Investors With $14T AUM Heighten Expectations For Corporate Net Zero Plans And Accountability

(Credit: Pexels)

by | Aug 2, 2021

(Credit: Pexels)

In a July 30 statement by The Institutional Investors Group on Climate Change (IIGCC), 53 leading investors with more than $14 trillion in assets under management (AUM), are raising the bar on corporate net zero commitments by asking companies to “disclose a net zero transition plan, identify the directors responsible for the plan, and provide a routine vote on the implementation of the net zero transition plan.” 

With this new request, the IIGCC is escalating expectations with corporate net zero goals, aiming to ensure that companies’ climate action plans are aligned with achieving the Paris Agreement’s net zero goal and reducing global GHG emissions by 45% by 2030 from 2010 levels. Currently, about one-fifth of the world’s 2,000 largest public companies have committed to net zero targets, though detailed plans to achieve commitments are often limited.

“In order for investors to do their job as stewards of capital, companies must establish effective mechanisms to demonstrate their net zero transition plans to shareholders and outline how they will be achieved,” says Stephanie Pfeifer, Chief Executive, IIGCC. “It is clear that shareholder voting and director oversight is needed to hold companies to account on their commitments to achieving a net zero future.”

More specifically, the IIGCC would like companies to utilize the Taskforce on Climate Related Financial Disclosures (TCFD) to steer their climate action disclosures, as well as the Climate Action 100+ Net-Zero Company Benchmark indicators as core metrics to demonstrate progress, including short, medium and long range GHG emissions reductions targets along with a decarbonization strategy and capital allocation alignment. Additionally, investors want companies to identify any ‘principal directors’ responsible for the development and implementation of the net zero plan in order to ensure greater accountability, rather than just assigning responsibility to the board as a whole. Finally, the IIGC is asking for an advisory voting process to afford investors a mechanism for assessing the ongoing progress of the net zero plan’s implementation.

Signatories to the statement include, but are not limited to, BT Pension Scheme, Ethos Foundation, GAM Investments, Fidelity International, JP Morgan Asset Management, Legal & General Investment Management and UBS Asset Management.

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