Climate Action 100+ is introducing new, optional ways for investor participants to contribute to the initiative as sector lead or sector contributing investors.
In 2021, CA100+ launched the Global Sector Strategies, recognising while companies need to take more action to decarbonise, for corporates to thrive in a transitioning economy, policy and real economy conditions should be aligned with this goal. Where they are not, companies face barriers to completing their transition to net zero. Consequently, investor engagement with companies in isolation is often insufficient to ensure their full transition and engagement with the wider ecosystem for each sector is needed.
The Global Sector Strategies project has already produced a number of reports (aviation, steel, food and beverage, electric utilities).
For phase 2, the aim is to build on CA100+’s existing Global Sector Strategies to help facilitate new sector engagements. Climate Action 100+ is expanding its focus to support signatories to identify and implement engagements with stakeholders to help create the ecosystem conditions needed for sectors to transition.
Such engagement could fall under four key categories around the main ecosystem barriers facing sectorial transition. The new sector lead investors under CA100+ would facilitate this type of macro engagement:
Investor engagement with corporates to align with 1.5°C is unlikely to lead to global voluntary decarbonisation while the same companies are incentivized by a real economy and regulatory frameworks that still largely ignore this goal. Stakeholders such as policymakers and corporate peers (through industry-level policy advocacy) can help create the real economy and policy conditions for target list companies to succeed in a 1.5°C world.
Engagement with companies at a single point in the value chain is often insufficient as the company’s alignment with 1.5C oftentimes requires action along the value chain, e.g. heavy-duty transport engagement dialogues would be more effective if they included additional relevant corporate sectors (power utilities, vehicle manufacturers, vehicle customers, etc.) and their respective trade associations. Engagements with a single company otherwise run the risk of facing limits to greater ambition as companies are impacted by other parts of the value chain, reducing investors’ ability to increase accountability on 1.5C aligned transition plans.
Corporate engagement on transition plans oftentimes runs into technology-related roadblocks. Paris-aligned engagement plans may rely on new and potentially unproven technologies. This raises financial and feasibility concerns to corporates and investors alike. Removing barriers to technological roll-out and costs requires a multi-stakeholder approach, including policymakers, investors, corporate peers, and value chain co-operation.
Some investor action on enabling corporate transition can go beyond the scope of stewardship, e.g. by helping to upscale financing for specific transition needs in each sector. The global transition requires well over $100 trillion in capital and innovative financing mechanisms. While corporates should disclose how they are going to finance their transition, there is an opportunity for investors to help develop financing mechanisms that can support them in their efforts.
How can signatories get involved?
Once a signatory has signed up as a lead or contributing investor on a company, they can also opt-in to becoming a sector lead or sector contributing investor. Please refer to the Handbook for further information and terms of reference.
Sector engagements are supported by existing and new resources from Climate Action 100+. Such resources include an annual, global report mapping out key barriers and priority macro engagement actions investors could choose to take across sectors and the existing Global Sector Strategies papers.
Signatories may propose new sector engagements or enquire about existing opportunities with their regional network coordinator. The relevant network will discuss the idea in more detail with the signatory, to understand the scope and annual objectives.
The below table sets out more detail on the nature of sector engagements:
|Who?||CA100+ signatories who are lead or contributing investors on a CA100+ focus company list can opt-in to becoming a ‘lead sector investor’ or ‘contributing sector investor’.|
|What?||The aim of sector engagement is to address sector-wide (and common cross-sector) barriers to each sectors’ transition with relevant stakeholders, such as policy makers and value chain companies.|
|Where?||Global sector research helps identify actions investors can choose to take and then implement regionally through coordination by the local networks.|
|When?||May be shorter-term ‘sprints’ or longer-term engagements depending on the action, e.g. value chain engagement or policy advocacy.|
|How?||Potential activities include (but are not limited to): Letters, meetings, roundtables, and activities related to annual general meetings.|
|Outcome?||There will be increased investor engagement on key barriers to sector decarbonisation with ecosystem stakeholders. This in turn will unlock greater ambition from CA100+ companies.|
Watch this space: Global cross-sector report to be published by Q2 ‘24.
- Cross-sector report mapping out key barriers and priority macro engagement actions investors could choose to take in the upcoming year.
Sector deep-dives/Global Sector Strategies
- Climate Action 100+ has produced four Global Sector Strategy reports that mapped out the key transition levers and supporting investor actions for the aviation, food and beverage, electric utilities, and steel sectors.