Resource Helps Investors Push Companies Toward Sustainability Changes

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Just as companies make plans and set goals to grow and profit, they should set a similar path to sustainability efforts and investors play a major role to shape such efforts and make them a reality.

Sustainability nonprofit organization Ceres says investors have increasing power to make those changes happen and points out that during the 2020-21 proxy season investors withdrew 70 shareholder proposals in exchange for sustainability commitments and that among the climate-related shareholder resolutions that went to vote, 14 received major backing, which doubled from the year before.

To continue to gain from that pressure, Ceres released a new resource for investors called Investor Guide to Corporate Greenhouse Gas Commitments. The guide recommends investors not only work to make sure companies remove emissions from their value chains but are also looking to implement net-zero business strategies.

The resource includes tools and fact sheets investors can use to engage with companies. It addresses why there needs to be more sustainability commitment and what investors can do to drive corporate ambition.

Among the areas businesses need to focus on are energy efficiency, renewable energy, greenhouse gas reduction, science-based target initiatives (SBTi) and overall net zero commitments.

The guide illustrates what it calls an ambition spectrum to help tackle where companies stand.

At the base of that spectrum companies are doing nothing and have no goals. From there they have clean energy goals only and move forward to net zero goals, SBTi, robust goals and finally robust goals and transition plans in place.

Ceres says while 20% of the world’s 2,000 largest publicly traded companies representing $14 trillion in sales have made sustainability commitments, most US companies are not yet facing the urgency of the matter. Ceres says more than 85% of Fortune 500 companies lacked robust climate goals and just 9% had started including action transition plans in their sustainability reports.

Investors have already spurred action at companies like Chevron, which recently pledged to reduce its emissions intensity and put money toward carbon improvements. That move came on the heels of the company’s investors defying Chevron’s board on Scope 3 emissions standards. Similar actions happened this past summer with Exxon and Shell as companies are starting to face consequences for not making these changes quickly enough.

This type of action also comes objectives like the UN’s sustainable development goals face big financing gaps and making net zero changes could provide economic opportunities despite also needing more investment to spur success.

The Ceres resource says investors have several options to put on companies to encourage changes.

They include direct communication, talks involving multiple investors and investors across different companies and bringing companies together with environment, sustainability and governance (ESG) experts. They can also implement shareholder resolutions, go directly to boards or even involve the media to get information public.

Fact sheets the guide aimed at helping investors directly address companies focus on clean energy goals, GHG reduction and SBTi, carbon neutrality goals, Scope 3 emissions and transition plans, and inclusive economies. The fact sheets include ways to engage companies, red flags to look for and the next steps for recommendations to help businesses advance through the ambition spectrum.