This module, consisting of six indicators, assesses a company’s climate governance and its strategic approach to the low-carbon transition. ACT assessments are primarily future oriented, so the forward-looking indicators - low-carbon transition plan and scenario planning - are given a heavier weighting. The other indicators - oversight, expertise, management incentives and fossil fuel incentives - have a lower weighting in the overall performance rating, but do provide important contextual information on the company’s credibility and commitment to achieving the Paris goals.
The seven lowest ranking companies have no climate governance in place. This includes four Chinese-headquartered companies – CHN Energy, China Datang Corp, China Huaneng Group and China Three Gorges – as well as Comision Federal de Electricidad (CFE), Egyptian Electricity Holding Company and Saudi Electricity Company, which is yet to acknowledge climate change as an issue.
Across the rest of the companies, low-carbon commitment is evident to varying degrees. 41 of the companies in this benchmark report board-level oversight for climate issues. 42 have reportedly set transition plans or transition planning commitments; but as our third key finding shows us, many of these plans are lacking in substance.
It is only within the companies in the top ten for the management module that we see strengthening of forward-looking commitments with appropriate management and processes. The only five companies (EDP, Ørsted, E.ON, Vattenfall and Iberdrola) to have clearly severed ties between executive remuneration and fossil fuel capacity growth are in this top ten. Indeed, the only three companies (CLP Holdings, Enel and Iberdrola) with at least one board member with climate expertise are in the top five for this module.
Iberdrola – 4th in the overall ranking – performs best in the management module. Iberdrola’s top place in this module is secured by its overall strategic commitment to its decarbonisation goals; not only has it set the strongest low-carbon transition plan of the companies, it is ensuring the successful delivery of this plan through low-carbon aligned executive incentive schemes and board-level expertise. Iberdrola is the only company assessed to achieve top performance across all four of the contextual management indicators.