Peter Taylor
Corporate Programme Director
Investor signatories of the Net Zero Engagement Initiative (NZEI) have until 31 May to have their say on proposed companies to add to its focus list. In just over a year IIGCC’s engagement initiative has gathered significant momentum – we take a look at what’s next.
In March 2023, 107 companies received a personalised letter signed by more than 100 investors, setting out their expectations of a credible net zero transition plan and marking the launch of NZEI. Based on company responses a targeted engagement programme followed, with investors forming engagement groups supported by our team at IIGCC.
Since then, three-quarters of companies have met their engagement group, many at the senior executive level. Signatories have used NZEI to convene around sector-specific challenges, government consultations and follow-up letters to non-responding companies.
We supported signatories throughout the year to help them get the most out of NZEI and engage constructively with companies, through webinars and best practice guidance. We also shared third-party analysis from partners and peers including the Transition Plan Initiative (TPI), Science-based Targets Initiative and Influence Map to help inform engagements.
Signatories, have your say on the company focus list and engagement strategy for NZEI 2024-25. The consultation is open until 9 June.
Selection process
At its core, NZEI is about scalability. It helps investors expand the breadth of their portfolios covered by collaborative engagement in line with the goals of the Paris Agreement. As part of this expansion, the initiative is now finalising a new group of companies to add to its focus list.
Current and prospective NZEI signatories are invited to help shape the company list for the initiative’s second year. This involves determining which of the year-one companies from 2023-2024 to deepen engagements with alongside those new additions. Companies will only be included if investors sign up to engage them during the review period.
To help investors determine these new additions we have produced a list of suggestions to consider. Acknowledging the limitations of any one approach, we have used several factors to determine the draft list including emissions across all scopes, market capitalisation, region, free float, and sectors already covered by IIGCC at a technical level. All new companies must be covered by TPI data.
Banking and financial institutions, which are covered in separate IIGCC workstreams, as well as private and non-listed companies are not included.
About NZEI
The initiative first set out to scale and accelerate climate-related corporate engagement beyond the 170 companies covered by Climate Action 100+, a global investor engagement initiative which targets the world’s heaviest emitting companies. IIGCC launched Climate Action 100+ along with other networks in 2018.
Looking beyond those heaviest emitters, NZEI aims to include more companies that are critical to the decarbonisation pathway of individual investor portfolios.
Companies on its focus list represent nine sectors on both the demand and supply side of the energy transition: utilities, transport, chemicals, industrials, consumer goods, mining, and oil and gas. They are based in 24 markets, 19 in Europe and five in Asia.
Supporting investor commitments
In 2023, we shared “Investor expectations of net zero transition plans: From A to Zero” alongside that initial letter to companies. Open to the public, it supports investors and offers more detail to companies on the questions they might ask when assessing transition plans. This includes the rationale for those requests and how companies can meet them.
Most investors use the Net Zero Investment Framework (NZIF) to work towards those commitments. It is now the most widely implemented net zero methodology by investors who have set a net zero commitment today with an updated version – NZIF 2.0 - scheduled for mid-2024.
As part of its criteria, NZIF asks investors to engage, or classify as aligned, assets that account for 70% of financed emissions in material sectors. NZEI helps investors to deliver on against that commitment.
Signatories, have your say on the company focus list and engagement strategy for NZEI 2024-25. The consultation is open until 9 June.