Climate Action 100+ sees more commitments on net-zero, not enough progress

Companies are committing to net-zero emissions but are not showing the type of urgent progress needed, Climate Action 100+ said Wednesday in a release announcing the latest results of its net-zero company benchmark assessments.

The investor engagement initiative on climate change represents 700 investors responsible for $68 trillion collectively. It launched the net-zero benchmark in 2021 to measure 166 companies on their progress against three engagement goals and a set of key indicators related to business alignment with the goals of the Paris Agreement.

The benchmark methodology was updated in 2022 to reflect the pace of change required to limit global warming to 1.5 degrees Celsius and to be aligned with the most recent science-based policy. The 166 companies are considered high emitters, accounting for up to 80% of corporate greenhouse gas emissions, according to Climate Action 100+.

Additional indicators focus on the just transition and climate accounting and audit, in response to evolving investor priorities, the release said.

The latest assessment found that 69% of the companies have set commitments to achieve net zero-emissions by 2050 or sooner, a 17% increase from one year ago.

Yet, companies are not showing progress across the benchmark's key indicators. Only 17% have set medium-term targets that cover all material emissions and only 42% have comprehensive commitments for net-zero by 2050 that cover all material emissions, including Scope 3 emissions. Only 5% of companies explicitly commit to align their capital expenditure plans with their long-term greenhouse gas reduction targets, and only 17% companies have quantified decarbonization strategies.

A new indicator on climate accounting and audit introduced into the benchmark this year found no company demonstrating that assumptions for financial statements are consistent with the goal of net-zero by 2050, according to the release.

Climate Action 100+ did find overall year-over-year improvement from companies cutting greenhouse gas emissions, improving climate governance and strengthening climate-related financial disclosures, with 90% of the focus companies having some level of board oversight of climate change, and 89% supporting Taskforce on Climate-related Financial Disclosures or using climate-scenario planning.

The benchmark "is clearly driving an increase in corporate disclosures from focus companies," and the framework is being increasingly used to frame net-zero transition planning in company annual reports, the release said.

Stephanie Maier, global head of sustainable and impact investment at GAM Investments and chairwoman of the Climate Action 100+ steering committee, said in the release that the benchmark "clearly shows that focus companies are not making the progress required." Ms. Maier predicted "a ratcheting of investor-led shareholder resolutions as well as increased scrutiny on transition plans brought to the vote, starting with the imminent (annual general meeting)season."

Another round of assessments is planned for later in the year.