Climate Action 100+ worked with EY in 2020 to develop an initial framework for capturing and structuring the data needed to gauge company performance on climate transition. This work involved 50 signatory investors, investor network experts, leading climate research and data organisations and corporate stakeholders. The framework became the Climate Action 100+ Net-Zero Company Benchmark. This seeks to assess the performance of focus companies against the initiative’s goals, with assessment indicators that are robust, fair, and applicable across sectors and regions.
The Climate Action 100+ Technical Advisory Group, comprised of Carbon Tracker Initiative (CTI), InfluenceMap (IM), Transition Pathway Initiative (TPI) and 2° Investing Initiative (2DII), has been central to the overall development of the new Benchmark and the indicators used to assess focus company alignment with the initiative’s goals. This benchmarking project was undertaken through the leadership and support of the Climate Action 100+ Steering Committee and the investor network staff.
Once the framework was finalised, TPI was selected to conduct the company disclosure research and analysis. TPI is supported by its research and data partners the Grantham Research Institute on Climate Change and the Environment at the London School of Economics (LSE) and FTSE Russell and Chronos Sustainability.
Additionally, Carbon Tracker Initiative and 2 Degrees Investing Initiative have been chosen to analyse recent focus company capital expenditures (CapEx) and output relative to a range of alternative climate change scenarios to provide a third-party assessment on the relative adequacy and alignment of company actions with the Paris Agreement goals. The Benchmark also includes a link to InfluenceMap’s data on corporate climate lobbying practices and individual company assessments to provide deeper insights into focus company approaches to climate lobbying.
The Climate Action 100+ Steering Committee and lead investors sent a letter (via email) to the CEO and lead independent director(s) of the focus companies. The letter was accompanied by a provisional copy of the Benchmark and other relevant contextual information. The objectives of the letter were to introduce the new standardised progress reporting framework for Climate Action 100+ and expectations linked to the new Benchmark. It also encouraged companies to make new commitments and provided an opportunity to participate in the development and implementation of sector-specific net-zero transition action plans.
The framework for the Climate Action 100+ Net-Zero Company Benchmark was publicly announced in the 2020 Progress Report. At the same time, preliminary company assessments were prepared by TPI based on public data as of 30th September 2020. Companies, as well as Climate Action 100+ lead investors, were then invited to review these assessments for accuracy of data. Companies were invited to provide factual evidence to contest any inaccuracies, as well as submit any new and valid publicly disclosed information for consideration (up until the end of the review period on 22 January 2021, which was the cut-off date for the current published assessments).
We expect the Benchmark to continue to evolve. In particular, there are five key topics which are priorities for inclusion in future iterations of the benchmark:
- 1.5°C Scenario: In the absence of a credible 1.5°C scenario, companies are currently assessed against best-available below 2°C scenarios. For its next iteration the Benchmark will seek to incorporate the International Energy Agency (IEA)’s forthcoming 1.5°C scenario once published (The World’s Roadmap to Net Zero by 2050 is due for release in May 2021).
- Expanded sector alignment methodologies: At present there are not sufficient methodologies available to assess greenhouse gas (GHG) target alignment for companies in certain sectors, including chemicals, consumer goods, other industrials and services. Climate Action 100+ investor network partners and TPI will seek to develop these for future iterations of the Benchmark.
- Climate accounting: In line with opinions from IASB and IAASB, the Benchmark will seek to incorporate an indicator to assess whether a company’s accounting practices and related disclosures reflect consideration of transition risk relative to a range of possible climate scenarios.
- Just transition: Climate Action 100+ is working with leading experts to develop ‘just transition’ related indicators, which will be introduced in the next assessment cycle.
- Expanded green revenue indicator: The current framework uses a ‘green revenues’ definition that aligns with the European Union’s (EU) Green Taxonomy criteria on ‘turnover’ (or revenues) for companies headquartered in the EU (as well as the UK, Switzerland and Norway). Companies headquartered outside of these regions are not being assessed in the 2021 iteration of the Benchmark. Future iterations of this indicator will assess non-EU companies using appropriate green revenue classification systems and/or regional taxonomies where available.
Climate Action 100+ intends to hold a public consultation in the second-half of 2021 so that investors, companies and other stakeholders can provide feedback on proposed new or modified indicators and can also provide feedback on the future evolution of the Benchmark. The next assessment cycle is planned for 2022.
In the meantime—general feedback and questions are welcomed at [email protected].