The state of transition in the coal mining, electricity and oil and gas sectors: TPI's latest assessment - July 2018
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The state of transition in the coal mining, electricity and oil and gas sectors: TPI’s latest assessment July 2018 Simon Dietz, Carlota Garcia-Manas, Dan Gardiner, William Irwin, Augustin Lion, Michal Nachmany, Bruno Rauis, Rory Sullivan
Disclaimer 1. All information contained in this report and on the TPI website is derived from publicly available sources and is for general information use only. Information can change without notice and The Transition Pathway Initiative does not guarantee the accuracy of information in this report or on the TPI website, including information provided by third parties, at any particular time. 2. Neither this report nor the TPI website provides investment advice and nothing in the report or on the site should be construed as being personalised investment advice for your particular circumstances. Neither this report nor the TPI website takes account of individual investment objectives or the financial position or specific needs of individual users. You must not rely on this report or the TPI website to make a financial or investment decision. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs. 3. This report and the TPI website contain information derived from publicly available third party websites. It is the responsibility of these respective third parties to ensure this information is reliable and accurate. The Transition Pathway Initiative does not warrant or represent that the data or other information provided in this report or on the TPI website is accurate, complete or up-to-date, and make no warranties and representations as to the quality or availability of this data or other information. 4. The Transition Pathway Initiative is not obliged to update or keep up-to-date the information that is made available in this report or on its website. 5. If you are a company referenced in this report or on the TPI website and would like further information about the methodology used in our publications, or have any concerns about published information, then please contact us. An overview of the methodology used is available on our website. 6. Please read the Terms and Conditions which apply to use of the website. 2
Contents
Foreword 4
Executive Summary 5
Management Quality 5
Carbon Performance 7
1. Introduction 9
About the Transition Pathway Initiative 9
This report 9
Brief overview of methodology 9
2. Overview of results 12
Management Quality in coal mining, electricity and oil & gas 12
Indicator by indicator 15
Carbon Performance of electricity utilities 16
Carbon Performance in coal mining, and oil & gas 16
3. Management Quality of coal mining companies 18
Overall results 18
Trends in company Management Quality 19
Indicator by indicator 20
4. Management Quality and Carbon Performance of electric utilities 21
Overall results for Management Quality 21
Trends in company Management Quality 23
Indicator by indicator 23
Global Carbon Performance 25
Regional Carbon Performance 26
5. Management Quality of oil and gas producers 28
Overall results 29
Trends in Management Quality 29
Indicator by indicator 30
Appendix 1. List of companies covered in this report 31
Appendix 2. TPI Management Quality indicators 35
Appendix 3. Carbon Performance assessment 38
Bibliography 40
RESEARCH FUNDING PARTNERS:
We would like to thank our Research Funding Partners, Aberdeen Standard Investments, BNP Paribas
Asset Management and Legal & General Investment Management, for their ongoing support to the
Transition Pathway Initiative and their enabling the research behind this report and its publication.
3Foreword
By Adam Matthews and Faith Ward, co-chairs of the TPI
TPI – The Asset Owner Carbon The findings of this report show some very
Performance Assessment Tool positive messages – for example over half of the
The Transition Pathway Initiative was established company targets in the electricity generation
to empower and enable asset owners to add sector are ambitious enough to align with the
their voice to debates on climate change and the Paris Pledges (NDCs) in 2020, and most of them
financing of the transition to a low-carbon are even ambitious enough to align with a Below
economy. 2 Degrees scenario. There has also been
demonstrable improvement in management
Although the toolkit was designed by asset
quality by companies previously assessed by TPI
owners for asset owners, since TPI’s launch in
over a year ago.
early 2017, the tool has also been used by asset
managers, sell-side analysts, investment banks, Alongside the publication of this report TPI is also
and research and proxy service providers – outlining the feedback we have received to the
demonstrating its versatility and effectiveness. Discussion Paper on Oil and Gas Carbon
TPI is now supported by asset owners and asset Performance. It is clear that TPI has outlined a
managers representing £7/$9.3 trillion in assets methodology that enables asset owners to track
under management. future carbon performance in this sector based
on public disclosure. This is a key development
We believe the strength of the tool comes from
that has the potential to considerably shape our
its clarity and academic rigour – making it
understanding of transition in this important
decision-useful! The clarity provides time poor,
sector and our engagement with it.
overloaded asset owners with standard,
comparable metrics across the 183 companies Both reports capture the significant progress
and seven sectors covered by TPI. The academic that is being made by many companies in the
rigour is driven by the world-leading Grantham most challenging sectors of our economy. They
Research Institute at the London School of also demonstrate that there is much to be done
Economics and Political Science, and the by both companies and policy makers if our
practical data solutions provided by FTSE Russell; ambitions of ensuring that these major sectors
together they provide the information asset of the economy align with, or exceed, the goals
owners need in a useable and impactful way. of the Paris Agreement.
