Companies have more work ahead in climate push: study

AN analysis of 159 companies, including global giants such as Berkshire Hathaway, Airbus, Exxon Mobil and Coca-Cola, has found that none performed at a "high-level" across a full set of indicators relating to climate action.

The study, which also included 32 Asian companies - among them Toyota, Reliance Industries, and United Tractors, which is partly owned by Jardine Cycle & Carriage's subsidiary Astra - evaluated business alignment with a net zero emissions future and goals of the Paris Agreement.

Called the Climate Action 100+ Net-Zero Company Benchmark, it offers comparative assessments of individual company performance against three high-level commitment goals - reducing greenhouse gas emissions, improving governance, and strengthening climate-related financial disclosures.

"While there is growing global momentum around companies making ambitious climate commitments, the benchmark assessments show that companies still have a long way to go in delivering on these promises," said Climate Action 100+ (CA100), the entity behind the study and the largest investor engagement initiative on climate change.

"No focus company assessed performed at a high-level across all of the nine key indicators and metrics that were used to evaluate each company."

Indicators assessed include whether a company has ambition for net-zero greenhouse gas emissions by 2050 (or sooner), and if it has short, medium and long-term reduction targets to attain this. Other indicators involve the company's decarbonisation strategy, capital allocation alignment, and climate governance.

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Company assessments were based on public disclosures, with supplementary information also furnished.

CA100 said: "While some companies in a range of sectors are ahead of their peers in making progress towards some of the disclosure and decarbonisation strategy indicators, all companies have more work ahead."

Areas for improvement include having clearer strategies and "robust" short-term and medium-term targets to back long-term ambitions. Fewer than half of the assessed companies have set short-term targets (up to 2025), and only eight met all of CA100's assessment criteria.

Future investments would also need to be more clearly aligned with the net zero transition, CA100 added.

It found that only six companies explicitly committed to aligning their future capital expenditure with their long-term emissions reduction targets, and none have committed to aligning future capital expenditure with the Paris Agreement's goal of limiting global temperature rise to 1.5 degrees Celsius.

The benchmark also found that corporate boards and executive management teams need to improve climate change governance. Although 87 per cent of the assessed companies have board-level oversight of climate change, only a third tie executive remuneration directly to the company's emissions reduction targets.

The Net-Zero Benchmark was designed to inform and improve investor engagement strategies to drive faster climate action. CA100, which was launched in 2017 to ensure the world's largest corporate greenhouse gas emitters take necessary action on climate change, involves 575 investors with collectively US$54 trillion in assets under management.

"The relatively low-performing companies reflect the fact that most of the world's largest companies are still in the early stages of the shift to a net zero economy," CA100 said, adding that the benchmark helps to set the baseline against which future delivery can be assessed.

Mindy Lubber, chief executive of sustainability non-profit Ceres, and CA 100 steering committee member, said: "Right now, the world's largest corporate emitters have an opportunity to act quickly to distinguish themselves from their peers, and move forward with plans to become net zero businesses."

Rebecca Mikula-Wright, executive director at Asia Investor Group on Climate Change, and CA100 steering committee member, said: "While the Net Zero Company Benchmark results show some good progress across Asian markets, we expect that greater progress can be made this year as companies respond to the increasingly strong climate policy signals from national governments in the region."

The next iteration of the benchmark will be published in 2022.