Your Net-Zero Strategy
Addressing climate risk through engagement
Investors are assessing the resilience of companies to climate risk and the transition to a net-zero world, and are focusing their shareholder engagement accordingly. The goal: to influence companies to consider the risks and opportunities of climate change.
- Finding the emissions in private equity and debt funds
- How climate risk could affect corporate bonds
- How climate change could impact credit risk
- Aligning private equity portfolios with net-zero
- Getting to net-zero for endowments
- Taking your portfolio’s temperature
- Addressing climate risk through engagement
- Unpacking climate-related risks and opportunities
- Measuring the climate-alignment of your portfolio
- Categorizing climate-related financial risk
- Climate risk in equity and fixed income portfolios
- Aligning with TCFD recommendations
Making net-zero a central part of business strategy
As investors consider climate change in their investment decision-making, they’re using their influence as shareholders to push directors and senior management on plans to reach net-zero emissions. Investors want to see how (or whether) companies are assessing their strategies in the context of an economy that removes as much greenhouse gas from the atmosphere as it puts in.
Investors want to understand, among other things:
- Whether (and how) companies businesses’ might be helped or hurt by the transition to net-zero or the physical risks of a warming world
- How companies are thinking about the future and factoring climate change into their long-term planning
- Companies’ understanding of their impact on the environment, including how they engage customers, employees, suppliers and communities in their drive to decarbonize
- The success metrics and time horizons that companies rely on, as well as how they’re quantifying climate risk
Investor focus on the risks and opportunities of climate change is spurring a wave of activism directed toward long-term plans. The hedge fund Engine No. 1 installed three directors at Exxon Mobil in May 2021 after persuading shareholders that the oil giant should be exploring growth areas that include more significant investment in clean energy.
More broadly, both the campaign at Exxon Mobil and a successful climate-related shareholder proposal that called on Chevron to cut greenhouse gas emissions from the use of its products highlight a growing focus by investors on the transition to a net-zero economy and a rethink on what skills directors need to bring to the boardroom.
Incorporating climate change into portfolios may demand intensive efforts to engage companies. Many companies will need to go beyond tinkering with gains in energy efficiency to completely transform their business models or to leave certain businesses altogether. And while a growing number of companies are announcing decarbonization commitments, the details indicate differences in their scope and feasibility.
Exxon Mobil: Drilling Down on the Proxy Vote. Exxon management’s reliance on oil production may have contributed to a loss of confidence in its ability to deliver sustainable investment returns, according to this analysis by MSCI ESG Research.
Shareholders Are Pressing for Climate Risk Disclosures. That’s Good for Everyone. Shareholder activism induces firms to voluntarily disclose climate risks, an analysis by researchers at Boston University’s Questrom School of Business and Harvard Business School finds.
2021 ESG Trends to Watch. MSCI ESG Research discusses engagement as one of several possible paths by which investors can reduce the carbon intensity of their portfolios to the extent that would be required each year to reach net-zero by midcentury.
What Biden’s Climate Plan Means for U.S. Utilities. Most U.S. energy utilities lacked decarbonization plans (as of May 2020) that were aligned with the Biden administration’s goal of decarbonizing electricity generation by 2035, this analysis by MSCI found.
Climate Action 100+. An investor-led initiative that seeks commitments from companies to implement a strong governance framework for climate risk, act to reduce greenhouse gas emissions across the value chain and provide enhanced disclosure in line with the recommendations of the TCFD.