Climate group calls for investor power

Climate Action 100+ is working, and it can become even more effective if investors and asset managers throw their weight behind it, according to Oliver Grayer, Project Director at the Institutional Investors Group on Climate Change (IGCC).

Speaking at the Principles for Responsible Investments (PRI) Climate Forum in London, he urged attendees to add their muscle to the five-year initiative. Climate Action 100+ aims to engage with the 100 largest greenhouse gas emitters to improve corporate governance, curb emissions and strengthen climate-related financial disclosures.

Most recently, Japan’s ¥158 trillion ($1.4 trillion) Government Pension Investment Fund (GPIF) joined the initiative, which is now backed by around 300 asset owners and managers with $31 trillion under management. The volume of investors getting involved has spurred unprecedented lobbying initiatives and activity, Grayer said.

So far, Climate Action 100+ has been most effective in engaging with supply-side companies in the oil and gas, mining and metals and utilities sectors. Grayer called for investors and managers to push engagement with companies on the demand side in construction, transport and steel where decarbonisation is challenging and complex.

“There are always individuals in firms that want the support of investors,” he said. “Asset managers need to help us drive through the changes required.”

One metric, one target

Companies need investor engagement to understand what investors actually want, and they need corporate leadership to listen and provide that information,said Marc Jacouris, head of investor relations at Norway’s state-owned oil company Equinor.

Equinor, formerly Statoil, owns oil and gas assets as well as renewables and carbon-capture and storage technology.

“The more investors ask for the same thing around metrics and targets, the more we will listen,” Jacouris said.

He said that the company found scenario analysis particularly challenging because every company has its own assumptions and parameters, making comparability difficult.

Data gaps

Seema Suchak, sustainable investment analyst at Schroders, told delegates that Climate Action 100+ sets out “really good” and “consistent” questions for investors to ask companies.  She added that the asset manager is targeting its engagement in Asia, but it has found that successful engagement is tempered by the pace of the regulatory environment.

“China wants to meet the Paris goals, but enforcement is not there yet,” Suchak said.

Schroders’ large allocation to active management helps give the asset manager good access to companies. However, emissions data, particularly in companies’ supply chains, is lacking; data on the location of companies’ assets is also hard to come by. More information on these data points would enable climate modelling tools to work much better, she said.

“We have developed a physical climate risk tool but, with data gaps, we have to rely on assumptions,” she said.

Schroders runs a “nimble” engagement strategy which it has adjusted and evolved.

“What works for some won’t work for others,” Suchak said.

Schroders has also begun to engage with non-executive directors.