Responses are being sought to a consultation on a framework to assess whether corporate lobbying is aligned with the goals of the Paris Climate Agreement, write Clare Richards and Rory Sullivan
Since the creation of the United Nations Framework Convention on Climate Change (UNFCCC) in 1992, governments have adopted a range of climate change-related policies and programmes aimed at reducing greenhouse gas emissions and supporting society's response to physical climate risks. While progress has been impressive, it is also fair to say that the rate at which policy and legislation has been implemented has varied.
National economic conditions, the level of dependency on fossil fuels and public attitudes to the environment in general and to climate change have all been important influences on the decisions taken and the policies implemented.
Lobbying by companies and by their agents (in particular trade associations) has also been important. In fact, lobbying that opposes policy action on climate change has been recognised as a significant barrier to progress, with fossil fuel and energy-intensive sectors (energy, utilities, chemicals, automotive) often to the forefront of these efforts.
The role of investors
Investors have long been concerned about the implications of corporate lobbying on climate change policy. While not completely outweighing the effects of negative lobbying practices, investors, through initiatives such as the Institutional Investors on Climate Change and the Principles for Responsible Investment, have adopted progressive and highly supportive positions, acting as an important countervailing force in policy debates on climate change.
"Companies may face criticism and negative reaction from customers, investors or other stakeholders if there is a clear direct or indirect link to delaying or blocking climate policy"
The rationale for investor involvement is sound. A failure to adopt and effectively implement policy measures that significantly reduce global greenhouse gas emissions and accelerate the transition to a low-carbon economy presents a direct risk to investors' portfolios. At an individual company level, the potential impacts are also clear.
Delays in the implementation of climate change policy may mean that companies do not prepare now for the low-carbon transition, thereby compromising their longer-term viability.
Companies may also face criticism and negative reaction from customers, investors or other stakeholders if there is a clear direct or indirect link to delaying or blocking climate policy. This is particularly pertinent in sectors such as oil and gas, and mining and extractives, where companies' individual and collective social licences to operate are already under significant pressure because of the carbon characteristics of their products and services.
Bridging the gap
However, there are gaps and inconsistencies in how investors oversee companies' lobbying practices and in how investors engage on this issue. For example, does lobbying simply refer to the direct engagement between companies and their trade associations and policy-makers? Does lobbying include social media? Which forms of lobbying are most harmful? What does good practice look like? Should investors have a role in the development of corporate policies on climate change?
These gaps and inconsistencies have meant that often investor engagement has not been as effective, or as demanding, as it needs to be, with the result that irresponsible lobbying practices for short-term gain have gone unchecked.
In June 2020, AP7, BNP Paribas Asset Management and the Church of England Pensions Board announced that they have partnered with Chronos Sustainability to develop a framework that will enable the assessment of whether and to what extent corporate lobbying is aligned with the goals of the Paris Agreement on Climate Change.
The outputs from the project will also include the development of a high-level stakeholder statement that sets out investors' expectations on responsible climate change lobbying. Now in its initial consultation phase, the project team is seeking immediate and varied perspectives from global stakeholders who are involved in or in some way affected by the shaping, delivery and impact of corporate lobbying practices.
As noted by Charlotta Dawidowski Sydstrand, sustainability strategist at Swedish pension fund AP7: "AP7 has identified that weaknesses in current climate policy globally pose a risk to the long-term value growth of our pension portfolios. We find it unacceptable that at this point in time companies still counteract ambitious climate policy, either directly or through their business organisations."
The consultation survey closes on 31 July. The project team is seeking input from anyone involved in or in some way affected by the shaping, delivery and impact of corporate climate change lobbying practices, including people who work in companies and industry associations that are undertaking lobbying, policymakers who are lobbied, investors, academics, civil society organisations, journalists and members of the public who see lobbying in action. To respond, visit: https://www.chronossustainability.com/responsible-lobbying
Clare Richards is senior engagement manager at Church of England Pensions Board, and Dr Rory Sullivan is CEO of Chronos Sustainability.