This report introduces three new indicators that We will continue to increase our coverage of
brings the TPI methodology into alignment with those companies, public and private, that make
the recommendations from the Taskforce on the most significant contribution to global
Climate-related Financial Disclosures (TCFD), greenhouse gas emissions. TPI will provide an
providing the macro-framework based on accountability mechanism for these companies,
company public disclosure which enables and for investors looking to assess the
investors to assess which companies are taking effectiveness of their engagement. We will
action (management quality); and which are continue to build our asset owner constituency
aligning their business model (carbon and encourage them to increase the use of TPI
performance) to meet the ambitions of the 2015 across the investment industry.
Paris Agreement.
4Executive Summary
This new report by the Transition Pathway http://www.transitionpathwayinitiative.org. The
Initiative (TPI) assesses the carbon management online tool now contains 183 company
and performance of 105 of the world’s largest assessments across seven sectors. The other four
and highest-emitting public companies in three sectors assessed to date are automobile
sectors at the heart of climate change: coal manufacturing, cement, paper and steel.
mining, electricity, and oil and gas. It updates
assessments published by TPI in 2017, enabling us
Management Quality
to track companies’ progress. We extend TPI’s Management Quality framework is based
coverage in the electricity sector from 20 to 41 on 17 indicators, each of which tests whether a
companies and in the oil and gas sector from 20 company has implemented a particular carbon
to 45 companies. We also cover 19 of the world’s management practice (Yes/No), for example
largest publicly listed mining companies that formalising a policy commitment to action on
were engaged in mining coal in 2017/18. climate change, setting emissions targets and
TPI’s assessment is divided into two parts: undertaking climate scenario planning. These 17
indicators are used to map companies on to the
1. Management Quality covers companies’
following five levels:
management/governance of greenhouse gas
emissions and the risks and opportunities arising Level 0 – Unaware of (or Not Acknowledging)
from the low-carbon transition. Climate Change as a Business Issue.
Level 1 – Acknowledging Climate Change as a
2. Carbon Performance assessment involves
Business Issue: the company acknowledges
quantitative benchmarking of companies’
that climate change presents business risks
emissions pathways against the international and/or opportunities, and that the company
targets and national pledges made as part of the has a responsibility to manage its greenhouse
2015 UN Paris Agreement, for example limiting gas emissions. This is the point where
global warming to below 2°C. companies adopt a climate change policy.
We assess Management Quality and Carbon Level 2 – Building Capacity: the company
Performance separately, because a large body of develops its basic capacity, its management
research shows the relationship between them is systems and processes, and starts to report
by no means clear cut. Management Quality on practice and performance.
assessment focuses on processes, while Carbon Level 3 – Integrating into Operational
Performance focuses on outcomes. Together Decision Making: the company improves its
they are intended to provide a holistic view of operational practices, assigns senior
companies’ progress on the low-carbon management or board responsibility for
transition. The framework is aligned with climate change and provides comprehensive
disclosures on its carbon practices and
recommendations of the FSB Taskforce on
performance.
Climate-related Financial Disclosures (TCFD),
Level 4 – Strategic Assessment: the company
tracking companies in relation to TCFD’s four
develops a more strategic and holistic
recommendation areas: governance, strategy,
understanding of risks and opportunities
risk management, and metrics and targets.
related to the low-carbon transition and
TPI publishes the results of its analysis through integrates this into its business strategy
an open access online tool, available at decisions.
5Figure ES1. Management quality of public companies in coal mining, electricity, and oil and gas.
Headline numbers (top panel) and shares by sector (bottom panel)
Level 0 Level 1 Level 2 Level 3 Level 4
Unaware Awareness Building Integrating into Strategic
capacity operational assessment
decision making
29 companies
24 companies 6 coal mining
companies
33 companies 2 coal mining 15 electricity
companies utilities
18 companies 2 coal mining 12 electricity 8 O&G
companies utilities producers
1 company 8 coal mining 10 electricity 10 O&G
companies utilities producers
1 coal mining 4 electricity 21 O&G
company utilities producers
6 O&G producers
35
30
25
Number of companies
20
Electricity utilities
15 Oil and gas
Coal mining
10
5
0
0 1 2 3 4
Level
The average company assessed in this report is setting an emissions reduction target and
just transitioning from Level 2 to 3 (Figure ES1), disclosing operational emissions.
in other words from building capacity to manage Roughly 30% of companies have gone much
climate change, to integrating the issue into further than this, reaching Level 4, and six
operational decision making. Such a company companies satisfy all the management
has explicitly recognised climate change as a indicators; we call these 4* companies (Table
business risk/opportunity and made a policy ES1).
