There has long been a suspicion among investors and environmental groups that even companies that profess their support for moves to tackle climate change in public are, behind the scenes, quietly lobbying for the exact opposite, either individually or through their trade associations.
But, increasingly, for companies doing this, there is nowhere to hide. Now a group of investors representing assets of $2 trillion has written to 55 companies challenging their approach to climate lobbying. The letter was sent to some of the world’s largest companies in the Automotive, Chemicals, Food and Beverages, Industrials, Mining and Metals, Oil and Gas, Transportation and Utilities sectors.
Among the companies targeted by investors including the Church of England Pensions Board and Swedish Pension Fund AP7 were pretty much every European carmaker, including BMW, VW, Renault, Fiat Chrysler, PSA, Volvo and Daimler. Among the companies in other sectors were Rio Tinto, BP, Total, Shell, Rolls Royce, Siemens, Nestle and Unilever, and the group has warned that it may file shareholder resolutions later this year.
The move comes after a leaked document suggested that BusinessEurope, a large confederation representing trade bodies across the EU, was planning to “oppose” greater EU ambition on climate policy.
The investors urged the companies to urgently align their approach to corporate climate lobbying with Paris Agreement goals, following warning in a recent report from the Intergovernmental Panel on Climate Change, warning that the world is on course for 3°C of global warming.
The 55 high-emitting companies targeted are the worst performers in Europe in the seven sectors that are the focus of the investors’ engagement, according to an assessment by InfluenceMap, an independent NGO that monitors lobbying activity by companies.
InfluenceMap scored the companies for their overall position on climate policy, the extent of their influence on policy-makers and on whether publicly-stated corporate climate policies matched those of the trade associations acting on their behalf. The auto sector, grappling with the aftermath of the Dieselgate scandal and the transition to electric vehicles, was one of the worst performing sectors.
Some companies are starting to become more aware of potential lobbying conflicts – Rio Tinto and its Australia-listed rival BHP Billiton have both pressured the Minerals Council of Australia to change its stance on climate change, for example.
In the run up to key UN climate negotiations in 2020, the funds have targeted this group of European companies due to their high greenhouse gas emissions and their significant role in energy intensive sectors. Each company has been asked to review relationships with key trade associations and lobbying organisations, to ensure alignment with their formal company positions supporting implementation of the Paris climate agreement. A set of ‘investor expectations’ outlining best practice on lobbying has been sent to each company.
The letter to the Chair of each company states: “We would ask you to review the lobbying positions being adopted by the organizations of which you are a member. If these lobbying positions are inconsistent with the goals of the Paris Agreement, we would encourage you to ensure they adopt positions which are in line with these goals. We would ask you to ensure that you are transparent about your own policy positions and how you ensure these are implemented in your direct and in-direct lobbying activities.”
The influence of trade associations is often exerted behind closed doors and can be deeply insidious to public policy making on climate change, said Adam Matthews, director of Ethics & Engagement at the Church of England Pensions Board.
Alice Garton, a lawyer at ClientEarth, said: “Fossil fuel companies are seeing the energy transition bite and their executives are starting to panic. Coal and diesel in particular are seeing an existential threat. But aggressively lobbying to keep these outdated business models intact while public-facing statements assure shareholders the business cares about the climate is deeply hypocritical – and as we’ve seen in the US, puts businesses at real risk of litigation. You cannot say you are actively working to tackle climate change while pouring money into campaigns that seek to maintain a high-carbon economy.”
The letter to the companies outlines three reasons why corporate lobbying inconsistent with meeting the goals of the Paris Agreement present financial risks to investors:
- Regulatory risks: Delay in action now is likely to result in the need for stronger and more drastic regulatory interventions later, leading to much higher costs for companies.
- Systemic economic risks: Delay in the implementation of the Paris Agreement increases the physical risks of climate change, posing a systemic risk to economic stability, and introducing uncertainty and volatility into investor portfolios.
- Reputational and legal risks: Companies may face backlash from their consumers, investors or other stakeholders if they or the organisations that they support are seen to be delaying or blocking effective climate policy. This may also lead to legal risk, particularly for companies which continue to invest in high-carbon projects, or whose corporate disclosures are alleged to be misleading.
The full list of companies the letter was sent to is below:
|Autos||Chemicals||Food & Bev & Industrials||Mining & Metals||Oil & gas||Transportation||Utilities|
|Fiat Chrysler Automobiles||BASF||Siemens||Rio Tinto Group||BP||Rolls-Royce||RWE|
|Daimler||Bayer||Danone||ArcelorMittal||Total||Air France-KLM||PGE Group|
|BMW Group||LyondellBasell Industries||Philips||Glencore International||Royal Dutch Shell||Airbus Group||Centrica|
|Renault||Air Liquide||Nestle||HeidelbergCement||OMV||Moller Maersk Group||CEZ|
|Groupe PSA||ThyssenKrupp AG||Repsol||Naturgy (Gas Natural Fenosa)|
|MMC Norilsk Nickel||Equinor (formerly Statoil)||Enel|