This guide serves as a resource for investors evaluating corporate greenhouse gas (GHG) commitments and engaging with corporations to increase their climate action ambition. The often confusing array of corporate commitment options can make it challenging to accurately determine how ambitious a company is in its approach to climate action. This guide will define terms, highlight key questions, and provide clarity around these topics so investors feel confident engaging with and assessing corporate climate and clean energy ambition.
The climate is in crisis. As the recent code red warning of the world’s leading scientists’ makes clear, without immediate, large-scale GHG emissions reductions, the goals set by the Paris Agreement of limiting global warming to 1.5 degrees Celsius will be out of reach. During the next decade, we have to cut emissions by half. Every actor within the economy—companies, investors, policy makers, and regulators—must raise their ambitions and match that ambition with transparent action.
Businesses, in particular, must take bold actions that remove GHG emissions from their value chains in order to meet the goals of the Paris Agreement, and implement a business strategy to thrive in a fair and just decarbonized economy that supports an equitable transition for affected communities and workers. Companies have a critical role to play not simply because they are significant emitters of GHG emissions, but also because they are driving the new business models, the breakthrough technologies, and the government ambition needed to make this future a reality.
Companies have been making progress in setting corporate climate commitments, especially in the last few years. Some 20% of the world’s’ 2,000 largest publicly traded companies representing $14 trillion in sales have made net zero commitments, according to a March 2021 report by researchers at the Energy and Climate Intelligence Unit and Oxford Net Zero.
While this progress is positive and encouraging, the majority of large U.S. companies still either haven’t set climate goals or haven’t set science-based goals. In fact, 40% of the largest U.S. companies from the Fortune 500 lack any climate goals, and of the 60% that do have goals, only one in four are Science-Based Targets.
Given the urgent need for more ambitious corporate climate action, investors must understand and have the confidence to engage companies on corporate climate commitments. Decarbonization of the global economy starts with strong and robust corporate clean energy and climate goals, which companies use to create transition plans that determine how companies will achieve their goals. As they are crafting these transition plans, companies will also need to take into account considerations such as responsible policy advocacy, capital allocation, carbon credits, support for worker transitions, community engagement, and supply chain management that indicate proof of legitimate implementation to reach sustainability goals.
Investors play a leading role in holding companies accountable by ensuring that they are taking the necessary steps to develop these interim milestones and that the company is acknowledging its responsibility to deliver a just and equitable transition for workers and affected communities. Investors also benefit from understanding how a company’s current and proposed commitments align with the Ambition Spectrum and the degree to which a company’s climate action ambition addresses climate risk in an investor’s portfolio.
Download the full guide which includes more details about the Ambition Spectrum as well as fact sheets investors can utilize to support dialogue, resolutions, or additional engagement tactics with companies on the following topics:
Clean Energy Goals
GHG Reduction Goals and Science-Based Targets
Net Zero and Carbon Neutrality Goals; Carbon Credits
Scope 3; Transition Plans
Just and Inclusive Economies