commitment to action, and is at the point of
6Table ES1. Four star companies on TPI's Management Quality framework
4* Company Sector
AGL Energy Electricity
Anglo American Coal mining (general mining)
BHP Billiton Coal mining (general mining)
Equinor (formerly Statoil) Oil and gas
National Grid Electricity
Repsol Oil and gas
Electricity utilities score highest on Management Carbon Performance
Quality on average, followed by oil and gas
producers, with coal mining companies scoring TPI’s Carbon Performance assessment translates
lowest. Many pure play coal mining companies emissions targets made at the international level
remain stuck on Level 1, mainly because they do under the 2015 UN Paris Agreement into
not yet have a policy commitment to action on benchmarks, against which the performance of
climate change. By contrast, all the general individual companies can be compared. We take
mining companies included in this report are on a take sector-by-sector approach, recognising
Levels 3 or 4. Many oil and gas producers are on that different sectors of the economy face
Level 2, because they are yet to set emissions different challenges arising from the low-carbon
reduction targets. transition, including where emissions are
All three sectors have improved since 2017, with concentrated in the value chain and how costly it
is to reduce emissions.
the largest average improvement in oil and gas.
Of the 54 companies that were also assessed last In this report we assess the Carbon Performance
year, 17 have moved up and 3 have moved down. of 37 electricity utilities that have a significant
electricity generation business. The results
Companies that have moved up have done so by
demonstrate the continuing shortfall of
implementing new carbon management emissions targets that TPI can use to assess the
practices, in particular explicitly recognising Carbon Performance of electricity utilities
climate change as a business risk/opportunity, (Figure ES2), even if targets are more prevalent
and setting emissions reduction targets. There is in the electricity sector than they are in most
more progress at the lower levels. other sectors TPI has assessed to date.
7Figure ES2. Alignment of electricity utilities’ emissions intensity with international emissions
targets in selected years
2020 2030
5
11
13
6
18
1
1
11
8
No targets Not aligned Paris Pledges 2C Below 2C
More encouraging is the finding that over half of In March 2018 we published a discussion paper,
the company targets that are in place in the which sets out a proposal for how Carbon
electricity sector are ambitious enough to align Performance could be assessed in the oil and gas
with the Paris Pledges (NDCs) in 2020, and most sector in future.[1] Its central premise is that oil
of them are even ambitious enough to align with and gas producers are engaged in primary
a Below 2 Degrees scenario (Figure ES2). In 2030, energy supply and therefore that the appropriate
still more than half of company targets are measure of carbon performance in the sector is
aligned with the Paris Pledges, but only five the lifetime carbon intensity of primary energy
company targets are aligned with Below 2 supply. IEA projects that in a 2 Degrees scenario
Degrees: E.ON, EDF, Enel, Iberdrola and SSE. this carbon intensity will fall by two thirds
This implies that companies’ targets are often between now and 2050.
ambitious, but by 2030 they are struggling to In conclusion, TPI’s latest assessment
keep pace with the decarbonisation necessary to demonstrates measurable progress over the past
deliver the Paris Agreement’s overall objective. 18 months, particularly in corporate carbon
We found a similar pattern last year. management. Many companies have now
TPI does not currently assess the Carbon implemented a wide range of carbon
Performance of companies in the coal mining management practices and have a strategic
and oil and gas sectors. This is due to a lack of approach to climate change. Increasing numbers
company emissions targets in these two sectors of electricity utilities are making the transition to
that encompass downstream emissions from use renewable energy.
of sold products, i.e. burning coal, oil and gas for However, most companies still do not take a
energy in buildings, electricity, industry and strategic approach to climate change, and most
transport. The vast majority of lifecycle electricity utilities either do not have
emissions in these sectors stem from such use of quantitative, long-term emissions targets, or
companies’ sold products. their targets do not keep pace with what the
Paris Agreement requires. Therefore there
remains much to be done.
81. Introduction
About the Transition Pathway It updates assessments published by TPI in 2017,
enabling us to track companies’ progress, and
Initiative extends coverage in the electricity sector from 20
to 41 companies and in the oil and gas sector
The Transition Pathway Initiative (TPI) is a global
from 20 to 45 companies. We also cover 19 of the
initiative led by asset owners and supported by
world’s largest publicly listed mining companies
asset managers. Established in January 2017, TPI
that were engaged in mining coal in 2017/18.
investors now collectively represent over
UK£7/US$9.3 trillion of assets under All 105 companies are assessed on Management
management.1 Quality, while we assess the Carbon Performance
of 37 electricity utilities with a significant
On an annual basis, TPI assesses how companies
electricity generation business.
are preparing for the transition to a low-carbon
economy in terms of their: In each sector, TPI looks at the largest public
companies globally, on the basis of market
Management Quality – all companies are capitalisation. These companies usually
assessed on the quality of their constitute the largest holdings in investor
governance/management of greenhouse gas portfolios. We also cover a number of smaller
emissions and of risks and opportunities companies that have been selected for
related to the low-carbon transition. engagement by the Climate Action 100+ Initiative
Carbon Performance – in selected sectors, TPI on the basis of their aggregate, lifecycle
quantitatively benchmarks companies’ greenhouse gas emissions.2 These companies are
carbon emissions against the international systemically important for climate change. Full
targets and national pledges made as part of details of the companies assessed can be found
in Appendix 1.
the 2015 UN Paris Agreement.
