Climate Action 100+
Breckinridge continued its participation in efforts of Climate Action 100+ (CA100+) in 2022. CA100+, an investor-led initiative, advocates for the world’s largest corporate GHG emitters to take action to address climate risks. Three high-level goals relate to climate action: 1) reducing GHG emissions, 2) improving climate risk oversight by Boards of Directors, and 3) enhancing climate risk disclosures. In total, 700 investors with $68 trillion in assets under management engage with 166 companies on the CA100+ list that represent 80 percent of global industrial emissions.
Breckinridge is co-lead engagement investor with three U.S.-based large-capitalization industrial companies on the CA100+ list. The companies are in the aerospace & defense, construction machinery, and retail sectors. Climate topics raised during our engagement meetings reflect each company’s unique business models, as well as their relative performance on the CA100+ Net Zero Benchmark Report, an annual report assessing execution and progress on the three CA100+ goals.
Breckinridge participated in 11 CA100+ engagement discussions in 2022. While the conversations covered a variety of topics for each company, an overarching theme surfaced. Scope 3 emissions measurement and management emerged as an important issue in which all three companies need to improve. Quantifying and managing Scope 3 emissions can be challenging, and in the end, may be based on reasonable estimations.
While acknowledging the difficulties, participants in our engagement meetings urged the companies to make progress in the areas of Scope 3 disclosure, assessment, and target setting. For example, we encouraged one company to connect its largest and most material Scope 3 emissions more clearly with initiatives that may be in place to mitigate them. The enhanced disclosure would benefit investors and could be included in the company’s ESG reporting.
We asked another company to consider setting a GHG reduction target approved by the SBTi, which would include a target for cutting Scope 3 emissions. Management offered well-reasoned arguments for deciding against pursuing SBTi approval at this time. However, the representatives communicated interest in learning more. In response, the engagement team will organize a meeting with the company and an SBTi expert in early 2023.
The third company we met with is trailing industry peers in terms of transparency and goals related to the emissions from the use of its vehicles, a Scope 3 category. The company has neither measured nor a set target to reduce this important source of emissions, while several of its peers already have done so. The CA100+ Benchmark Report also highlighted the company’s lack of emission reduction ambitions. Favorably, due in part to our ongoing engagement, the company pledged to publish its product-use phase emissions in 2023.