How to engage with companies on climate lobbying

Stage 1: Identifying potential red flags

Before engaging with a company on its climate lobbying practices, several signs will help indicate the likelihood of direct or indirect obstructive climate lobbying practices:

no transparency or a negative public stance on climate science;
no reporting on money spent on national or subnational lobbying; and
limited or no transparency on engagement on climate change policy and with policy makers.

Even if a company has disclosed a positive stance on climate science, significant risk of misalignment with indirect lobbying practices may be highlighted through:

no transparency on memberships of trade associations or other industry-backed and tax-exempt organisations (especially those with a reputation of having a negative stance on climate change); and
no disclosure of level of funding to these organisations.

Stage 2: Asking the right questions

Beyond identifying initial red flags, a deeper dive on corporate lobbying practices provides insight into current performance and establishes a baseline for engagement.

A number of questions have been highlighted to engage companies on their lobbying practices across four key areas:

governance;
corporate climate position and direct lobbying practices;
indirect lobbying through association; and
managing alignment.

The questions below have been adapted from the following resources which can be used to develop engagement further:

Governance

The following questions help to establish the involvement of the board on climate and lobbying-related issues:

Is there board-level oversight of climate-related issues relevant to the company?
Is there any representation on the board with expertise or experience on climate change/environmental management?
Is there board-level oversight of lobbying activity undertaken by the company (and the organisations it is a member of)?
Does the company have a publicly disclosed policy for lobbying activities related to climate, or is this content incorporated into another publicly available corporate policy?
If a policy for climate lobbying is available, does it assign responsibility at the board or senior management level?

Climate position and direct lobbying practices

The following questions help to identify the company’s climate position and its direct influences on policy makers:

What was the level of spending on lobbying activities in the last year?
- What proportion of this was spent on national and subnational lobbying?
What is the company’s position on the Paris Agreement?
- What general policies are supported to ensure the goals of the agreement are met?
- Are these positions publicly disclosed and updated?
Has the company engaged directly with policy makers on climate-related issues?
- If so, in which jurisdictions?
- What specific issues have been addressed?
Does the company disclose its positions on, and engagement activities with, specific climate change policy and related regulation that impacts, or may impact, its operations?

Indirect lobbying

The following questions help to establish the company’s awareness of indirect lobbying practices:

Does the company maintain a full list of trade associations and other similar tax-exempt organisations it is a member of?
- Does this include details of payments or funding provided?
- Does accounting cover the portion of these payments that are used for lobbying?
Does the company disclose its membership in or support for third-party organisations that engage on climate change issues?
Is the company aware of the climate positions of the trade associations it is a member of?
- Does it disclose an account of any activities the company has undertaken to influence these positions?
Is the company represented on the board of any trade associations or does it provide funding beyond membership? Are there any other links between the company and the trade association that do not constitute direct membership?

Managing alignment

The following questions help to establish the company’s ability to identify misalignment between its own climate position and the lobbying practices undertaken through the organisations it is a member or funder of:

What processes are in place to ensure that all direct and indirect activities that influence policy across all geographies are consistent with the company’s overall climate change strategy, and corporate financial and reputational interests?
- Is a policy available to capture this?
Are there adequate governance processes and policies in place to identify the climate change positions of third-party organisations that the company is a member of across all geographies?
- Do such processes and policies take into account credible media reporting regarding the activities of third-party associations?
- Is there board oversight of the governance process and policy, and management accountability in respect of its implementation?
Does the company disclose actions taken when the positions of third-party organisations do not align with the company’s climate change policies and positions?
Are there processes in place to review and proactively manage membership of third-party organisations where their positions do not align with the company’s climate policies and positions? Do these processes include engagement and escalation strategies (such as termination of membership), should misalignment be identified?

In cases where misalignment is identified, Appendix D provides a letter template from ClientEarth which can be used by investors to encourage alignment of statements and practices, and internal review of policies.

Issues for consideration

During the engagement process on corporate climate lobbying practices, there are a number of considerations for investors. Some examples are highlighted below.