TPI publishes the results of its analysis through
Brief overview of methodology
an open access online tool hosted by the TPI assesses companies on their Management
Grantham Research Institute on Climate Change
Quality and Carbon Performance, two quite
and the Environment at the London School of
Economics (LSE): different elements of how companies are
www.transitionpathwayinitiative.org. approaching the low-carbon transition. The
former focuses on inputs and processes, the
Investors are encouraged to use the data,
indicators and online tool to inform their latter on outcomes. Together these assessments
investment research, decision making, are intended to provide a holistic view of
engagement with companies, proxy voting and companies’ progress.
dialogue with fund managers and policy makers,
Management Quality
bearing in mind the Disclaimer that can be found
in the inside front cover. Further details of how TPI’s Management Quality framework is based
investors can use TPI assessments can be found on 17 indicators, each of which tests whether a
on our website at www.lse.ac.uk/Grantham company has implemented a particular carbon
Institute/tpi/about/how-investors-can-use-tpi/. management practice (Yes/No), for example
formalising a policy commitment to action on
This report climate change, disclosing its emissions, setting
This latest TPI report assesses the Management emissions targets and undertaking climate
Quality and Carbon Performance of 105 of the scenario planning.
world’s largest and highest-emitting public These 17 indicators, which are described in detail
companies in three sectors of critical importance in Appendix 2, are then used to map companies
to climate change: coal mining, electricity and on to the following five levels:
oil and gas.
1
As of 5 June 2018.
2
http://www.climateaction100.org/
9 Level 0 – Unaware of (or Not Acknowledging) Carbon Performance
Climate Change as a Business Issue.
Level 1 – Acknowledging Climate Change as a TPI’s Carbon Performance assessment translates
Business Issue: the company acknowledges emissions targets made at the international level
under the 2015 UN Paris Agreement into
that climate change presents business risks
benchmarks, against which the performance of
and/or opportunities, and that the company
individual companies can be compared. We take
has a responsibility to manage its greenhouse a take sector-by-sector approach, recognising
gas emissions. This is the point where that different sectors of the economy face
companies adopt a climate change policy. different challenges arising from the low-carbon
Level 2 – Building Capacity: the company transition, including where emissions are
develops its basic capacity, its management concentrated in the value chain and how costly it
systems and processes, and starts to report is to reduce emissions.3
on practice and performance. In this report we benchmark the emissions
Level 3 – Integrating into Operational Decision intensity of electricity generation in the
Making: the company improves its electricity sector against three scenarios that are
operational practices, assigns senior derived from modelling by the International
management or board responsibility for Energy Agency (IEA):
climate change and provides comprehensive Paris Pledges, consistent with the emissions
disclosures on its carbon practices and reductions pledged by countries as part of the
performance. Paris Agreement in the form of Nationally
Level 4 – Strategic Assessment: the company Determined Contributions or NDCs.
develops a more strategic and holistic 2 Degrees, consistent with the overall aim of
understanding of risks and opportunities the Paris Agreement to hold “the increase in
related to the low-carbon transition and the global average temperature to well below
integrates this into its business strategy 2°C above pre-industrial levels and to pursue
decisions. efforts to limit the temperature increase to
1.5°C above pre-industrial levels”, albeit at
With the exception of Level 0, companies need to
the low end of the range of ambition.
be assessed as Yes on all of the questions
pertaining to a level, before they can advance to Below 2 Degrees, consistent with a more
the next level. The data underpinning the ambitious interpretation of the Paris
indicators are provided by FTSE Russell. Box 1 Agreement’s overall aim.
summarises revisions to the indicator set for this
Appendix 3 describes the methodology in more
and future reports.
detail.
3
The approach is similar to that employed by the Science Based Targets Initiative.
10Box 1. Revisions to TPI’s Management Quality framework for 2018, and correspondence with
TCFD
TPI’s Management Quality framework has been revised for this report. Based on feedback from
TPI’s Steering Group and its Technical Advisory Group, and enabled by new ESG data collected by
FTSE Russell, five new questions have been added:
Does the company have a process to manage climate-related risks? (Level 3)
Does the company disclose materially important Scope 3 emissions? (Level 3, for selected
sectors only)
Does the company incorporate climate change risks and opportunities in their strategy?
(Level 4)
Does the company undertake climate scenario planning? (Level 4)
Does the company disclose an internal price of carbon? (Level 4)
Together these new questions help bring TPI’s Management Quality framework into full alignment
with the recommendations of the FSB Taskforce on Climate-related Financial Disclosures (TCFD).
