Climate Action 100+ Net Zero Company Benchmark shows continued progress on ambition contrasted by a lack of detailed plans of action

• Updated and more ambitious Benchmark used to assess focus companies on their net zero transition plans.
• Assessments show incremental progress on company ambition and long-term targets not supported by sufficient progress on short term targets, decarbonisation strategy or capital allocation.
• Benchmark assessments are a cornerstone of Climate Action 100+ and are intended to help inform investors’ engagement strategies and wider public debate.

Thursday 18 October: Climate Action 100+, the world’s largest investor engagement initiative on climate change, has released the latest round of company assessments against its newly updated Net Zero Company Benchmark, drawing on distinct analytical methodologies and datasets from public and self-disclosed data from companies.

A summary of the results and the full data set can be found here.

The results showed that most focus companies are not moving fast enough to align with the goals of the Paris Agreement.

In 2023, the Disclosure Framework shows that companies have continued to perform well with respect to long-term greenhouse gas (GHG) reduction targets, medium-term GHG reduction targets and TCFD aligned disclosure.

However, with significant progress still needed on short-term GHG reduction targets, capital expenditure (CapEx) allocation, climate policy engagement, consideration and incorporation of material impacts in financial statements, just transition and GHG emissions reductions, the necessary details to demonstrate that companies have credible plans to align with the goals of the Paris Agreement are often missing.

The Alignment Assessments further underpin this, with little evidence of companies adopting strategies in line with a 1.5°C pathway set out in the International Energy Agency’s Net Zero Emissions by 2050 Scenario (NZE).

Key Benchmark results

Specifically, the Disclosure Framework assessments show:

• More companies are disclosing details on their net zero transition plans, but quantification of individual decarbonisation levers is lacking: 59% of focus companies assessed this year now identify actions needed to meet their GHG reduction targets, compared to 52% in October 2022. However, further progress is needed on quantifying the contribution of these actions to their GHG reduction goals, as well as on disclosures on the use of offsets and abatement technologies.
• Companies are making steady progress on long- and medium-term target setting, but most of these targets are not sufficiently comprehensive or Paris aligned. 82% of focus companies have set long-term GHG reduction targets and 87% of focus companies have now set medium term However, only 37% of these long-term and 33% of medium-term targets also cover material Scope 3 emissions. In addition, while 30% of long-term GHG reduction targets can now be considered aligned with a 1.5°C trajectory, this is true for only 13% of medium-term targets.
• New climate solutions disclosures show positive potential: Despite this being the first year climate solutions metrics have been introduced, it is positive that approximately a third (29%) of focus companies disclose how much they invested in climate solutions in the past year and 32% specify the value of CapEx they plan to allocate to climate solutions in the future. These results come at a crucial time, following the publication of the IEA’s updated Net Zero Roadmap indicating that limiting global warming to 1.5°C remains possible due to the growth of clean energy

The Alignment Assessments, which complement the Benchmark’s Disclosure Framework by measuring implementation of Paris-aligned corporate actions, indicate that despite continued progress on some Disclosure Indicators, the majority of focus companies’ actions are not aligned with the Paris Agreement.

Key results for Alignment Assessments include:

• InfluenceMap’s climate policy assessments show that most companies still do not align their real-world climate policy engagement activities with Paris Agreement goals, although partial alignment is increasing: Only 4% of companies fully align their climate policy engagement with the goals of the Paris Agreement, while 66% are only partially aligned.
• For climate accounting and audit, the Carbon Tracker Initiative (CTI) analysis, which considers both disclosure and alignment, shows that although there is still no focus company that meets all criteria of this assessment, 7%  of assessed companies show real overall progress on climate accounting and audit disclosures compared to last year.
• CTI’s capital allocation assessments found that 23% of utilities have announced or already phased out their coal assets in accordance with a 5°C pathway, the IEA’s NZE. An additional 29% of utilities assessed have announced full retirement of their coal fleet, but too late to align with a 1.5°C pathway.
• CTI’s assessments show that the CapEx plans of oil and gas companies across the board are not aligned with the Paris Agreement goals. In particular, the results from CTI’s Indicator 2 for upstream oil and gas show that, across the industry, future capital is not aligned with an IEA Net Zero Emissions by 2050 (NZE or 1.5°C)
• The Rocky Mountain Institute sector-specific capital allocation assessments show that there has been encouraging improvement in the automotive sector, especially by those with a 5-year plan to rapidly increase electric vehicle However, cement and airline focus companies need to make rapid progress on decreasing their emissions intensity in line with a Paris Agreement trajectory.

Revised strategy for phase two

The latest results demonstrate the importance of the recently updated strategy – developed in consultation with signatories – for Climate Action 100+’s second phase to inspire the move from words to action. Not only has the Benchmark evolved to meet the accelerating urgency of climate change, but the initiative has expanded the ways investors can participate and expanded its sectoral strategy work, and enhanced the lead engagement model, calling for stronger and more robust strategies from leads.

A summary of key enhancements to the initiative for Phase 2 can be found here.

Barbara Davidson, Head of Accounting, Audit and Disclosure at Carbon Tracker Initiative: “The Climate Accounting and Audit Assessment helps investors engage, make voting decisions and allocate capital in the face of climate-related risks. Unfortunately, most companies and their auditors continue to fall short in demonstrating how they have considered the financial impacts of material climate-related risks—even their own emissions targets. This information is vital if we are to meet our global and local climate goals and curb the significant risk of loss from climate change, and the energy transition, today.”