Asset Managers’ Focus on Companies’ Transition Readiness and Lobbying Activities

At a Glance

• Claims that investors and companies are losing interest in climate risks are overstated.
• Investor-driven transparency on corporate and industry lobbying influencing climate policy is increasing standards.
• Companies are encouraged to disclose comprehensive reviews of their lobbying activities and alignment with the 1.5°C climate goal to enhance transparency for investors and stakeholders.

Balancing Political Backlash and Investor Concerns on Climate Risks

Despite political resistance to climate action, such as criticism of “climate extremism,” major investors continue to prioritize climate risk assessment. For example, Norway’s largest wealth fund updated its climate risk models, revealing previous underestimations of physical climate threats.

In alignment with the Sustainable Development Goals (SDGs), particularly SDG 13 (Climate Action) and SDG 12 (Responsible Consumption and Production), investors representing over €2.6 trillion in assets recently urged the European Union to commit to a 90% reduction in greenhouse gas emissions by 2040, emphasizing “competitive sustainability.”

Research indicates that European companies have become more positive in their climate lobbying efforts over the past five years. This shift reflects a growing understanding that robust climate policies support long-term commercial interests by fostering innovation and creating a level playing field, especially in clean technology sectors.

Investor Leadership in Driving Transparency

Investors are at the forefront of demanding transparency regarding corporate lobbying and its influence on climate policy. The relaunch of the investor-led Global Standard on Responsible Climate Lobbying exemplifies this leadership.

Storebrand, Norway’s largest asset manager, utilizes this standard to engage companies in transparent and accountable political engagement reporting. This practice supports SDG 16 (Peace, Justice and Strong Institutions) by promoting accountability and transparency.

Although corporate reporting is often pressured to simplify, detailed disclosures on policy engagement are essential. They reveal how companies plan their transition to sustainable models, identify inconsistencies between business strategies and lobbying activities, and highlight potential legal and reputational risks.

Large investors recognize that supportive climate policies are critical to securing future returns, linking financial performance with SDG 8 (Decent Work and Economic Growth) and SDG 9 (Industry, Innovation and Infrastructure).

A recent briefing by Storebrand and other institutional investors, in collaboration with the climate accountability think-tank InfluenceMap, confirms that investor interest in climate risk and lobbying transparency is intensifying.

Regulatory Landscape and Disclosure Requirements

• Seven major disclosure regimes were assessed by Oxford Net Zero, with all but one requiring lobbying disclosure.
• The EU Corporate Sustainability Reporting Directive (CSRD) mandates political engagement disclosures and remains unaffected by recent regulatory changes.
• The UK’s Transition Plan Taskforce framework and IFRS guidance also incorporate requirements for transition planning and policy engagement disclosures.
• There is a strong call for more explicit IFRS guidance on lobbying disclosures, reflecting their material importance to investors.

Investor Expectations: Public Commitment and Policy Engagement Review

Investors expect companies to take the following actions to align with the 1.5°C target of the Paris Agreement (SDG 13):

1. Public Commitment: Companies should publicly commit to climate goals after thorough board-level consideration, ensuring alignment of direct and indirect lobbying efforts.
2. Review of Lobbying Positions: Companies must assess and address any misalignments between their lobbying activities and the 1.5°C goal, including those of industry associations.
3. Comprehensive Disclosure: Companies should provide transparent reports on their lobbying activities and alignment with climate targets, enabling investors and stakeholders to evaluate their transition readiness.

Tools such as InfluenceMap’s science-based benchmarks assist companies in summarizing scientific policy advice and monitoring lobbying alignment.

Examples of Positive Corporate Engagement

• Business alliances like RE100 have successfully lobbied for renewable energy incentives, facilitating projects such as Sony’s solar panel installations in Thailand and Japan.
• Nearly 90 companies have published over 200 policy engagement reviews since 2017, with 2024 seeing increased activity from leaders like Unilever and Enel, following the Global Standard on Responsible Climate Lobbying.
• Initial analyses of CSRD reports by the We Mean Business Coalition highlight promising disclosures, with companies like Ørsted reporting significant positive impacts on their business prospects through policy advocacy.

