OUR DEMANDS ON COMPANIES’ ENGAGEMENT
Financial institutions must immediately cease all financial services to companies that are unable or unwilling to transform their activities to align them with a 1.5°C trajectory. However, companies not meeting the exclusion criteria should not be overlooked. If these companies want to engage the transformation necessary to align themselves with a 1.5ºC trajectory, they have no time to lose.
Financial institutions must incentivise this transformation through robust engagement policies founded on specific and time-bounded demands to deploy long-term 1.5ºC alignment strategies and immediate emission reduction measures to halve emissions by 2030.
These engagement goals must take precedence over personal interests and business arrangements between large groups. Strong conflicts of interest are thwarting shareholder engagement initiatives for climate. Reclaim Finance calls on investors to join collective engagement initiatives such as Climate Action 100+. However, participation must be proactive and should complement, rather than replace the adoption of internal engagement strategies.
Reclaim Finance believes that shareholders, but also bondholders, banks, and insurers can influence corporate behaviour. We call on financial institutions to adopt the following measures.
The right approach
Increase staff in charge of engaging with companies.
Approach and convince other financial institutions to join in the commitment efforts and adopt measures to exclude companies that are not aligned with or do not wish to align with the 1.5°C at once.
Ensure that external asset managers follow up on these demands.
Integrate engagement goals into the overall customer relationship and renew services dependent on the achievement of these goals.
- Publish and publicise demands for client companies and corporations listed in their investment, financing, and insurance portfolios (hereafter referred to as companies).
The right demands
Reclaim Finance calls on financial institutions to ask companies for:
- Pledging to aligning their activities with the 1.5°C target, and for fossil fuel companies to move out of oil and gas by 2040 in EU/OECD countries and by 2050 in other countries, and for the coal sector to move out ten years earlier.
- Committing to integrate workers’ rights and local community rights in business transformation and train them for sustainable jobs in the future.
- Integrating climate criteria at the highest level, by linking board appointment and remuneration to climate goal achievements.
- Committing to publicly not conduct or support anti-climate lobbying practices. This implies being transparent about lobbying expenditures and quitting professional associations that promote practices contradictory to the 1.5°C target or oppose public climate measures.
- Committing to review development (CapEx) and operational (OpEx) expenditures to align them with the 1.5°C target.
- Committing to (1) use scenarios with high chances of success, immediate emission reduction efforts, and low use of negative-emission technologies; (2) always follow the best available scenarios, methodologies and tools, and support efforts to develop them.
- Aligning reporting with the Task Force on Climate-related Financial Disclosure (TCFD) recommendations. This includes targets, investment plans and decarbonisation goals, as well as the governance structure dedicated to integrating the achievement of climate goals into corporate management.
The right sanctions
Reclaim Finance asks financial institutions to sanction:
- Companies that start or threaten to initiate legal action, for example, through the investor-state dispute settlement mechanism, to counter climate regulations.
- Companies that sell instead of closing their carbon assets, as this does not lead to real reductions in greenhouse gas emissions.
- Companies that do not meet the demands. Before engaging companies, financial institutions must have adopted and communicated a strategy of increasing pressure, to be deployed if engagement fails or delivers poor results. This strategy must include intermediary deadlines (6, 12, 16, 24 months) and use all the tools available to financial institutions. These tools include open letters, forums, and public statements; filing and voting on resolutions and sanctions against management at the General Meeting; suspending financial services and tightening the terms of financing and finally excluding companies from all financial services.