants to undertake coordinated engagement with “systemically important emitters”, as well as additional companies identified as having “specific opportunities to drive the clean energy transition” or that are materially exposed to climate-related risks.
Currently the initiative's focus list comprises 167 companies - which together cover over 80 per cent of global industrial emissions and have a market capitalisation of US$10.3 trillion.
CA100+ investors participants by region
CA100+ enormous potential to drive effective climate action among focus companies.
But, there are signs the initiative is not meeting its potential
CA100+’s own Net Zero Company Benchmark found 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 its capital expenditure with a 1.5C future or produced financial statements that reflect relevant climate risks. While 42 per cent of the initiative’s focus companies proclaim long-term net-zero ambitions, CA100+ signatories have so far failed to trigger within them the practical actions needed to achieve those goals.
This raises questions about the ambition and effectiveness of CA100+ engagement to date
Despite limited progress from focus companies, in CA100+ announcements, signatories have welcomed the incremental steps focus companies have made. Meanwhile, our 2021 Voting Matters report analysed the voting behaviour of 65 of the world’s largest asset managers. We found that, of the 45 CA100+ signatories we sampled, many either declined to vote in support of environmental resolutions at AGMs in 2021, or actively voted against them.
Without clear expectations for engagement, CA100+ risks allowing investors to greenwash their activities through signing up to the initiative while neglecting to use their influence to drive emissions reductions.
CA100+ investors are still falling short when it comes to engagement
We analysed 60 CA100+ Investor Participants on how they approach and report on engagement with companies on climate change (see report for full methodology).
We found that:
Climate engagement strategies are inadequately articulated
- Over one-third of investors (37 per cent) did not clearly specify climate change as a thematic engagement priority;
- Forty-nine investors (82 per cent) did not specify any objectives for climate change engagement; and
- Forty-nine investors (82 per cent) did not specify escalation steps for unsuccessful engagement.
Aggregate engagement reporting by investors is inconsistent and vague
- Thirty-seven investors (62 per cent) did not provide aggregate statistics on climate change engagements; and
- One-sixth of investors did not report on progress of engagements;
Climate engagement case studies are of low quality
- Half of investors named the company in question in climate change engagement case studies.
CA100+ signatory status is frequently highlighted, but detail of activities and outcomes are lacking
- Seventy-seven per cent of investors publicly stated that they are signatories of CA100+, but just 5 per cent named all companies for which they are the Lead Investor; and
- Only 15 per cent of investors gave engagement case studies where they were the CA100+ Lead Investor.
CA100+ and investors have an opporutnity to raise ambition
The findings of this report are relevant to all investors for assessing their own climate change engagement and reporting practices and identifying areas for improvement.
We recommend that investors:
1. Develop a strategy for climate change as a thematic engagement priority that includes science-based SMART objectives and is backed up by clear escalation steps.
2. Report on engagement statistics at an aggregate level, clearly articulating the definition of engagements that are captured and reporting engagement on ESG sub-topics as well as milestones reached.
3. Provide detailed case studies on a representative sample of climate change engagements, clearly outlining:
- Details of the company engaged;
- Engagement status;
- Engagement objectives;
- Actions taken towards engagement objectives
- Outcomes of engagement; and
- Next steps for engagement.
For CA100+ Investor Participants:
4. Report on participation with CA100+, including numbers and names of companies where the firm is a Lead or Collaborating Investor as well as case studies (as above) for each.
As CA100+ nears the end of its initial five-year phase, it has an opportunity to raise the ambition of engagement with focus companies ahead of its second phase, from 2023 onwards.
We recommend that CA100+:
1. Set minimum transparency requirements on climate change policies and require Investor Participants to commit to them.
2. Set minimum escalation expectations for engagements undertaken via CA100+ and require Investor Participants to commit to them.
3. Publish and maintain a list of Lead and Collaborating Investors for each focus company.
4. Publish and maintain a list of engagement objectives and milestones for each focus company.
5. 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.
Download the full report
To aid investors in implementing these recommendations, and to facilitate robust and comparative engagement reporting, we have developed a Best Practice Engagement Reporting Template, which is included in the Annex to the report.