The Investor Group on Climate Change (IGCC), whose members hold more than $33 trillion in global AUM, has today released a clear set of investor expectations for Australian businesses’ climate plans.
While more Australian and New Zealand businesses have been releasing their plans to decarbonise their operations, the plans’ quality and credibility is often inadequate, or hard-to-assess. Many companies’ plans are also inconsistent with their stated ambitions to reach net zero emissions.
In an effort to improve the quality of business transition plans, the new report Corporate Climate Transition Plans: A guide to investor expectations draws on the collective input of IGCC’s members, and broader investment industry.
It lays out five important principles for adequate climate transition plans:
- Set comprehensive science-based quantitative targets across all material emission scopes (which includes emissions in the supply chain and from customers’ use),
- Outline a strategy to deliver targets, identify enablers and disclose quantifiable impacts,
- Set sector-specific commitments and actions aligned with 1.5°C decarbonisation pathways,
- Ensure investment commitments (capital expenditure) is aligned to the targets,
- Commit to annual transparent disclosure and monitoring with external verification.
Companies should additionally report on the broader, overarching climate-related topics:
- Governance
- Just transition
- Climate policy and lobbying
- Scenario analysis
Quotes from Laura Hillis, IGCC Director of Corporate Engagement:
“For the first time, public companies have a clear and comprehensive picture of what investors want in businesses’ plans to get ready for a net zero economy.
“Australia’s biggest superannuation and investment funds have made their expectations very clear, and we think businesses will appreciate that.
“Proxy season is coming, and we expect corporate engagement and shareholder votes on climate are set to become much more common.
“This guide should help raise the bar for Australian businesses as they seek to align with the expectations of the market in a rapidly decarbonising world.”
Overseas, the UK government is preparing to make net zero planning mandatory for corporations, with the rules set to take force next year.
Locally, companies have been publishing their plans in response to pressure from the community, investors, and regulators.
The report has had strong levels of input and engagement from the environmental NGO sector, climate researchers, investor initiatives, and from IGCC’s members; institutional investors that include Australia’s largest superannuation and wealth management firms, holding approximately $33 trillion in global AUM.
The report will be of particular interest to companies who will be able get a comprehensive and well-organised picture of investor expectations.
During the upcoming proxy season all business stakeholders, including investors, will be able to use the report as an important point of reference for assessing companies’ climate plans.