TCFD’s recommendations are in four areas: governance, strategy, risk management, and metrics
and targets. The revised Management Quality framework includes multiple indicators in each of
these four areas, while our separate Carbon Performance assessment is focused on metrics and
targets specifically.
The new question on materially important Scope 3 emissions enables TPI to better differentiate
companies in terms of the comprehensiveness and quality of their Scope 3 disclosures, where
these command a large share of companies’ lifecycle greenhouse gas emissions.
We have deleted two questions from the 2017 framework. They are:
Has the company reduced its total Scope 1 and 2 greenhouse gas emissions over the past 3
years? Deleting this question enables a cleaner separation of management practices from
emissions performance.
Does the company provide information on business costs associated with climate change?
This question has been replaced with the question about internal carbon pricing.
Two minor modifications have also been made to existing questions:
Question 2 has changed from “Does the company explicitly recognise climate change as a
significant issue for the business?” to “Does the company explicitly recognise climate
change as a relevant risk and/or opportunity for the business?”, reflecting a change in how
FTSE Russell captures the underlying data, intended to bring the framework more closely
into line with TCFD.
Question 4 now relates to greenhouse gas emissions reductions specifically (rather than
emissions and/or energy use) and Questions 7 and 13 now relate to emissions reductions
across Scopes 1, 2 and/or 3, again reflecting changes in how FTSE Russell captures the
underlying data.
Further details, including a mapping of the framework to the TCFD recommendations, can be
found in our latest Methodology and Indicators Report.[2]
112. Overview of results
Management Quality in coal sectors together, while drawing out the key
differences between them. Nineteen mining
mining, electricity, and oil & gas companies are assessed, as well as 41 electricity
utilities and 45 oil and gas producers. Figure 1
This section provides an overview of the results of
shows the number of companies on each
our Management Quality assessment, looking at
Management Quality level.
the coal mining, electricity, and oil and gas
Figure 1. Management quality of public companies in coal mining, electricity, and oil and gas.
Headline numbers (top panel) and shares by sector (bottom panel)
Level 0 Level 1 Level 2 Level 3 Level 4
Unaware Awareness Building Integrating into Strategic
capacity operational assessment
decision making
29 companies
24 companies 6 coal mining
companies
33 companies 2 coal mining 15 electricity
companies utilities
18 companies 2 coal mining 12 electricity 8 O&G
companies utilities producers
1 company 8 coal mining 10 electricity 10 O&G
companies utilities producers
1 coal mining 4 electricity 21 O&G
company utilities producers
6 O&G producers
35
30
Number of companies
25
20
Electricity utilities
15 Oil and gas
Coal mining
10
5
0
0 1 2 3 4
Level
12Only one company is on Level 0 – Unaware of they are material, specifically disclose emissions
(or not Acknowledging) Climate Change as a from use of sold products (coal mining, and oil
Business Issue. This is the coal mining company and gas, only); have operational emissions data
Shougang Fushan Resources, listed in Hong verified; support domestic and international
Kong. efforts to mitigate climate change; introduce a
Eighteen (18) companies are on Level 1 – process to manage climate-related risks.
Acknowledging Climate Change as a Business Twenty-nine (29) companies have made it to
Issue. Most companies on this level have a Level 4 – Strategic Assessment. These
climate change policy in place, but do not companies satisfy all TPI’s indicators on Levels 0-
explicitly recognise climate change as a relevant 3 and are undertaking some, but usually not all,
risk and/or opportunity for the business. A few of the following: setting quantitative, long-term
companies do the opposite, alluding to the emissions targets; incorporating ESG issues into
materiality of climate change, without having a executive remuneration; incorporating climate
policy commitment to action. change risks and opportunities in company
Thirty-three (33) companies are on Level 2 – strategy; undertaking climate scenario planning;
Building Capacity. Companies on this level have disclosing their internal carbon price.
a climate change policy in place and have Six companies satisfy all of the TPI indicators for
explicitly recognised climate change as a their sector. We refer to these as four star
relevant risk/opportunity. But either they do not companies (Table 1).
disclose their operational greenhouse gas At the sector level, electricity utilities fare best,
emissions (i.e. Scope 1 and 2), and/or they have with relatively more companies on Levels 3 and 4
not set any targets to reduce their emissions in (see Figure 1) and an average level score of 2.9,
absolute or relative terms (even unquantified compared with 2.4 in oil and gas and just 2.2 in
targets). More companies are on Level 2 than coal mining.
any other level; 31% of all 105 companies.
