25 May 2023 4 min read

Climate lobbying: turning up the heat

By Anna Hirai , Cristy Rodriguez , Dror Elkayam

In this blog, we set out our expectations of companies regarding climate lobbying and disclosures, and why we believe this is a crucial part of enabling the transition to a net zero economy.

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Ambitious climate policy and responsible corporate climate lobbying1 are essential to keeping hope of a 1.5⁰C world alive. For decades, a select group of corporations and trade associations have lobbied heavily to forestall progress on addressing climate change.2 It is our view that all economic actors must use their influence positively and advocate for public policies that would support the delivery of a net zero economy.

As active owners, we are committed to engaging collectively and individually with companies globally to highlight and improve their climate lobbying accountability and to escalate this where required. As part of our climate engagement programme, LGIM’s Climate Impact Pledge, we have developed net zero sector guides to support companies in their transition and to clearly outline our sector-specific expectations. These include a ‘red line’ for all 20 ‘climate-critical’ sectors on their climate lobbying activities.  

As we observed certain companies whose lobbying activity is at odds with their public net zero commitments, this red line is particularly pertinent to ensure the alignment of their climate lobbying activity with the goals of the Paris Agreement.

What are our expectations for companies?

We believe that companies should fully disclose all political contributions, direct lobbying activity, political involvement and indirect lobbying via trade associations. There should be full transparency regarding the memberships of and monies paid to trade associations and lobbying groups including:

  • A breakdown of payments to political parties, candidates and associations, trade associations, think tanks, and of direct and indirect lobbying activity on policy and legislative proposals etc.
  • A clear explanation of how each of the above associations, contributions and actions etc. would benefit the causes the company supports and their link to the company’s strategy
  • A public statement from the company outlining where it disagrees with the associations of which it is a member on a particular issue, and the reasons why it believes it is beneficial to remain a member
  • Disclosure of where responsibility sits within the company for the oversight of such relationships

Also, from a good governance perspective, we expect companies to have a transparent framework whereby membership with different industry associations is reviewed by the board in a timely and frequent manner.

How do we assess climate lobbying?

For our engagement activity, we first look for relevant information that companies directly disclose in their annual/ESG reports and in their CDP disclosures. Additionally, we use and reference information by external data providers to highlight leaders and laggards with regards to climate lobbying activity and any misalignment between companies’ public commitment and their actions.

For example, InfluenceMap provides a ranking of all CA100+ target companies and industry associations in the order of their level of support for Paris-aligned climate policy. In addition to corporate disclosures, we use such data in our engagements with our investee companies in the following ways:

  1. Climate Impact Pledge ratings
  2. Climate Impact Pledge direct engagements
  3. ESG score

How should companies disclose their climate lobbying activity?

We recommend companies review this guidance from ICCR, which includes FAQs from companies on climate lobbying as well as best-practice examples. We hope that this guidance is helpful for companies that are looking to improve their climate lobbying disclosures, as the report explains how they can report in line with the global standard on responsible climate lobbying, which was created by and for investors, based on existing standards and frameworks such as Global Reporting Initiative.

We also recognise the importance of collaborative efforts in driving systemic change in the market. We expect other investors to increase their efforts around lobbying and raise this topic through organisations such as IIGCC, CERES, PRI etc.

For our investee companies and for LGIM to achieve net zero emissions by 2050, it will be critical that companies are not stalling regulatory development on climate transition and that they are using their influence to push policy makers to align climate regulation with the goals of the Paris Agreement. Based on the world energy outlook 2022 from IEA, we know that policy and technology progress need to be accelerated to keep hope of a 1.5⁰C world alive.

 

Sources

1. When we say lobbying, we mean both direct and indirect lobbying through trade associations.

2. Efforts to reduce industrial effect on environment 'uneven', UN agency reports | UN News

Anna Hirai

ESG Analyst, Investment Stewardship

Anna Hirai is responsible for LGIM’s voting and engagement activity on ESG issues, with a focus on the consumer staples and industrials sectors. She supports various ESG engagement campaigns including Climate Impact Pledge and contributes to updating LGIM’s exclusion list – Future World Protection List. She also represents LGIM in the 30% Club France Investor Group, an influential group of investors that engages with companies on diversity at senior leadership level. Anna joined LGIM in 2022 from SquareWell Partners where she held the title of Co-Head of ESG Research. Prior to that, she worked as an ESG Research Analyst at Vigeo Eiris, now part of Moody’s ESG Solutions. Anna graduated from University College London with a BA in History, Politics, and Economics.

Anna Hirai

Cristy Rodriguez

ESG Analyst, Investment Stewardship

Cristy is an ESG Analyst supporting the team in ESG engagement campaigns including LGIM’s flagship Climate Impact Pledge. She is responsible for in-depth research and the assessment of companies across key sectors using LGIM’s climate assessment framework. Cristy joined LGIM in 2020 after graduating from Anahuac University, Mexico with a bachelor’s degree in Social Responsibility and Sustainability Management.  

Cristy Rodriguez

Dror Elkayam

Global ESG Analyst, Investment Stewardship

Dror joined the investment stewardship team in 2021 as a Global ESG Analyst, leading engagements with the energy and mining sectors, as well as the development of LGIM’s ESG scores. Dror Joined LGIM from Georgeson, a boutique corporate advisory firm, where he acted as an adviser to investors and corporates on shareholder engagement strategies, in preparation for general meetings, proxy contests and M&A in the UK and globally. Prior to that, Dror had spent nearly five years at Bloomberg as an ESG specialist. Dror graduated from Bar-Ilan University in 2012 with a BA in Economics and Business Management and obtained the CFA chartership in 2019.

Dror Elkayam