The electric utilities sector is heavily regulated due to its structural importance to economies and society; however, regulation affecting the sector is usually developed in a consultative fashion due to the need for technical inputs. This allows significant opportunity for influence of these regulations, potentially in a way that is negative for the climate. Since the industry is currently a major source of emissions, effective and timely regulation is necessary to ensure that scientific limits are observed to mitigate climate change and that there is a “level playing field” for businesses in this sector to approach the transition to a low-carbon economy.
This module assesses both company governance around relationships with trade associations (does it have a policy, who has oversight and responsibility and what actions will it take if the trade association position differs from that of the company) and the company’s actual support or obstruction of climate policies. Only CLP Holdings performs well across both aspects. All other companies perform well in one or neither aspect. Many of the companies that are supportive of climate-positive policies do not have good internal policies to manage their policy engagement. Arguably this is less necessary for these companies, as they are less likely to be engaging with climate-negative trade associations. All of the top-scoring European companies are in this position which may reflect that there are other regulatory controls in place in Europe or that the European Union is more progressive on climate than some other regions.
It is notable that 80% of the companies in this benchmark have no policy for managing trade association engagement, policy oversight or an action plan for resolving differences. Of the remaining ten companies, none have all three markers of strong policy governance.
Only eight companies were found to have publicly communicated direct opposition to climate-positive policy. However, there are other companies who indirectly take a climate-negative position through trade association memberships. 21 companies are either on the board of or provide funding (beyond membership) to trade associations that have climate-negative activities or positions, or do not disclose information on their memberships of trade associations.
The policy environment differs across countries and regions and there are different ways of influencing government and regulators. Some state-owned and/or highly regulated companies will have specific channels of policy influence which are not publicly reported and therefore difficult to assess.
In the USA nearly all companies are members of the Chamber of Commerce or the American Gas Association, both with negative climate positions. This reflects a more climate change science-sceptic sentiment in the US business community. Of the Asia-headquartered companies (excluding mainland China), only four score moderately well on supporting climate-positive policy; even they score poorly on internal governance.