Even a few years ago, it was rare to find a big company in high-carbon sectors like oil or power that aspired to eventually eliminate its carbon footprint. Now, committing to reach net zero emissions by mid-century is seen as table stakes for any company wishing to be seen as remotely credible on climate change. Most of the biggest polluters have made that promise. Few have done much to make that promise come true.
That’s the conclusion of an Oct. 13 analysis of the climate progress of 159 high-carbon companies worldwide by CA100+, a network of hundreds of asset managers, pension funds, and other institutional investors pushing for climate action in companies in which they hold shares. The 159 companies represent most of the world’s biggest carbon emitters: utilities like NextEra, oil producers like Exxon and Chevron, automakers like Ford, airlines like Delta, and industrial manufacturers like ThyssenKrupp.
Three-quarters of these companies have committed to net zero across some or all of their emissions footprint by 2050, up from 52% in March 2021. And 91% of the companies now include climate-related information in their financial disclosures, up from 80% in March 2021.
Corporate climate plans lack detail and cash
But half of these companies exclude the emissions of their customers and suppliers from their climate targets, which in the case of many constitutes the majority of their footprint. Around 81% lack a detailed decarbonization strategy, and 90% have no five-year interim emissions targets—the timeline that matters most for executives’ daily decision-making. Of these companies, 90% have no plan to change their capital spending to support decarbonization, and 90% have not adopted guidelines to lobby in favor of climate policy. Finally, among the 159 companies, not one comprehensively accounts for climate-related risks in its internal accounting and auditing.
“There is progress, but not the action we need to see,” said Morgan LaManna, director of investor engagement at the sustainable finance advocacy group Ceres, which helps coordinate the CA100+ group. “There are these targets, but what are you actually doing about it?”
The shortfall on lobbying is especially concerning, LaManna said, because new government regulations and policies will be needed to help companies reach their long-term goals. Without pressuring governments to act, these companies won’t be able to fulfill their promises.
Investors need to push companies harder on climate goals
In the meantime, LaManna said, companies should expect to face more aggressive supervision from their major shareholders, who are increasingly threatening to vote out the executives of companies that fail to deliver on climate.
Institutional investors who have set climate goals for their own portfolios now need to get much more aggressive, said Catherine Howarth, CEO of the shareholder advocacy group ShareAction, in a statement. A ShareAction study in May found that most investors in the CA100+ lack any specific objectives for their climate change engagements with companies. Investors also don’t outline any steps for escalation if companies don’t follow through.
“At the close of CA100+’s initial five-year phase, its target emitters are not remotely decarbonizing at the pace needed to avert severe climate damage,” Howarth said. “This failure of stewardship risks significant losses to investment portfolios and economies. Signatories to CA100+ have failed so far to manage climate risks in line with their fiduciary duty of prudent behavior.”