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Introducing the Net Zero Engagement Initiative: The next step in investor corporate engagement

Introducing the Net Zero Engagement Initiative: The next step in investor corporate engagement

The Net Zero Engagement Initiative aims to support investors aligning their portfolios with the goals of the Paris Agreement. IIGCC has also released sector-neutral guidance to help companies understand and respond to investors’ expectations.

On 17 March, 107 companies received personalised letters from investors outlining their expectations of a credible net zero transition plan.

This marked the launch of the Net Zero Engagement Initiative (NZEI), which we hope will scale and accelerate climate-related corporate engagement.

The letter recommends that a company transition plan should include a comprehensive net zero commitment; aligned greenhouse gas targets; tracked emissions performance; and a credible decarbonisation strategy.

Based on responses, NZEI’s 93 participating investors will develop an engagement strategy for each company. For those identified as strategic priorities, this will include agile ‘engagement sprints’ which will focus on key pools of companies.

These sprints are not designed to be a burden for companies – they’re there to support those with specific challenges and with sector-wide barriers.

Delivering on commitments

As a founding partner of Climate Action 100+, which set out to engage with the world’s heaviest-emitting companies in 2018, IIGCC has seen significant progress from this proactive approach by investors.

Building on that momentum, NZEI expands on the range of companies covered by Climate Action 100+’s focus list of 166. This includes more companies who are heavy users of fossil fuels, contributing to demand for its products.

The objective is to help investors align more of their portfolio with the goals of the Paris Agreement, as set out by their net zero commitments. This includes the Net Zero Asset Managers (NZAM) and Paris Aligned Asset Owners (PAAO) initiatives, which IIGCC co-convenes.

To work towards those commitments, many investors use the Net Zero Investment Framework (NZIF) – the most widely utilised net zero methodology in the industry today.

It asks investors to engage, or classify as aligned, assets that account for 70% of financed emissions in material sectors.

NZEI addresses both points; offering a platform that supports understanding of alignment and ongoing engagement with a wider list of companies, and one that can scale as the list of target companies grows.

Stephanie Pfeifer, IIGCC CEO explained that: “NZEI provides part of the solution to the greatest challenge facing investors who have made net zero commitments: how to deliver on these through engagement with companies.

“By building on other initiatives, including Climate Action 100+, and by scaling up engagement, the NZEI adds to the ‘how’. In doing so, NZEI supports investors in the implementation phase of their net zero journey.”

Supporting engagement

To further support investors and to help companies understand and respond to this request, we have also published new guidance, “Investor expectations of corporate transition plans: From A to Zero.”

This public resource offers more details on the information investors might ask for when assessing transition plans, the rationale for those requests, and how companies can meet them.

It aims to define the key components of a credible transition plan, relevant to companies of different sizes and applicable across a range of sectors and geographies.

The report foreword states that “by clearly articulating the data requested by investors and setting out how these requests interrelate with emerging frameworks such as the Transition Plan Taskforce and others, it is designed to be useful to companies looking to develop and articulate their transition strategies.”

This comes alongside a new paper exploring a cumulative metric, applicable to asset and portfolio level, which should help to improve the assessment of company target assessments. This is available exclusively to IIGCC members.

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.