An investor collective has launched its first benchmark evaluating the climate action of the world’s largest greenhouse gas emitters, ruling that Australian companies are lagging behind their peers.
The international group of investors, Climate Action 100+, has issued a benchmark, which defines how businesses are aligned with the Paris Agreement.
While there is growing global momentum around companies making climate commitments, the benchmark assessments have stated that companies still have a while to go before they can deliver on their promises.
According to Climate Action 100+, none of the companies it assessed have fully disclosed how they will achieve their goals to become a net-zero enterprise by 2050 or sooner, including short and medium-term targets to deliver emissions reductions.
Around half (52 per cent) of the focus companies had announced a net zero by 2050 target, but only half of the plans covered the full scope of their most material emissions.
Around 107 companies (a little more than half of the total) had set medium-term targets, within the next 15 years, but only 21 met all assessment criteria. Likewise, 75 companies set short-term goals (up to 2025), but only eight met all of the assessment criteria.
Only six companies were found to commit to aligning their future capital expenditures with their long-term emissions reduction target but none had committed to lining up their capital expenditure with the goal of limiting the temperature rise to 1.5 degrees Celsius.
The majority of companies (87 per cent) had board-level oversight of climate change, but only a third of companies tie executive remuneration directly to the group’s emission reduction targets.
Further, no company had performed at a high level across all of the nine key indicators and metrics used for their performance assessment, which included evaluations across climate governance, alignment with the Task Force for Climate-related Financial Disclosure (TCFD) and climate policy engagement.
Emma Herd, chief executive of Australian and New Zealand-based Investor Group on Climate Change (IGCC) and fellow Climate Action 100+ steering committee member added the results of the first benchmark also showed many Australian giants need to step up.
“…Australia’s largest companies still need to move beyond glossy sustainability brochures and establish hard strategies and commit capital to cutting emissions and transitioning to net zero,” Ms Herd said.
“In many areas Australian companies are not matching their investors’ returns. In a carbon constrained world, companies that are not demonstrating a concrete transition to net zero emissions will increasingly lose value against those who are making the transition.”
Andrew Gray, director of ESG and stewardship at AustralianSuper and steering committee member at Climate Action 100+ commented as the first “cohesive investor-led framework for the world’s top carbon emitters”, the initiative will enable climate engagement to level up.
“The ability to measure through benchmarking means investors can set a base to track the progress of companies in relation to their management of climate change investment risks and opportunities,” Mr Gray said.
“It creates much needed clarity for both investors and companies in climate change engagement, which will enable better management of the investment risks and opportunities from climate change.”
Climate Action 100+ has signalled it will build on the company assessments released by publishing sector-by-sector analyses in the coming months.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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