Many pure play coal mining companies remain
Twenty-four (24) companies are on Level 3 – stuck on Level 1, mainly because they do not yet
Integrating into Operational Decision Making. have a policy commitment to action on climate
These companies disclose their operational change. By contrast, all the general mining
emissions and have set emissions reduction companies included in this report are on Levels 3
targets. Most have gone beyond this to or 4. Many oil and gas producers are on Level 2,
implement some, but not all, of the following because they are yet to set emissions reduction
carbon management practices: assign board targets. Most electricity utilities are on Levels 3
responsibility for climate change; set and 4.
quantitative emissions targets; disclose some
value-chain (i.e. Scope 3) emissions and, where
Table 1. Four star companies on TPI's Management Quality framework
4* Company Sector
AGL Energy Electricity
Anglo American Coal mining (general mining)
BHP Billiton Coal mining (general mining)
Equinor (formerly Statoil) Oil and gas
National Grid Electricity
Repsol Oil and gas
13At the sector level, electricity utilities fare best, Trends in Management Quality
with relatively more companies on Levels 3 and 4
(see Figure 1) and an average level score of 2.9, Overall, we have seen an improvement in
compared with 2.4 in oil and gas and just 2.2 in companies’ Management Quality since TPI’s first
analysis of these three sectors in 2017.4
coal mining.
All three sectors have improved on their average
Many pure play coal mining companies remain level scores in 2017, with the largest
stuck on Level 1, mainly because they do not yet improvement in oil and gas, up from 2.0 to 2.4
have a policy commitment to action on climate primarily due to an improvement in Management
change. By contrast, all the general mining Quality among the largest companies.
companies included in this report are on Levels 3 Figure 2 lists companies that have moved up or
or 4. Many oil and gas producers are on Level 2, down the Management Quality staircase since
because they are yet to set emissions reduction first being assessed by TPI in 2017. Of the 54
targets. Most electricity utilities are on Levels 3 companies assessed in 2017 and 2018, 20 have
and 4. moved level and 17 of these have progressed to a
higher level.
Figure 2. Companies that have moved up or down levels since the TPI 2017 assessment
Level
0 1 2 3 4
Adaro Energy
Anadarko Petroleum
BP
Bukit Asam
Canadian Natural Resources
Coal India
ConocoPhillips
Devon Energy
fall
DMCI Holdings
Dominion Energy rise
EOG Resources
Exelon
Firstenergy
Inner Mongolia Yitai Coal
Marathon Petroleum
Occidental Petroleum
PG&E
Phillips 66
Power Assets
Total
All of the companies that have climbed to a explicitly recognising climate change as a
higher level on the staircase have done so by business risk/opportunity.
introducing new carbon management practices, A further seven companies, including five oil
i.e. by improving their Management Quality: and gas producers, climb above Level 2 by
Ten companies, including eight oil and gas virtue of setting emissions reduction targets.
producers, climb above Level 0 or Level 1 by In the case of BP, setting a quantitative,
4
Electricity utilities and oil and gas producers were previously assessed in January 2017, while the coal mining
sector was assessed in July 2017.
14long-term emissions reduction target lifts the Indicator by indicator
company from Level 2 to 4.
When companies’ Management Quality is viewed
Three companies fall from Level 2 to 1, because indicator by indicator (Figure 3), we see a
they are assessed as not explicitly recognising greater proportion of companies across the three
climate change as a business risk/opportunity. sectors carrying out the basic carbon
This may reflect a change in methodology from management practices associated with Levels 0
2017, when the equivalent question was “Does to 2, and fewer companies implementing the
the company explicitly recognise climate change more advanced practices associated with Levels
as a significant issue for the business?” This year 3 and 4.
the question has a risk framing, in line with the
recommendation of TCFD.
Figure 3. Number of companies across all sectors scoring Yes (blue) against individual criteria,
and No (red)
0 15 30 45 60 75 90 105
L0|1. Acknowledge?
L1|2. Explicitly recognise as risk/opportunity?
L1|3. Policy commitment to act?
L2|4. Emissions targets?
L2|5. Disclosed Scope 1&2 emissions?
L3|6. Board responsibility?
L3|7. Quantitative emissions targets?
L3|8. Disclosed any Scope 3 emissions?
L3|9. Had operational emissions verified?
L3|10. Support domestic and intl. mitigation?
L3|11. Process to manage climate risks?
L4|12. Disclosed use of product emissions?
L4|13. Long-term emissions targets?
L4|14. Incorporated ESG into executive remuneration?
L4|15. Climate risks/opportunities in strategy?
L4|16. Undertakes climate scenario planning?
L4|17. Discloses an internal price of carbon?
One hundred companies out of 105 have a policy Progress is particularly weak on three practices
commitment to act on climate change and 90 associated with Level 4. Two of these constitute
companies explicitly recognise climate change as new criteria introduced by TPI in 2018 to reflect
a relevant business risk/opportunity. Most the recommendations of the TCFD in the area of
companies now disclose their operational strategy: incorporating climate change risks and
emissions (77/105) and have allocated board opportunities in company strategy (32/105) and
responsibility for climate change (67/105). undertaking climate scenario planning (23/105).