Common company concerns

A range of attitudes can be encountered towards the recognition of climate change and associated lobbying practices as a risk. As such, responses could include:

Options as a shareholder include:

highlight the risks associated with lobbying practices that obstruct climate policy development and the material impacts that can impact the company (in terms of fiscal risks from climate change impacts, legal risks as well as reputational risks); and
emphasise identifying and establishing alignment of own climate position with industry bodies early in the process to avoid legal implications from publicly disclosed information.

During engagement with a company, it may be apparent that climate change and lobbying practices are recognised as a risk, but there are constraints to act on this issue:

Suggested options:

encourage the company to consider publicly disassociating themselves from an association’s position (or in the case of litigation, a lawsuit);
emphasise that engagement with the association can take place discretely, but highlight the risk of not separating from an association’s position or lawsuit (reputational, legal etc.); and
encourage the company to consider reaching out to other member organisations of an association (either directly or at association meetings) to encourage others to consider these issues, rather than speaking out alone. This could result in creating a public statement as a group (ensuring that all those that sign are confident that any public positions remain consistent with their own).

Assessing the robustness of responses to questions

Company responses will vary significantly based on the extent to which lobbying practices are effectively captured and monitored by the portfolio company.

The boxes below run through the key features of responses that might be received from a portfolio company following initial engagement. To assess the level of information that has been provided and to consider engaging on the issue further, the following characteristics of answers can be considered.

Basic response (no evidence of awareness or management of climate lobbying practices)

No knowledge of climate position of trade associations or industry bodies
No indication of board oversight of climate-related issues

Adequate response (developing climate lobbying practices)

Limited knowledge of position of trade associations
Evidence of policies and systems being implemented
Evidence of monitoring engagement activities with a clear disclosure process

Good response (established climate lobbying practices)

Evidence of engagement with trade associations on their lobbying activities
Evidence of positive direct lobbying with policy makers
Evidence of oversight or monitoring of aligning climate policy and lobbying practices
Case studies and examples

Exploring good practice

To support the ongoing engagement process, this section provides examples of existing good practice.

Auditing, disclosure and engagement

The We Mean Business Coalition, whose remit is to “work with the world’s most influential businesses to take action on climate change” recommends that companies audit, disclose and improve their climate policy engagement activities. When assessing companies on this topic, there are two distinct issues for investors and other stakeholders to consider when identifying good practice.

Policy engagement governance: Is there a process for assessing all engagement activities within the company and ensuring alignment? Is there a process for assessing the climate lobbying positions of all third-party groups the company is a member of and is pursuing external alignment with? Are there clear stakeholder disclosure processes associated with this?
Climate policy positions: What are the company’s positions or lobbying activities on international, regional and national climate-related policy streams internally and within its key trade groups? How are these aligned with benchmarks such as the implementation of the Paris Agreement?

It is clear that these are separate issues. A company can be highly transparent about its lobbying practices in relation to climate, ensuring alignment with its industry associations, but such positions may not necessarily be positive. Similarly, climate-friendly policy positions may not be well communicated. Companies should demonstrate good practice through policy engagement governance, including full auditing and disclosure of lobbying. As part of policy engagement governance, companies should clearly specify what corrective actions they will take, should this auditing process reveal at any point engagement activities or trade association memberships that do not align with their own climate values.

Benchmarking

Assessing the company’s climate positions and related activities requires an external benchmark, such as alignment with implementation of the Paris Agreement and various national policy streams motivated by it. As such, undertaking this on a sector basis may be an effective approach. For example, comparing the climate policy advocacy positions of Tesla with those of Royal Dutch Shell may be interesting, but not particularly useful for investors in understanding corporate behavioural trends. It is far more revealing to understand Shell’s positions as compared to its peer group of oil majors which all face the same regulatory risks and opportunities.

InfluenceMap’s platform assesses climate policy engagement governance and relative positions (benchmarked against support for Paris-aligned policy) of the 300 largest industrial companies globally, looking at the company and its trade group links. The assessments are based on publicly available organisational disclosures and showcase good and inferior practice.