Paris, 31st march 2022 – Yesterday, a group of 700 investors worth $68 trillion has published an analysis of the climate transition plans of 166 companies. Despite distant carbon neutrality pledges, less than 10% of these companies have set adequate short-term goals to reduce greenhouse gas emissions, and none of them align its capital expenditures on a 1.5°C-compatible pathway. This casts serious doubts on the effectiveness of “stewardship” and “shareholder engagement” as it is currently conducted by investors. Reclaim Finance calls on investor to follow through on their own analysis and take action at the forthcoming Annual General Meetings (AGMs). They should vote against the management of companies that do not have a complete and ambitious climate plan, and consider filing shareholder resolutions to force them to adopt one.
The results from the Climate Action 100+ (CA100+) “Net Zero Company Benchmark” show that no company has developed a climate plan and climate targets compatible with the objective of limiting global warming to +1.5°C:
- 69% of analyzed companies aim to be carbon neutral by 2050, but only 42% of them cover all their emissions in this pledge (including those related to scope 3).
- Only 7% of companies have set a short-term (2025) greenhouse gas (GHG) emissions reduction target that is compatible with 1.5°C . Four-fifths of companies do not have a target 1.5°C-compatible target for the medium term (2035) either.
- None have aligned their capital expenditures with their commitment to carbon neutrality and only 17% have a precise decarbonation strategy matching their GHG reduction targets.
The benchmark also demonstrates a lack of significant progress over time. The share of companies achieving a satisfactory score increased by less than 10 percentage points for 7 of the 9 criteria that were analyzed. Substantial improvements were observed only for the least ambitious criteria, such as aligning climate reporting with the TCFD standard (1). Conversely, companies are not making progress on the most important issues, such as setting short-term GHG reduction targets and aligning capital expenditures on a 1.5°C pathway.
Guillaume Pottier, Stewardship Campaigner at Reclaim Finance comments: “These results largely discredit the idea that “transitioning companies” should be supported and accompanied by investors. 4 years after the launch of the CA100+ initiative, investors appear to have mostly failed to force the biggest polluters to confront the climate crisis. They need to urgently revise their methods to be more effective: This should include voting at AGMs against companies that fail to document substantial progress and planning to divest from the ones that keep aggravating the climate crisis.”
The oil and gas sector’s lack of transition is also clear. None of the 36 companies reviewed by investors have investment plans aligned with 1.5°C and only one is aligned with the International Energy Agency’s less stringent “Below 2°C” scenario (2).
The case of TotalEnergies is representative of the sector’s lack of transition. Last week, the company unveiled the content of its latest climate plan, which will be submitted to an advisory shareholder vote on the 25th of May. However, TotalEnergies meets only 3 of the 9 criteria examined by CA100+ – on CAPEX alignment, its 2022 score even deteriorates compared to 2021. The French oil and gas major still does not have complete and aligned reduction targets for the short- and medium-term. While TotalEnergies has a long-term decarbonisation target that investors consider “adequate”, its short- and medium-term targets are insufficient for the company to be truly aligned with a 1.5°C trajectory. Indeed, by 2047, TotalEnergies’ emissions surplus will continue to accumulate – a factor not taken into account by the investors’ benchmark.
The results of CA100+’s work have direct implications for the upcoming Annual General Meetings, particularly for the so-called “Say on Climate” resolutions that consult shareholders on the companies’ climate plans. As investors begin to clarify their expectations on the content of such plans – like CNP Assurances did this morning (3) by asking for short-term emission reduction targets – the analysis produced by CA100+ could and should guide investors’ votes.
“Despite its recent announcements, TotalEnergies remains far from being aligned with 1.5°C. Investors’ upcoming vote on its climate plan at the next AGM will be a decisive test for stewardship and engagement. Last year, most investors rubber stamped a plan that was both incomplete and incompatible with a 1.5°C pathway. Investors must not be fooled again: the analysis produced by CA100+ clearly shows that TotalEnergies’ plan is flawed, so they must vote against it.”, concludes Guillaume Pottier.