Is climate change engagement actually having an impact?

Discover whether investor engagement on climate change is having a real-world impact.
April 2021
Investors must play a central role in tackling the climate crisis, and we are committed to playing our part. Engaging companies to adopt climate-friendly business models has been on our engagement agenda for two decades. Climate change is not just an issue for oil companies – with fossil fuels embedded across our economies, it an issue that affects companies across sectors and regions, and we have covered industries throughout the value chain. In this article we will focus on three – mining, transportation and financial services – to give an overview of how our engagement is having an impact.

Mining

The mining sector is diverse, and we have engaged with both the largest multinational diversified miners, as well as specialist miners focused on commodities such as coal and gold. Overall, the large diversified miners are the furthest ahead in terms of formal commitments to a net zero transition. BHP BillitonAnglo American and Glencore all now have coal exit strategies, with BHP and Anglo aiming to sell their stakes, and Glencore running them to the end of life. One key focus area for these companies is on how they use their considerable political influence; as co-lead of the Climate Action 100+ engagement with BHP Billiton, we led intensive engagement on its lobbying and trade association memberships, and 2020 saw the company announce a market-leading lobbying framework.

The picture among more specialist and regional miners is more mixed. Gold miner Newmont was one example of leadership, with its net zero target. Miners in Asia and South America have so far been less responsive to engagement. Companies in this sector tend to be strongly influenced by national government policies; with more net zero government commitments likely to emerge in the run-up to COP26, we anticipate scope for engagement to progress.

Transportation

Our engagement has targeted automotive manufacturers and shipping companies. With further policy measures from governments to phase out internal combustion engine vehicles, most automotive firms now see an electric vehicle (EV) strategy as essential to maintaining their competitive edge. Two leaders in terms of ambition include Volkswagen, which has committed to 70 all-EV models by 2030, and Daimler, aiming for a net zero emissions fleet by 2039.

Our engagement focused on companies whose ambition lags the leading group, particularly Fiat Chrysler (now part of Stellantis), where we lead the Climate Action 100+ engagement and had two meetings with their sustainability director. In order to directly address the Board, we made a statement at the AGM, asking for medium-term climate-related targets and transparency around climate lobbying.

In shipping, the International Maritime Organization set out a pathway to a low-emissions transition in 2018 – but driving this through to implementation has seen mixed success. Maersk was the first major firm to set a net zero target, in 2018.

Financial institutions

Financial institutions such as banks, insurers and asset managers present a more complex picture than other sectors in terms of assessing ‘Paris alignment’, as their impact comes primarily through activities they finance, rather than through their direct operations. In 2020 we followed up on previous engagement with South East Asian banks, and were pleased to see some positive progress on integrating deforestation criteria, such as Maybank requiring sustainable certification schemes in lending, or CIMB, which has introduced enhanced due diligence for palm oil and forestry clients.

We also looked at European and North American banks, and particularly their implementation of the recommendations of the Task Force on Climate-related Financial Disclosures. Analysis and disclosure accelerated in 2020, particularly in Europe where financial regulators made clear their expectation that this should be part of risk management practices.

The shareholder resolution at Barclays – which we supported – calling for a phase-out of fossil fuel financing prompted the bank to adopt a net zero target, making it one of the first international banks to do so. Others have followed, although the industry remains at a relatively early stage in terms of implementation plans. Some of the issues to address include integrating climate change across business lines, not just in lending.

Risk warnings
The value of investments and any income derived from them can go down as well as up and investors may not get back the original amount invested.
The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

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