Press release: 21 October 2020
ClientEarth publishes key principles for ‘Paris-aligned’ strategies
Today, ClientEarth lawyers have published a set of key principles for how companies and investors should ensure that bold ambition to be ‘Paris-aligned’ and ‘net zero’ is translated into real action.
Five years on from the signing of the Paris Agreement, there is growing pressure for firms to align their strategies with global net zero emission goals. The UN’s ‘Race to Zero’ campaign alone includes more than a thousand firms that have set ambitions to achieve net zero emissions by 2050.
A recent review by ClientEarth found that around 50% of FTSE 100 companies disclosed some form of Paris-alignment or net zero target in their annual reporting last year.
Yet while many firms are setting these targets, the strategies they are developing to reach them often fall short. Transition Pathways Initiative (TPI) has reported that despite commitments, none of the world’s biggest oil and gas companies are on track to meet climate goals.
This clear gap between ambition and action is why ClientEarth lawyers have developed a principles-based approach to underpin all Paris-aligned strategies. They must be:
- Reasonable: Paris-aligned targets, assumptions and methodologies must be reasonable, precautionary, evidence-based and regularly updated in line with the best available science;
- Transparent: targets, assumptions, uncertainties, methodologies, performance and impacts must be transparently disclosed; and,
- Accountable: decision-makers must be incentivised and accountable for meeting targets.
Each principle is strengthened by several non-negotiable ‘red lines’, which provide detail on what satisfying these principles requires in practice.
ClientEarth lawyer Daniel Wiseman said: “Businesses and investors are finally setting Paris-alignment and net-zero targets – which is crucially needed. But unless these targets are supported by strategies that are reasonable, transparent and include strong accountability mechanisms, there is a significant risk that stakeholders will be misled.”
While companies are developing new climate strategies, investors and shareholders now also expect it. Earlier this year, Barclays announced its commitment to Paris-alignment after shareholder pressure, while BP set out the details of its net zero strategy at its capital markets day last month. Large investors, like the BT Pension Scheme, are also setting their own net zero goals.
Wiseman continued: “As businesses release details of their climate strategies, they must combine ambition with credibility.
“These principles can help guide firms to develop and implement meaningful net zero strategies. This is in their best interests, and the best interests of all of their stakeholders in addressing systemic climate change risks.
“They can also help us to identify greenwashing and hold firms that are not going far enough to account.”
Notes to editors:
ClientEarth’s Paris-aligned principles:
Principle 1 – Reasonable: Paris-aligned targets, assumptions and methodologies must be reasonable, precautionary, evidence-based and regularly updated in line with the best available science
- Red line (i): the entity must set an objective of achieving net-zero GHG emissions (Scopes 1- 3) in the 2040s or sooner, depending on sector, and consistent with a 1.5°C pathway
- Red line (ii): the entity must adopt a strategy which sets short, medium and long term targets to achieve its net-zero objective, including 2025 and 2030 targets (Scopes 1-3)
- Red line (iii): the strategy and underlying assumptions must prioritise reductions in direct value chain GHG emissions and not unreasonably rely on unproven or uncosted negative GHG emissions, offsets, and/or technology
- Red line (iv): the strategy must explicitly consider ‘just transition’ imperatives
Principle 2 – Transparent: targets, assumptions, uncertainties, methodologies, performance and impacts must be transparently disclosed
- Red line (v): the entity must disclose its targets, assumptions, uncertainties, methodology, impacts, and strategy, and report annually against progress in its financial reporting
- Red line (vi): assumptions used in the entity’s financial accounts, capital expenditure and/or investment decisions must be consistent with its targets and strategy
- Red line (vii): disclosures must be subject to third party assurance
Principle 3 – Accountable: decision-makers must be incentivised and accountable for meeting targets
- Red line (viii): the net-zero objective must be adopted in the entity’s articles of association or other constitutive documents, subject to any restrictions in local law
- Red line (ix): responsibility for achieving targets must be allocated to specific individuals within the entity and linked to remuneration and performance incentives
- Red line (x): the entity’s lobbying activity and trade association membership must be consistent with its targets and strategy
- Red line (xi) – financial institutions: Financial institutions must disclose a policy which explains how they will influence reductions in their Scope 3 GHG emissions through investment, stewardship, financing and underwriting decisions, in order to achieve their targets
ClientEarth is a charity that uses the power of the law to protect people and the planet. We are international lawyers finding practical solutions for the world’s biggest environmental challenges. We are fighting climate change, protecting oceans and wildlife, making forest governance stronger, greening energy, making business more responsible and pushing for government transparency. We believe the law is a tool for positive change. From our offices in London, Brussels, Warsaw, Berlin and Beijing, we work on laws throughout their lifetime, from the earliest stages to implementation. And when those laws are broken, we go to court to enforce them.