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Felicia Tan
in
Finance
November 19 16:53

The paradox of Climate Action 100+

Investors' positive influence on climate change 
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Investors all around the world are proving, that they can be a force for positive change. And they are doing so not by giving out funds, but by threatening to take them away. This paradox is called Climate Action 100+.
By wielding their financial influence this collective of investors and businessmen has managed to make the policies of a few large companies – such as Glencore, British Petroleum and Royal Dutch Shell – eco-friendlier and mitigated the conflict between automakers and US government.
Climate Action 100+ is a global organization of investors, that want to make sure that largest greenhouse gas producers work towards aligning their operations with Paris Agreement, which has set universal guidelines for climate action. Since its inception in 2017 it became the largest investor initiative in its field.
Essentially the organization ensures that other company’s take the necessary steps to reducing their carbon footprint and puts financial pressure on those who don’t participate in the effort. The investors have a powerful means of influencing the corporate policies. And now they have a way to use it in an organized, constructive way.
The collective has repeatedly stated, that climate change might hit any kind of business very hard and in the nearest future. Especially an increase of global temperature by 4 degrees will mean an immediate economic crisis. The Chairman of the initiative – insurance company AXA – described this possible development as an “uninsurable risk”.
The company works primarily with venture capitalists, managers, leading consultants, directors and other business specialists. At the moment Climate Action 100+ has 373 signatories from all over the world. 219 of them come from Europe, 103 – from North America, 31 – from Australia and 18 more from Asia. South America and Africa each “supplied” one signatory. The combined net worth of the signatories is valued at $35 trillion.
Investors may engage with the company in a wide variety of ways: they have the right to call for group meetings, making joint statements with the company, voting for or against reports, accounts and resolutions etc. And they all get a say in company’s Annual General Meeting.
Recently the organization has published a report, which covers the results of the first two years of their work. The initiative has achieved important agreements with companies in some of the most complex and difficult sectors, initiated collaborative investor engagement on climate in Asia, and managed to encourage a series of large-scale disclosures of corporate lobbying plans and policies on climate change.
The assessment of other companies’ performance is based on their long-term plans, the correlation of this plans with Paris Agreement Guidelines and the scientific grounds of their methods and goals. According to the report, 70% of the analyzed companies have set long-term strategies for reducing emissions. However, only 9% of these plans actually align with Paris Agreement. Investors urge the boards to accelerate the process and offer their own contribution in the form of developed step-by-step frameworks.
The report also provides an extensive statistical data about climate action across different sectors and comparison of their progress in their ecological transformation. In most cases businesses that specialize on consumer products tend to be the most “progressive” and put the most effort into changing their policies. Mining companies, on the other hand, turned out to be the least responsive and generally failed to create a long-term science-based plans.
A separate part of the report deals with the overview of climate action in Asia. The region has a special significance for climate change discussion. Asia is responsible for almost a half (49$) of the global emissions and is especially exposed to immediate risks of climate change: namely the extreme weather events and conditions.
Climate Action 100 adapted a special approach for its work in the region. The initiative aimed to create a cohesive framework for collaborative work on climate change in Asia and increase the number of Asian signatories, to get more local influence. According to the report, some important milestones were achieved. The organization now has 18 signatories from the region – 9 from Japan, 5 from China, 2 from Taiwan, 1 from India and 1 from Indonesia. They represent $3 trillion of assets under management.  The Asia Advisory Group has been established “to provide strategic insights” for environmental problems.
The report also deals with the issue of lobbying for climate change. Many of high grade investors support the governments in their efforts to fight climate change. However, currently only a handful of large companies fully support the climate policies and help in pushing them forwards in legislation.
Climate Action 100 addressed the problem by compiling and issuing an official statement – the European Investors Expectations on Corporate Lobbying on Climate Change. The statement expects the companies to disclose the information on its positive influence on climate change lobby and their position on industry associations that lobby against effective climate policies
The initiative also directly took part in creation of the new legislation for American carmakers. In 2018 the trump administration offered to loosen up the passenger vehicles production standards and revoke California state’s authority to regulate tailpipe emissions.  The Climate Action 100+ engagement group ensured that large companies – such as Ford and General Motors – played positive roles in negotiation process. Their influence led the producers to take a position that aligns with their position on climate. The companies sent an open letter to the government, asking to reopen negotiations and strengthen the new standards.
The organization promised to further monitor similar situations and be ready to take action.
Climate Action 100+ has already set the tasks for the near future. In the coming years the initiative is going to focus on furthering their lobbying efforts - investors will focus on securing more disclosure commitments, and will urge the companies to set out clear support for climate policy. They will also develop more specific frameworks for business adaptation and gradual carbon footprint reduction to net zero.
Overall, the initiative strongly believes, that the private sector is becoming more and more responsible for handling the climate change. This belief goes both ways – according to the report, 71% of CEOs are certain that with growing commitment, business can play a critical role in contributing to the climate action.