Chronos supports Climate Action 100+ in creating guidance for investor engagement in Asia
Chronos supports Climate Action 100+ in creating guidance for investor engagement in Asia
Ella Harvey, Rory Sullivan and Chup Priovashini
Chronos Sustainability has worked with the Asia Investor Group on Climate Change (AIGCC) to produce The Climate Action 100+ Investor Guide for Engaging in Asia. Released on 6 July 2022, the report provides guidance on how companies can align their disclosures with the expectations of the Climate Action 100+ Net Zero Company Benchmark (the CA100+ Benchmark), a region- and sector-agnostic tool that measures companies’ progress against the initiative’s three high-level goals: emissions reduction, governance, and disclosure.
This new report includes reflections from investors engaging with companies in Asia, case-studies that highlight key challenges facing Asian companies, examples of good disclosure, and an analysis of the state of play of Asian companies.
The guide also explains how differences in markets and corporate structures in Asia can meaningfully change the engagement context for investors, and therefore change the engagement approach that investors need to take. It recognises all companies are in different stages of transition within the CA100+ Benchmark, from just starting (e.g. the company has not yet set a net zero target) to moderately advanced (e.g. the company has a net zero target and interim targets but needs to align these targets with a 1.5°C pathway) and provides guidance and engagement priorities for companies in each stage.
Gaining practical insights from Asia markets
As part of the process of preparing the report, Chronos conducted interviews with investors in different Asian markets. Reflecting on the practicalities of investor-company engagement in Asia, the interviewees emphasised the following points:
1. Building long-term, supportive trust-based relationships between investors and companies is key to ensuring engagement is fruitful.
2. State-owned enterprises (SOEs) may require tailored engagement strategies, as their approach to sustainability is more likely to reflect that of their home government, compared to publicly traded companies.
3. Engagement may be improved by facilitating collaboration between local and international investors, as the integrating of local norms with international best practices demonstrates the convergence of messages and priorities around climate action.
The guide also identifies four engagement priorities for investors engaging with companies based in Asia:
1. Companies must set their net zero commitments no later than 2050. National-level ambitions, including nationally determined contributions to the goals of the Paris Agreement (NDCs) set the baseline expectation, but companies eventually need to align with the goal of global net zero by 2050 outlined in the Benchmark.
2. All corporate commitments and targets must be set for the specific entity being evaluated by the Benchmark, as group- or subsidiary-level commitments are not sufficient to score under the Benchmark.
3. Companies must make explicit commitments to align their capital expenditures with the Paris Agreement, as providing detail on capital expenditure plans is not sufficient to score.
4. Companies are expected to disclose their climate lobbying activities, even though taking proactive steps to disclose corporate lobbying activities may not currently be a priority for companies headquartered in some Asian markets.
Further information
This guide complements existing climate engagement tools as an important resource providing detailed advice to investors engaging with Asian companies on priorities for aligning disclosures with the expectations of the CA100+ Net Zero Company Benchmark. It concludes that when investor dialogue is tailored to the regional context and state of play, engagement can be an effective tool for driving climate action by companies.
About AIGCC: AIGCC is an initiative to create awareness and encourage action among Asia’s asset owners and financial institutions about the risks and opportunities associated with climate change and net zero investing. It is one of the founding investor networks behind the Climate Action 100+ (CA100+) initiative.
About CA100+: Climate Action 100+ is a global, investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change. It is backed by more than 700 investors representing $68 trillion in assets under management.