Peter Taylor
Corporate Programme Director
On 21 March more than 120 investors attended IIGCC Engage, where we set out our corporate engagement strategy for 2023. Attendees heard from investors and members of our Corporate team, as well as joining one of four workshops for interactive sessions focused on key engagement themes.
The event outlined new initiatives, highlighted progress and was hosted by Schroders in their London office.
Conversations began with a first look at the new Net Zero Engagement Initiative (NZEI).
Describing it as “collaborative engagement for companies beyond Climate Action 100+”, Peter Taylor, IIGCC’s Head of Corporate Engagement, outlined NZEI before being joined onstage by some of its founding investors.
The initiative aims to address the ‘long tail’ of companies not already covered by Climate Action 100+, which was established in 2017 to focus on the world’s heaviest-emitting companies.
NZEI involves a clear two-stage process. Baseline engagement begins with personalised letters delivered to companies outlining investor expectations. Targeted ‘engagement sprints’ will then follow based on company responses, aimed at supporting those with specific challenges and sector-wide barriers.
Looking at net zero transition progress in the context of the broader sector was a common theme throughout the day. In a later keynote, Stephanie Pfeifer, IIGCC CEO highlighted that:
“Companies do not exist in a vacuum – change must also happen across sectors and supply chains and be enabled by a supportive policy environment.”
The next phase
In the main plenary session investors joined Sophie Barnes, IIGCC’s Corporate Senior Programme Manager, to discuss Climate Action 100+ progress and how to set it up for success in its next phase.
Speakers agreed on the huge progress that Climate Action 100+ has made to date, highlighting that three quarters of the 166 focus companies have now set a net zero commitment, compared to just three when the initiative began.
Looking ahead at the next seven years, talk turned to implementation, with panellists emphasising the importance of translating targets into real-term emissions reductions.
They also noted the need to expand the ways that investors can contribute – reflecting the growing signatory base of 700 investors. A recently released update of the popular Net Zero Company Benchmark also offers additional guidance for investors.
Workshops
Between the keynotes and panel discussions, members joined one of four workshops led by an IIGCC expert, working group investor Chair, and three investors active in that space.
Bondholder engagement: Engaging with emerging markets and private companies using publicly listed corporate debt
With bondholders accounting for 60% or more of a company’s financing structure, attendees agreed that this space has significant potential to influence climate action. Our Net Zero Investment Framework reiterates this importance, with the Net Zero Stewardship Toolkit soon to offer additional guidance.
During conversations investors pointed out that the two most opportune moments to drive sustainability are also the most high-pressure – bankruptcy and insolvency. Discussions also touched on transparency challenges in private markets, as well as sovereign debt in developing markets.
Making thematic engagements work: Lessons from lobbying and accounting engagements
This workshop outlined lessons from two key workstreams coordinated by IIGCC: accounting and lobbying engagements. Participants discussed the importance of a company’s financial information being aligned to its annual reports, particularly with regard to consideration of climate into the accounts. While this can be a challenging process that often requires engagement over several reporting cycles, it is key to hold the company – and in particular, the directors – to account.
Alignment of corporate lobbying on climate was also discussed, demonstrating the significance not only of disclosure on advocacy activities, but also action in cases of misalignment. In both cases external initiatives and data sources were highlighted as particularly useful to engagement, including Carbon Tracker and InfluenceMap, but speakers noted that when it comes to board-level conversations, this is best left to the shareholder.
Our investor expectations for Paris-aligned accounts was highlighted as well as the Global Standard for Responsible Climate Lobbying, alongside the ongoing accounting and lobbying investor working groups.
A new approach? Using cumulative benchmark divergence to assess carbon targets
Many investors wanted to hear more about IIGCC’s paper on a new cumulative metric to help assess climate target alignment. IIGCC’s Dr Sam Cornish and Dan Gardiner presented the methodology, outlining how it could complement the main approaches to asset and portfolio alignment.
IIGCC members can read the full paper and supporting member summary, with more work to follow from the investor working group.
Sector focused engagements: Policy, value chain, and technology barriers to the transition – exploring the next frontier of engagement under CA100+ Phase 2
As highlighted by our CEO in her closing remarks, the key theme of this workshop was exploring the need for all sectors to have an approach which looks at their broader ecosystem, including their specific policy environment and value chains. Our experts pointed out that some sectors overlap – for example renewable hydrogen impacts both the steel and chemical industries.
The availability of renewable energy, their cost, and the demand for new low-carbon technologies were just a few of the specifics covered in this in-depth discussion.
Jana Hock, our Corporate Senior Programme Manager, leads IIGCC’s expansion into ecosystem sector engagements and highlighted the ongoing steel value chain and chemical investor working groups. Workshop attendees also expressed an interest in aviation and the potential to support a similar working group focused on this sector within IIGCC.
Implementation
Throughout the day investors also heard from a panel discussing net zero voting policies, as well as a preview of our upcoming work on a net zero standard for banks.
Overall, it’s clear that investor net zero commitments are supporting engagement with companies and indicating how best to decarbonise portfolios to deliver a real-world impact. But that work is only just beginning.
“The next few years are about implementation, not just target setting,” Stephanie Pfeifer emphasised, echoing the sentiment of the room.
If you’d like to take part in our working groups and be the first to see insights and analysis, why not speak to our investor relations manager today to find out more about becoming a part of IIGCC.