Of the more advanced practices, it is notable In addition, only 24 out of 105 companies disclose
that 70% of companies (73/105) have a process an internal price of carbon. Still only 54% of
in place to manage climate-related risks, and companies (57/105) have set any kind of target
72% (76/105) have incorporated ESG issues into to reduce their emissions.
executive remuneration.
15Carbon Performance of utilities in emerging markets, and relative to the
global average. This makes it easier for them to
electricity utilities align with global benchmarks. The EU’s Below 2
Degrees benchmark is particularly low.
The second approach TPI takes to assessing
companies on the low-carbon transition is Carbon Performance in coal
Carbon Performance. This is a quantitative
benchmarking of companies’ emissions
mining, and oil and gas
pathways against the international targets and TPI does not currently assess the Carbon
national pledges made as part of the 2015 UN Performance of companies in the coal mining
Paris Agreement. and oil and gas sectors. This is due to a lack of
In this report, we assess the Carbon Performance company emissions targets in these two sectors
of 37 electricity utilities that have a significant that encompass downstream emissions from use
electricity generation business. The results of sold products, i.e. burning coal, oil and gas for
demonstrate that there continues to be a energy in buildings, electricity, industry and
shortfall of emissions targets TPI can use to transport. The vast majority of lifecycle
assess the Carbon Performance of electricity emissions in these sectors stem from such use of
utilities, even if targets are more prevalent in the companies’ sold products, so it is imperative that
electricity sector than they are in most other they are included in the analysis.
sectors TPI has assessed to date. Of the 37 In March 2018 we published a discussion paper,
companies assessed, 26 have targets extending which sets out a proposal for how Carbon
to at least 2020, but only 19 have targets Performance could be assessed in the oil and gas
encompassing 2030. This is, however, an sector in future.[1] Its central premise is that oil
improvement on the share of companies with and gas producers are engaged in primary
long-term emissions targets in our 2017 report on energy supply and therefore that the appropriate
the sector. measure of carbon performance in the sector is
In terms of the ambition of utilities’ targets, it is the lifetime carbon intensity of primary energy
encouraging to see that more than half of the supply. IEA projects that in a 2 Degrees scenario
company targets are aligned with the Paris this carbon intensity will fall by two thirds
Pledges in 2020, and most of them are even between now and 2050.
aligned with Below 2 Degrees (Figure 4). In 2030, We test the concept using recent disclosures
still more than half of the company targets are from a small number of oil and gas producers,
aligned with the Paris Pledges, but only five who are beginning to embrace a low-carbon
companies do enough to be aligned with Below 2 strategy for the long term that will see them
Degrees: E.ON, EDF, Enel, Iberdrola and SSE. This reduce their carbon intensity of primary energy
implies that companies’ targets are often supply, or otherwise provide information about
ambitious, but by 2030 they are struggling to long-term production and sales. We also set out
keep pace with the decarbonisation necessary to minimum disclosures that we think should be
deliver the Paris Agreement’s overall objective. provided by all oil and gas companies. A similar
We found a similar pattern last year. approach could be followed in the coal mining
The largest global utilities are predominantly sector and we continue to work with both sectors
based in the USA and Europe and as such they to develop and embed these approaches.
have a lower emissions intensity on average than
16Figure 4. Alignment of electricity utilities’ emissions intensity with international emissions
targets in selected years
2020 2030
5
11
13
6
18
1
1
11
8
No targets Not aligned Paris Pledges 2C Below 2C
173 . Management quality of coal mining
companies
coal in 2017/18. This group includes seven general
This TPI assessment looks at 19 of the world’s mining companies and 12 companies specialised
largest mining companies, by market in mining coal.
capitalisation, which were engaged in mining
Figure 5. Management Quality of 19 of the world's largest companies engaged in mining coal in
2017/18
Level 0 Level 1 Level 2 Level 3 Level 4
Unaware Awareness Building capacity Integrating into Strategic
operational assessment
decision making
4* Anglo
American ↔
4* BHP Billiton
African ↔
Rainbow
Minerals ↔
Adaro Energy ↑1 Banpu ↔ Glencore ↔
Exxaro Rio Tinto ↔
Resources ↔
China Shenhua South32 NEW
Energy ↔ Vale ↔
Coal India ↓1
Shougang
Fushan DMCI Holdings ↑1
Resources ↔ Inner Mongolia
Yitai Coal ↑1
Jastrzebska Spolka
Weglowa NEW
Bukit Asam ↓1
Whitehaven Coal ↔
Yanzhou Coal
Mining ↔
↑Up from last year ↓ Down from Last year ↔ no change on previous assessment
Overall results One company is on Level 0 – Unaware of (or Not
Acknowledging) Climate Change as a Business
Figure 5 shows where the 19 companies sit on the Issue. This is the coal mining company Shougang
TPI Management Quality staircase. The TPI online Fushan Resources, listed in Hong Kong. This
tool provides a question-by-question assessment means it does not: (a) have a policy or
of each company.5 commitment statement on climate change that
5
http://www.lse.ac.uk/GranthamInstitute/tpi/the-toolkit/
18commits it to addressing the issue; (b) Building Capacity. However, only two mining
demonstrate recognition of climate change as a companies are actually on Level 2. Instead, there
relevant risk/opportunity to the business; (c) is a cluster of eight relatively high-performing
have emissions reduction targets; or (d) disclose companies on Levels 3 and 4. Seven of these are
its Scope 1 and 2 greenhouse gas emissions. general mining companies. The exception is
Eight companies are on Level 1 – Acknowledging Banpu. By contrast, the 12 pure play coal mining
Climate Change as a Business Issue. In seven companies are (Banpu aside) on Levels 0 to 2,
cases, these companies have in place a policy on with most on Level 1.
