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March 30, 2022

Climate Action 100+ Net Zero Company Benchmark, developed with technical support from 2DII, reveals insufficient corporate progress on climate action

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  • 2° Investing Initiative is a provider of alignment metrics and a member of the Technical Advisory Group to the Climate Action 100+ initiative’s Net Zero Company Benchmark.
  • Using the Paris Agreement Capital Transition Assessment (PACTA) methodology and data from Asset Resolution, 2DII provided CA100+ with alignment assessments for five carbon-intensive sectors, which will be used as the basis for engaging with the CA100+ focus list companies to reduce their CO2
  • Critically, 2DII’s scenario alignment assessment found that most power and automotive companies are on a pathway that is significantly above 2.7oC and that almost no steel, cement, or aviation focus companies’ emissions intensities are on a pathway to below 2 degrees.

New assessments released today by Climate Action 100+ (CA100+), the world’s largest investor engagement initiative on climate change, show some corporate progress against key climate indicators, but finds much more action is urgently needed from focus companies to support global efforts to limit temperature rise to 1.5°C.

The second Net Zero Company Benchmark assessed the 166 companies on the initiative’s focus list on progress against the three goals of CA100+ and business alignment with the goals of the Paris Agreement. The assessments indicate overall year-on-year improvements in some areas, including toward the initiative’s three engagement goals of improving climate governance, cutting greenhouse gas emissions, and strengthening climate-related financial disclosures. For instance, driven by pressure from CA100+ signatory investors, the results show that 69% of focus companies have now committed to achieve net zero emissions by 2050 or sooner across all or some of their emissions footprint, a 17% year-on-year increase.

Alarmingly, however, the assessments reveal a widespread failure of companies to set medium-term emissions reduction targets aligned with 1.5°C or to fully align future capital expenditures with the goals of the Paris Agreement, despite the increase in rhetoric around net zero commitments.

Learn more on the Climate Action 100+ website here.

Access 2DII’s methodology document here.

Key findings from 2DII’s alignment assessments

The non-profit think tank 2° Investing Initiative (2DII) has been supporting the work of CA100+ as an alignment metrics provider and member of the Technical Advisory Group to the Net Zero Company Benchmark. Specifically, 2DII uses the Paris Agreement Capital Transition Assessment (PACTA) methodology and data from Asset Resolution to provide CA100+ with forward-looking, company-level scenario alignment assessments for the power and automotive sector, and additionally this year, the steel, cement, and aviation sectors. These alignment assessments are used by CA100+ as the basis for engaging with the 166 focus list companies to reduce their carbon emissions. This helps ensure that CA100+ signatories have access to the most accurate, complete information about company performance against the three goals of the initiative.

For the 33 power and 13 automotive focus list companies, 2DII provided a comparison of each company’s technology mix with the sector average and an assessment of the alignment of their production capacity for each technology with the decarbonization pathways of International Energy Agency (IEA) climate scenarios. In addition, this year 2DII introduced a new company-level scenario alignment assessment, measured using the IEA’s Net Zero 2050 scenario for power and Beyond 2 Degrees scenario for automotive. This provides an overall perspective on a company’s alignment without losing the focus on the technology level, which allows investors to identify whether the phasedown of high carbon technologies or investment in low carbon technologies requires attention and engagement.

2DII found that while a notable proportion of electric utilities and automotive focus list companies have started to reduce their production of coal power and Internal Combustion Engine vehicles, there is not yet sufficient planned investment in renewable power and electric vehicles for most focus list companies to be on a pathway to net zero. Additionally, although there are positive signs of a phasedown in coal power capacity, investors must pay close attention to ensure this capacity is being closed down, not simply sold off. To address this issue, 2DII is currently working on new metrics, which we will propose to CA100+, that would allow investors to distinguish between capacity that has been shut down or sold.

This year, 2DII also expanded its coverage to assess three new sectors: steel (8 companies), cement (11 companies) and aviation (5 companies). For these sectors, 2DII measured the emission intensity of production in 2021 and an assessment of each company’s distance to meeting the 2030 emissions intensity target of the IEA’s Beyond 2 Degrees Scenario. Critically, 2DII’s scenario alignment assessment found that almost no steel, cement, or aviation focus companies’ emissions intensities are aligned with a 1.5°C climate scenario.

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About PACTA: Developed by the non-profit think tank 2° Investing Initiative, the Paris Agreement Capital Transition Assessment (PACTA) is a free, open-source methodology and tool, which measures financial portfolios’ alignment with various climate scenarios consistent with the Paris Agreement. Thus far, PACTA has been used by more than 4,500 individuals from over 3,000 institutions worldwide, as well as by supervisors and central banks to assess their regulated entities (such as the European Insurance and Occupational Pensions Authority, California Department of Insurance, Bank of England, and more).

More information here.

Access the PACTA tool here.

About our funder: This work was made possible in part by the ClimateWorks Foundation.

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