Recommendations for future engagement

Greater focus on improved governance measures

Investors should seek to understand from companies how, and the extent to which, climate risk, climate lobbying and relevant spending are overseen by boards of directors. To this end, companies should formalise any such procedures into governance practices.

This should include director nomination processes, ensuring that decisions on strategy, risk management, executive compensation, capital allocation, political and lobbying expenditures and climate risk disclosure are made with sufficient understanding and knowledge of climate change and its actual and potential impacts on the business.

Evidence of supporting public policy to limit temperature rise to 2 degrees Celsius

Investors should seek consistency in company policy engagement to support cost-effective measures to mitigate contribution and exposure to climate risk, especially in relation to the TCFD recommendations and the Paris Agreement.

Increased transparency

Investors should encourage further disclosure on all activities related to lobbying practices, as outlined in the investor expectations on corporate climate lobbying statement and including:

• all direct and indirect policy influences across geographies;
• interactions between companies and relevant industry bodies;
• business implications of climate risk: information on alignment between corporate public statements and political spending including actions taken to manage exposure to such risks (especially in relation to TCFD recommendations and the Paris Agreement);
• the company’s position on climate change and policies to mitigate climate risks;
• the company’s governance processes to oversee its climate change policy engagement;
• the company’s membership in or support for third-party organisations that engage on climate change issues;
• the specific climate change policy positions adopted by these third-party organisations, including discussion of whether they align with the company’s climate change policies and positions; and
• the actions taken when the positions of third-party organisations do not align with the company’s climate change policies and positions.

Establishing and controlling misalignment risk

Investors should seek evidence from companies on procedures in place to monitor climate policy engagement, assignment of responsibility at the board/senior level and overview of alignment of direct company activities or those of industry associations. Investors should request clarification from companies whose positions appear to be misaligned and inquire about the companies’ actions in response to this, if any.