Investor interest in climate risk is not waning – Sustainable Views

Asset Managers and Sustainable Development Goals: Emphasizing Climate Transition Readiness

At a Glance

• Claims that investors and companies are losing interest in climate risks are overstated.
• Investors are leading efforts to enhance transparency regarding corporate lobbying and its impact on climate policy.
• Companies are encouraged to disclose comprehensive reviews of their lobbying activities and alignment with the 1.5°C climate goal, supporting SDG 13 (Climate Action).

Investor Commitment to Climate Risk and SDGs

Despite political resistance to climate initiatives, significant investors continue to prioritize climate risks, aligning with Sustainable Development Goal 13 (Climate Action). For example, Norway’s largest wealth fund updated its climate risk models, revealing previous underestimations of physical climate threats.

Moreover, investors representing over €2.6 trillion in assets have urged the European Union to adopt ambitious emission reduction targets of 90% by 2040, promoting sustainable infrastructure investments that support SDG 9 (Industry, Innovation, and Infrastructure) and SDG 11 (Sustainable Cities and Communities).

Research indicates that European companies are increasingly positive about climate lobbying compared to five years ago, recognizing that robust climate policies foster innovation and create a level playing field, which aligns with SDG 8 (Decent Work and Economic Growth).

Investors Driving Transparency in Climate Lobbying

Investor-led initiatives are at the forefront of enhancing transparency in corporate lobbying related to climate policy, advancing SDG 16 (Peace, Justice, and Strong Institutions). The Global Standard on Responsible Climate Lobbying exemplifies this effort, promoting accountability and consistent reporting.

Storebrand, a responsible global investor, applies this standard in dialogues with companies to ensure transparency in their political engagements. Such disclosures are critical for assessing companies’ transition plans and identifying potential legal and reputational risks, thereby supporting SDG 12 (Responsible Consumption and Production).

Large investors recognize that effective climate policy environments are essential for sustainable returns, reinforcing the interconnectedness of SDGs.

Multiple disclosure regimes, including the EU Corporate Sustainability Reporting Directive and the Transition Plan Taskforce framework, mandate reporting on political engagement. These frameworks emphasize the materiality of lobbying information for investors, highlighting the importance of integrating climate policy engagement into corporate disclosures.

Corporate Public Commitment and Policy Engagement Aligned with SDGs

1. Public Commitment: Companies should publicly commit to the Paris Agreement’s 1.5°C target, aligning their direct and indirect advocacy efforts with this goal to support SDG 13.
2. Review of Lobbying Positions: Companies must assess and address any misalignments between their lobbying activities and climate objectives, including those of affiliated industry associations, to mitigate risks and seize opportunities.
3. Disclosure of Policy Engagement: Comprehensive disclosure of lobbying positions and activities, including their alignment with the 1.5°C target, is essential for transparency to investors and stakeholders, advancing SDG 17 (Partnerships for the Goals).

Since 2017, nearly 90 companies have published over 200 policy engagement reviews, with notable examples such as Unilever and Enel demonstrating best practices consistent with the Global Standard on Responsible Climate Lobbying.

Initial analyses of lobbying disclosures under the EU’s Corporate Sustainability Reporting Directive show promising results. For instance, Ørsted has identified its lobbying efforts as materially beneficial to its renewable energy initiatives, contributing to SDG 7 (Affordable and Clean Energy).

Ultimately, corporate lobbying can create opportunities for advancing net zero transitions both within companies and across the broader economy, reinforcing the critical role of investors in driving sustainable development.

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 13: Climate Action
   • The article focuses heavily on climate risks, climate lobbying, and the alignment of corporate activities with the 1.5°C goal of the Paris Agreement.
2. SDG 12: Responsible Consumption and Production
   • Transparency in corporate lobbying and sustainability reporting is a key theme, promoting responsible business practices.
3. SDG 16: Peace, Justice and Strong Institutions
   • Emphasis on transparency, accountability, and disclosure of lobbying activities aligns with stronger institutions and governance.
4. SDG 17: Partnerships for the Goals
   • Investor collaboration and multi-stakeholder initiatives like the Global Standard on Responsible Climate Lobbying highlight partnerships to achieve climate goals.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. SDG 13: Climate Action
   • Target 13.2: Integrate climate change measures into national policies, strategies, and planning – reflected in calls for transparent lobbying aligned with 1.5°C goals.
   • Target 13.3: Improve education, awareness-raising and human and institutional capacity on climate change mitigation and adaptation – implied by investor-driven transparency and disclosure standards.
2. SDG 12: Responsible Consumption and Production
   • Target 12.6: Encourage companies to adopt sustainable practices and to integrate sustainability information into their reporting cycle – seen in corporate disclosures on lobbying and climate policy engagement.
3. SDG 16: Peace, Justice and Strong Institutions
   • Target 16.6: Develop effective, accountable and transparent institutions at all levels – linked to demands for transparency in corporate lobbying and political engagement.
4. SDG 17: Partnerships for the Goals
   • Target 17.17: Encourage and promote effective public, public-private and civil society partnerships – reflected in investor-led initiatives and multi-stakeholder collaborations.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. Indicators related to SDG 13
   • Number and quality of corporate disclosures on lobbying activities aligned with the 1.5°C goal.
   • Extent of investor adoption of standards such as the Global Standard on Responsible Climate Lobbying.
   • Reduction in greenhouse gas emissions as targeted by investor coalitions (e.g., EU emission reduction target of 90% by 2040).
2. Indicators related to SDG 12
   • Number of companies publishing comprehensive policy engagement reviews and sustainability reports including lobbying transparency.
   • Inclusion of climate lobbying disclosures in corporate sustainability reporting frameworks such as the EU Corporate Sustainability Reporting Directive (CSRD).
3. Indicators related to SDG 16
   • Existence and enforcement of disclosure requirements on political engagement and lobbying in financial reporting standards (e.g., IFRS guidance).
   • Investor and stakeholder access to transparent and accountable corporate lobbying information.
4. Indicators related to SDG 17
   • Number of investor-led initiatives and partnerships focused on climate lobbying transparency.
   • Level of collaboration between investors, companies, and policy makers to promote climate-aligned lobbying practices.

4. Table: SDGs, Targets and Indicators

Source: sustainableviews.com