Ed. note: Today’s blog was written by Zachary Barlow who has been supporting our editorial team for a few months. We look forward to additional contributions from him.
By far, the biggest critique of ESG as a corporate priority is that it is simply “greenwashing.” Compared to just a few years ago, investors, customers, employees and regulators are now much more likely to scrutinize the alignment between a company’s public statements of “eco-friendly” actions and its internal corporate communications and policies, including lobbying and trade association activity. A study from just last month takes aim at oil & gas majors, but this isn’t limited to the energy industry. Companies across sectors need to be aware that climate activists and government regulators are scrambling to combat greenwashing.
From congressional hearings to the SEC Staff’s recent review of climate-related disclosures, regulatory action appears increasingly probable. However, as is often the case on ESG topics, investors are leaning into private action to spur corporate change. Yesterday, a coalition led by Swedish pension scheme AP7, BNP Paribas Asset Management, and the Church of England Pensions Board released a new 14 point framework to assess corporate climate lobbying efforts.
The framework goes well beyond investor initiatives we’ve seen to-date. Among other items, it calls on companies to:
- Adopt Policies & Commitments: Make a public commitment to align all climate change lobbying with the goal of restricting global temperature rise to 1.5⁰C above pre-industrial levels – across all subsidiaries and in all jurisdictions – and publicly commit to take steps to ensure that trade associations, coalitions, etc. conduct their climate lobbying in line with this goal.
- Implement Governance Procedures: Assign climate lobbying responsibility at the board & senior management levels, establish an annual review process, a stakeholder engagement process, and a framework for addressing misalignments.
- Take Action: Publish a detailed annual review of the companies assessment & actions related to the alignment of climate lobbying activities of the company and its trade associations, coalitions, etc., recognize the existence of and report on action to address any misalignments, and create or participate in coalitions that have the specific purpose of lobbying in support of the goal of restricting global temperature rise to 1.5⁰C above pre-industrial levels.
- Disclose Information: Provide detailed public disclosure – for all geographies – of membership & involvement in all associations, alliances and coalitions engaged in climate-related lobbying. Include, for each organization, how much the company pays them on an annual basis and which organizations the company is actively supporting through board membership, etc. Provide an overall assessment of the influence its climate lobbying has had on supporting climate change policy and the company’s ability to delivery its own corporate transition strategy.
This new framework and coalition (which includes US-based organizations like Ceres and ICCR) comes at a time when shareholder proposals on the topic of climate lobbying are achieving unprecedented levels of support. These proposals typically seek information on corporate climate lobbying strategies – and how those strategies align with the company’s transition strategy. Chevron, Exxon Mobil, Norfolk Southern, and Duke Energy are among several corporations which saw investor pressure for specific disclosures on climate lobbying last year. Proposals on this topic show no signs of stopping in 2022.
What This Means
This framework makes it clear that investors are not just demanding that companies cease lobbying efforts that hinder environmental progress, but that they also expect companies to wield their power to lobby for climate health. We recommend assessing how your climate lobbying efforts stack up against these guidelines. With investors increasingly scrutinizing corporate approaches to climate lobbying, companies that ignore these evolving investor expectations risk becoming targets for shareholder proposals that will force their hand.