Conclusion: The Role of Corporate Lobbying in Achieving Sustainable Development Goals

Corporate lobbying, when aligned with climate goals, can create opportunities for companies’ net zero transitions and broader economic transformation. Investors will continue to apply pressure to ensure transparency and accountability in these activities, supporting the achievement of SDG 13 (Climate Action), SDG 9 (Industry, Innovation and Infrastructure), and SDG 17 (Partnerships for the Goals).

As political and market dynamics evolve, the integration of comprehensive lobbying disclosures into corporate sustainability strategies remains a critical component of responsible investment and sustainable development.

1. Sustainable Development Goals (SDGs) Addressed or Connected

1. SDG 13: Climate Action
   • The article focuses on climate risks, transition readiness, and lobbying activities related to climate policy, directly linking to SDG 13 which aims to combat climate change and its impacts.
2. SDG 12: Responsible Consumption and Production
   • Transparency in corporate lobbying and sustainability reporting aligns with responsible consumption and production practices.
3. SDG 16: Peace, Justice, and Strong Institutions
   • The emphasis on transparency, accountability, and disclosure of lobbying activities relates to building effective, accountable institutions.
4. SDG 17: Partnerships for the Goals
   • Investor-led initiatives and multi-stakeholder collaborations to improve climate lobbying transparency reflect partnerships to achieve the goals.

2. Specific Targets Under Those SDGs Identified

1. SDG 13: Climate Action
   • Target 13.2: Integrate climate change measures into policies, strategies, and planning – companies are encouraged to align lobbying and business models with the 1.5°C goal of the Paris Agreement.
   • Target 13.3: Improve education, awareness-raising and human and institutional capacity on climate change mitigation – investor engagement promotes awareness and transparency.
2. SDG 12: Responsible Consumption and Production
   • Target 12.6: Encourage companies to adopt sustainable practices and sustainability reporting – the article highlights the need for comprehensive disclosure of lobbying activities and transition plans.
3. SDG 16: Peace, Justice, and Strong Institutions
   • Target 16.6: Develop effective, accountable and transparent institutions – transparency on lobbying and policy engagement is emphasized.
4. SDG 17: Partnerships for the Goals
   • Target 17.17: Encourage and promote effective public, public-private and civil society partnerships – investor-led standards and collaborative initiatives are driving higher standards for climate lobbying disclosure.

3. Indicators Mentioned or Implied to Measure Progress

1. Indicators related to SDG 13 (Climate Action)
   • Disclosure of companies’ lobbying activities and alignment with the 1.5°C target as a measure of integration of climate policies (implied through references to the Global Standard on Responsible Climate Lobbying and InfluenceMap benchmarks).
   • Physical risk models updated by large funds to assess climate risks (e.g., Norway’s largest wealth fund updating climate risk models).
2. Indicators related to SDG 12 (Responsible Consumption and Production)
   • Number of companies publishing comprehensive policy engagement reviews and transition plans (e.g., nearly 90 companies publishing over 200 reviews since 2017).
   • Inclusion of lobbying disclosures in corporate sustainability reports such as those under the EU Corporate Sustainability Reporting Directive (CSRD).
3. Indicators related to SDG 16 (Peace, Justice, and Strong Institutions)
   • Extent and quality of transparency and accountability in corporate lobbying disclosures, as assessed by investor-led standards and frameworks.
4. Indicators related to SDG 17 (Partnerships for the Goals)
   • Number and scale of investor-led initiatives and partnerships promoting climate lobbying transparency (e.g., Global Standard on Responsible Climate Lobbying, collaborations with InfluenceMap).

4. Table: SDGs, Targets and Indicators

Source: sustainableviews.com