Companies on the receiving end of shareholder engagement are more likely to set medium- and long-term climate targets, according to research.
An academic from the London School of Economics has sought to isolate the impact of Climate Action 100+, the investor network focused on encouraging listed companies to align with the goals of the Paris Agreement, on the firms it engages.
Nikolaus Hastreiter wanted to know whether climate improvements made by listed companies were the result of collaborative stewardship efforts, or simply a reflection of a broader global trend.
Mirroring the objectives of CA100+ during its first phase, he looked at how companies’ climate disclosures and targets changed over time. He also looked at whether firms were reducing their carbon intensity, which is one of CA100+’s more recently-set goals.
The analysis uses natural language processing, along with data from the Transition Pathway Initiative, to see how entities on CA100+’s focus list have behaved over recent years compared with firms that aren’t being engaged by the initiative.
“At the top level, I don’t find any material impact on the level of disclosure or the level of decarbonisation,” Hastreiter told IPE. “But I do find an impact on targets.”
While short-term climate targets were roughly the same for all the companies assessed, more 2035 targets were set among companies subject to CA100+ engagement than among those outside the list.
This difference was even more pronounced for 2050 targets, the research noted.
Hastreiter told IPE that one of the most interesting findings from the study was that companies selected for engagement on a discretionary basis were more likely to improve than those selected on a quantitative basis.
The first 100 companies added to CA100+’s target list were chosen because they were widely owned by long-term institutional investors, and they produced high levels of emissions.
The ‘+’ was added to the initiative’s name to account for the addition of a group of companies that didn’t qualify under the quantitative assessment, but were still deemed by CA100+ members to be crucial targets for collaborative engagement regardless.
This latter group saw greater improvements over the period than the former.Hastreiter said it was important to note that the research, which was published last week as a working paper and is still awaiting peer review, was not comprehensive in its assessment of CA100+’s impact.
“This is a quantitative paper, which may not capture qualitative impacts, such as changes to internal processes or culture, or raised awareness within companies, that CA100+ may have driven through its work,” he explained.
He also highlighted the potential for such a large group of investors to have changed the broader norms for climate action among listed companies, meaning firms may have improved their behaviour even if they weren’t subject to direct engagement.
Read the digital edition of IPE’s latest magazine
No comments yet