Investors focus ESG on contrast between climate words and actions

Ellen Meyers, CQ-Roll Call on

Published in Business News

Investors will ramp up their scrutiny of corporate political spending this spring with a specific focus on whether companies’ advocacy and lobbying align with the climate goals of the Paris Agreement.

The increased attention is coming from asset managers targeting environmental, social and governance issues, as well as advisory firms that are gearing up for proxy season, the portion of spring and early summer when most companies hold annual meetings.

Among the most influential of the asset managers is The Interfaith Center on Corporate Responsibility, a coalition of faith-based and secular investors representing more than $4 trillion in managed assets. The group this month issued guidance for its members to engage with companies on climate-related lobbying — and to make corporations more transparent about their political advocacy.

Many companies, especially in the tech, retail and utility sectors, broadly support the Paris Agreement and efforts to combat climate change, but some investors say the public support doesn’t completely align with political activities.

The Paris Agreement’s overarching goal is to curb global warming, limiting it to an increase of 1.5 degrees Celsius. The treaty’s parties and signatories, including the U.S., pledged to make meaningful contributions to reducing greenhouse gas emissions, fostering climate resilience and making investments that support decarbonization. Countries are required to update their progress in 2025.

“While corporations are not solely responsible for rising global temperatures, many high-emitting and high greenhouse gas-impact companies have spent years, or decades, intervening in regulatory and policy discussions … to delay the regional, local, and global rules that would enable a less disruptive energy transition,” ICCR said in its guidance.


“Investors — because of some of this history — now believe companies have a critical and urgent role to play in reversing this course,” it said.

Companies have increased their disclosures of lobbying information in recent years. The Jan. 6, 2021, attack on the Capitol prompted major companies to pause political contributions and reexamine their policies, and gave activist shareholders and other advocates more leverage to pressure companies to improve their transparency around their advocacy.

According to the Center for Political Accountability and the Wharton School of the University of Pennsylvania, nearly 78 percent of companies in the S&P 500 index fully or partially disclosed political spending last year.

However, asset management firms and investing coalitions interested in ESG issues now want corporations to explain how their political spending aligns with their publicly stated values and business goals, such as reducing greenhouse gas emissions.


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