INSIGHT by Climate Action 100+
In consultation with investor signatories, the initiative released an updated Benchmark (Benchmark 2.0) to ensure that it continues to effectively support investor engagements with focus companies during this critical decade. The enhancements made intend to embed a stronger focus on emissions reductions, alignment with 1.5°C pathways and the robustness of transition plans.
Climate Action 100+, the world’s largest investor engagement initiative on climate change, has launched the latest evolution – Benchmark 2.0 – of the Net Zero Company Benchmark.
Now in its third iteration, the Benchmark’s latest iteration will continue its role informing and supporting investors in their engagements with focus companies during this critical decade.
The Benchmark 2.0 framework draws on distinct analytical methodologies and datasets (from public and self-disclosed data from companies) categorised into two types of indicators: Disclosure Framework Indicators, which evaluate the adequacy of corporate disclosure; and Alignment Assessments, which evaluate the alignment of company actions with the Paris Agreement goals. The Benchmark is not a disclosure mechanism or database itself, but rather an assessment tool.
Enhancements have been made following a public consultation with investor signatories, other stakeholders and interested parties. A comprehensive overview of all changes and Benchmark 2.0 can be viewed here.
| Key changes to the Net Zero Company Benchmark
THEMATICALLY, THE BENCHMARK CHANGES CENTRE AROUND:
〉Emissions reductions, and the key underlying factors leading to these.
〉Alignment with 1.5°C pathways, evaluating if companies are on track to meet the goals of the Paris Agreement.
〉Robust net-zero transition planning, assessing key drivers of company decarbonisation, corresponding capital allocation, and asset-level changes.
SPECIFIC TO THE DISCLOSURE FRAMEWORK:
〉New this year: Disclosure Indicator 11: Historical Emissions Reductions that will focus on company past emissions intensity reductions and the key factors that led to these.
〉Significant amendments of Indicator 5: Decarbonisation Strategy, Indicator 6: Capital Allocation, Indicator 7: Climate Policy Engagement and Indicator 9: Just Transition, to ensure that assessments of corporate performance in these areas are as robust and comprehensive as possible.
〉Minor amendments to the timeframe and sub-indicators of Disclosure Indicators 2-4 focusing on company Long-, Medium- and Short-term GHG reduction targets.
〉Disclosure Indicator 8: Climate Governance is staying the same as in the previous iteration, but sub-indicator 8.3, assessing focus company Board climate competencies and capabilities, will now apply to all focus companies.
SPECIFIC TO THE ALIGNMENT ASSESSMENTS:
〉Climate Accounting and Audit Assessments, evaluated by Carbon Tracker Initiative: These assessments are staying the same this year, but will now include a more nuanced, granular scoring system at metric level. Companies will receive a ‘traffic light’ score (i.e., green/amber/red) rather than a binary yes/no score on climate accounting and audit metrics.
〉Climate Policy Engagement Alignment Assessments, provided by InfluenceMap, are being expanded this year with the addition of the following elements: 1. New aggregate scores of company overall direct and indirect climate lobbying performance, on a scale from A+ to F; 2. New indicator assessing the accuracy and completeness of company climate lobbying disclosures; 3. New indicator evaluating how companies review and ensure alignment between their climate policy engagement activities and the goals of the Paris Agreement
〉Capital Allocation Alignment Assessments for utilities and oil & gas, provided by Carbon Tracker Initiative: while the indicators underlying these assessments will continue to measure the same areas as last year, utility and oil & gas companies will now be assessed against the IEA’s Net Zero Emissions by 2050 Scenario and Announced Pledges Scenario, rather than the Beyond 2 Degrees Scenario.
〉Capital Allocation Alignment Assessments for aviation, automotive, cement, steel and utilities, provided by the Rocky Mountain Institute (RMI): This year, RMI are expanding their Capital Allocation Alignment Assessments for utility and auto companies, by introducing: 1. A new indicator for electric utilities and autos assessing company aggregate alignment with the IEA’s Net Zero Emissions by 2050 Scenario; and 2. A new indicator for electric utilities, assessing the rate at which companies are decarbonising their electricity generation and capacity, and whether the changes at asset level are real, or ‘virtual’ – that is, merely resulting from ownership transfers.
Additionally, we have made several structural changes, streamlining the Benchmark in order to assist investors in their understanding and communication of the framework. These changes include systematising the structure of assessments, so that they are all ordered into:
〉Indicators: top-level point of information being assessed
〉Sub-indicators: constituent point of information
〉Metrics: the unit or standard of measurement
| Key upcoming milestones
〉The company review period for the Disclosure Framework, during which companies will be invited to provide factual feedback on their preliminary Disclosure Framework assessments, will run for four weeks from the end of April.
〉Assessments using Benchmark 2.0 will be released in September/October 2023.
| about
Climate Action 100+ is an investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
