Investors seek accountability over corporate net-zero commitments

Investors are calling for net-zero targets to come with detailed transition plans

Investors from the Institutional Investors Group on Climate Change (IIGCC), which has recently published an ‘Investor Position Statement’, are calling for shareholders to have more options in holding corporates accountable over their net-zero pledges.

The statement claims that setting net-zero targets needs to be accompanied by robust methods to decarbonise. A “transition plan” should be issued by any corporate with a net-zero goal, the IIGCC argues, as well as outlining the directors within the company that are overseeing delivery and providing a means for investors to vote annually on progress against the plan.

Investors supporting the statement include BT Pension Scheme Management, the Church of England Pension Board, GAM Investments, JP Morgan Asset Management and Ethos, among notable others.

“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,” the IIGCC’s chief executive Stephanie Pfeifer said.

“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.”

Net-zero movement

At least a fifth of the world’s 2,000 largest public companies have committed to net-zero targets, including 52% of high-emitting companies that are engaging with investors through the Climate Action 100+ initiative. Additionally, at least one-third of FTSE100 companies have signed up to the UN’s Race to Zero campaign, designed to accelerate the adoption of net-zero targets ahead of COP26.

Investors involved in the Climate Action 100+ initiative will be putting the expectations of the IIGCC’s statement to companies over the coming months.

The IIGCC claims that a “lack of standardisation in commitments” poses a challenge for investors, who themselves are attempting to align with the net-zero movement.

Earlier this year, a coalition of 35 big-name investors applied a new net-zero investment framework to their portfolios, with $8trn of assets covered. The likes of Scottish Widows, Aberdeen Standard, Brunel, Nest, Legal & General Asset Management, the Church of England Pensions Board and the Environment Agency Pension Fund have all adopted the IIGCCC’s new framework, which was first trialled in real-world scenarios in the second half of 2020, on portfolios totalling $1.3trn. 

“Investors are increasingly setting net-zero goals to address climate change but to be successful, the companies in which they invest have to be aligned. Growing numbers of companies are developing net zero plans recognising that climate change is a core consideration,” BT Pension Scheme Management’s head of sustainable investment, Victoria Barron said.

“But we need more urgent action and more consistent disclosure. This statement emphasises that investors want to see net-zero strategies, they want to have the right to vote on them and they want clear accountability, metrics and targets.”

Matt Mace