$2 trillion investors challenge 55 companies on climate lobbying

NGOs welcomed the ECON's decision to make it mandatory for financial market participants to disclose sustainability risks. [Orgalime]

Five weeks before a pivotal UN climate conference (COP24) starts, a group of investors, led by the Church of England Pensions Board and Swedish national pension fund AP7, sent a letter to 55 companies to challenge them on climate lobbying.

The investors have targeted these 55 European companies because of their high greenhouse gas emissions and significant role in energy-intensive sectors, the group explained in a statement released on Monday (29 October).

Each company has been asked to review relationships with key trade associations and lobbying organisations, to ensure alignment with their formal company positions supporting the implementation of the Paris climate agreement, it added, specifying that a set of ‘investor expectations’ outlining best practice on lobbying has also been sent to each company.

“We would ask you to review the lobbying positions being adopted by the organisations of which you are a member. If these lobbying positions are inconsistent with the goals of the Paris Agreement, we would encourage you to ensure they adopt positions which are in line with these goals,”  the letter reads.

“More generally, we would ask you to ensure that your lobbying practices align with the ‘Investor Expectations’ document you have been sent, and that you are transparent about your own policy positions and how you ensure these are implemented in your direct and indirect lobbying activities,” it said.

Auto sector the worst

The 55 high-emitting companies have been assessed by InfluenceMap, a UK-based NGO that monitors lobbying activity by companies.

The organisation scored the companies according to their overall position on climate policy, the extent of their influence on policy-makers and on whether publicly-stated corporate climate policies matched those of the trade associations acting on their behalf, the investors said.

One of the worst performing sectors was the auto sector, the scoring list shows, comprising Fiat, Daimler, BMW, Renault, Volkswagen and Peugeot PSA, while RWE top the list of utility companies.

Among the chemicals companies, the list ranked German giants Bayer and BASF as the most active in climate lobbying, with Siemens and Danone being the most active in the food and beverage sector.

Among the oil and gas companies, BP, Total and Royal Dutch Shell are the top three on the list.

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Climate-related litigations are set to break new grounds following a landmark report by the Intergovernmental Panel on Climate Change (IPCC) earlier this month, which provided lawyers with new evidence that limiting global warming to 1.5°C is still possible. 

Legal risk

The letter to the companies outlines three key reasons why corporate lobbying activities that are inconsistent with meeting the goals of the Paris Agreement present financial risks to investors, the group continued.

It cited:

  1. Regulatory risks: Delay in action now is likely to result in the need for stronger and more drastic regulatory interventions later, leading to much higher costs for companies.
  2. Systemic economic risks: Delay in the implementation of the Paris Agreement increases the physical risks of climate change, posing a systemic risk to economic stability, and introducing uncertainty and volatility into investor portfolios.
  3. Reputational and legal risks: Companies may face a backlash from their consumers, investors or other stakeholders if they or the organisations that they support are seen to be delaying or blocking effective climate policy. This may also lead to legal risk, particularly for companies which continue to invest in high-carbon projects, or whose corporate disclosures are alleged to be misleading.

The investor action follows the news of a leaked document in September that suggested that BusinessEurope, a large confederation representing trade bodies across the EU, was planning to “oppose” greater EU ambition on climate policy.

Business lobby prepares pushback against EU climate goals update

A leaked internal memo, obtained by EURACTIV, gives a rare glimpse into the communication strategy of Europe’s main business lobby group ahead of the COP24 conference later this year, showing how it plans to “oppose” any increase in the EU’s climate ambition for 2030.

Positions

Adam Matthews, Director of Ethics & Engagement, Church of England Pensions Board, said: “Misleading and misaligned corporate lobbying practices undermine the ability of governments to act on climate change and meet the goals of the Paris Agreement. The influence of trade associations is often exerted behind closed doors and can be deeply insidious to public policy making on climate change. As the recent report from the IPCC clearly highlighted, the stakes are high and time is against us. It is therefore right that investors are challenging Europe’s most high-emitting companies to ensure consistency in their lobbying practices.”

Charlotta Dawidowski Sydstrand, from Sweden’s AP7 Pension Fund, said: “AP7 has identified that weaknesses in current climate policy globally pose a risk to the long-term value growth of our pension portfolios. At this point in time we find it unacceptable that companies counteract ambitious climate policy, either directly or through their business organisations. Lobbying on climate issues should be evaluated, managed and reported on transparently. We are hoping this will become a natural component of companies’ sustainability reporting.”

Stephanie Pfeiffer, CEO of the Institutional Investors Group on Climate Change (IIGCC), commenting on the action taken by the pension funds explains: “Long-term investors have a clear interest in the Paris Agreement being implemented to support the necessary transition to a low-carbon global economy. Shareholders should rightly expect companies in which they invest to advocate for the climate policy required for this to happen. This includes ensuring the trade bodies of which they are members are working to the same end.”

The IIGCC is the European forum for investor collaboration on climate action with over 160 investor members and €21 trillion in assets collectively under management.

Alice Garton, lawyer at ClientEarth who are supportive of the shareholder engagement, said: “Fossil fuel companies are seeing the energy transition bite and their executives are starting to panic. Coal and diesel in particular are seeing an existential threat. But aggressively lobbying to keep these outdated business models intact while public-facing statements assure shareholders the business cares about the climate is deeply hypocritical – and as we’ve seen in the US, puts businesses at real risk of litigation. You cannot say you are actively working to tackle climate change while pouring money into campaigns that seek to maintain a high-carbon economy. It is misleading and a threat to the value of investors’ shares. We commend these investors for their leadership in taking this issue to the boardrooms of major emitters.”

Further Reading

Pension fund chief: We are seeing a strong movement towards green financing

Investors increasingly have to take into account the legal risks associated with global warming and more and more of them are adopting a socially responsible approach, Phillippe Desfossé told EURACTIV France as Climate Week opens in New York.

Dutch climate change ambition is insufficient, court confirms

A Dutch appeals court on Tuesday (9 October) instructed the government to cut greenhouse gas emissions at a faster rate than planned, meaning they will have to be 25% below 1990 levels by the end of this decade.

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