Chronos supports launch of latest landmark Climate Action 100+ Net Zero Company Benchmark

Bridging the gap between Net Zero commitments and action: Chronos supports launch of latest landmark Climate Action 100+ Net Zero Company Benchmark

By Ella Harvey & Dr Rory Sullivan

Climate Action 100+, the world’s largest investor engagement initiative on climate change with USD 68 trillion AUM[1]launched its second Net Zero Company Benchmark on 30 March 2022. Chronos Sustainability provided technical direction and project management for the Benchmark, which assesses the climate performance of 166 of the world’s largest and most important corporate greenhouse gas (GHG) emitters, based on analysis from the Transition Pathway Initiative and data from FTSE Russell. 

Some year-on-year progress since 2021

Compared to the first Benchmark in March 2021, the latest results show that there has been some progress against the three high-level goals of improving climate governance, cutting corporate greenhouse gas emissions, and strengthening climate-related disclosures. The most evident improvement is in the proportion of companies that have made net zero commitments, which has increased from 52% to 62% of focus companies between 2021 and 2022. In addition, 90% of companies demonstrate at least basic board-level oversight of the management of climate change risks. While this is a large proportion, it is effectively unchanged from the previous Benchmark. Getting companies to make net zero commitments and to assign senior management responsibility for the delivery of these commitments have been key areas of focus for the investors backing the CA100+ initiative.

GHG commitments are not reflected in capex strategies

While companies are making high level commitments, most have yet to explain how they will ensure that these commitments will be translated into action. For example, even though companies are setting net zero targets, they may still be planning to pour substantial capital into fossil fuel intensive business lines for years to come.According to the Benchmark, only 9 focus companies (5%) have capital expenditure allocation plans that are explicitly linked to their long-term GHG reduction targets (or that commit the company to phase out planned expenditure in unabated carbon intensive assets or products). 

Corporate decarbonisation plans still lacking details

Similarly, corporate decarbonisation plans are still lacking the details investors need to determine whether they are on track to reach net zero. While nearly half (49%) of companies have strategies in place that relate to both their interim and long-term targets, only 17% of companies break down these strategies into their key elements, describing how each major source of emissions will be addressed. Without this level of detail, investors are left in the dark regarding the feasibility of a company’s plan to reach net zero emissions. Further, the Benchmark demonstrates that companies’ interim targets are generally not aligned with 1.5°C pathways – a testament to the lack of ambition in most corporate short-term GHG reduction targets.

Bridging the gap between commitment and action will be the priority for CA100+ engagement over the coming years. The immediate priorities will be ensuring that companies continue to set ambitious targets – with 2030 being a key focus – and develop low carbon transition strategies and capital investment plans that demonstrate how these targets are to be met.

Notes:

Ella Harvey is Manager of Policy Research at Chronos Sustainability and the Lead Researcher on the March 2022 CA100+ Benchmark update. 

Dr Rory Sullivan is the CEO of Chronos Sustainability and was Chronos’ Project Director for the delivery of the 2021 CA100+ benchmark and the March 2022 CA100+ Benchmark update. 

[1] as of April 1, 2022