climate change, but despite this they do not Trends in company Management
explicitly recognise climate change as a relevant
business risk/opportunity. The exception is DMCI
Quality
Holdings, which does the opposite. Figure 5 also tracks the progress of companies
Two companies are on Level 2 – Building that featured in TPI’s assessment of coal mining
Capacity. They are Adaro Energy and Exxaro from July 2017.[3] Seventeen companies were
Resources, but their Management Quality also covered last year, with two new additions
profiles are in fact quite different. Adaro Energy this year: Jastrzebska Spolka Weglowa, and
scrapes into Level 2 by virtue of having a climate South32.
change policy in place and explicitly recognising Five companies have moved up or down by one
climate change as a business risk/opportunity, level since 2017. The three movements up appear
but it does not satisfy any other criterion on Level to be attributable to improvements in the
2 or above. By contrast, Exxaro Resources relevant companies’ management practices,
satisfies 13 of 17 criteria in all, but is stuck on while the two movements down appear to be
Level 2 since it has not set an emissions reduction attributable to changes to the Management
target. Quality methodology:
Two companies are on Level 3 – Integrating into DMCI Holdings and Inner Mongolia Yitai Coal
Operational Decision Making. African Rainbow have both moved from Level 0 to 1, by
Minerals satisfies all Level 3 criteria, except it respectively demonstrating explicit
does not disclose Scope 3 emissions from use of recognition of climate change as a relevant
sold products, a key disclosure for companies risk/opportunity to the business, and
engaged in fossil fuel extraction. Banpu, the Thai introducing a climate change policy.
coal mining specialist, only satisfies two Level 3
Adaro Energy progresses from Level 1 to 2 by
criteria, those relating to assigning board
introducing a climate change policy.
responsibility for climate change and having set
a long-term quantitative emissions target. Coal India and Bukit Asam fall from Level 2 to
1, because they are no longer assessed as Yes
Six companies are on Level 4 – Strategic
on question 2. This may reflect a change in
Assessment. These include all the large cap
methodology, as question 2 has evolved from
general mining companies.
“Does the company explicitly recognise
Anglo American and BHP Billiton are both 4* climate change as a significant issue for the
companies as they satisfy all of the indicators. business?” to “Does the company explicitly
Coal mining has the lowest average recognise climate change as a relevant risk
Management Quality score of the three sectors and/or opportunity for the business?”
assessed in this report; 2.2, equivalent to Level 2,
19Indicator by indicator Coal mining companies perform worse than
electricity utilities and oil and gas producers on
Figure 6 looks at how the 19 coal mining almost all criteria, however a higher proportion
companies perform against the 17 individual of coal mining companies (led by the general
criteria/questions. Besides having a policy mining companies) have set quantitative
commitment to act on climate change (which in emissions targets than oil and gas producers
turn ensures companies are assessed as (short- or long-term), and more coal mining
acknowledging climate change as a business companies incorporate climate change risks and
issue), only two other criteria are met by a opportunities in company strategy than oil and
majority of companies in this sector: explicit gas producers.
recognition of climate change as a relevant
risk/opportunity for the business, and disclosure Only seven coal mining companies disclose
of operational emissions. emissions from use of sold products, despite their
importance to these companies’ lifecycle carbon
footprints.
Figure 6. Number of companies in the coal mining sector scoring Yes (blue) against individual
questions, and No (red)
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
L0|1. Acknowledge?
L1|2. Explicitly recognise as risk/opportunity?
L1|3. Policy commitment to act?
L2|4. Emissions targets?
L2|5. Disclosed Scope 1&2 emissions?
L3|6. Board responsibility?
L3|7. Quantitative emissions targets?
L3|8. Disclosed any Scope 3 emissions?
L3|9. Had operational emissions verified?
L3|10. Support domestic and intl. mitigation?
L3|11. Process to manage climate risks?
L4|12. Disclosed use of product emissions?
L4|13. Long-term emissions targets?
L4|14. Incorporated ESG into executive remuneration?
L4|15. Climate risks/opportunities in strategy?
L4|16. Undertakes climate scenario planning?
L4|17. Discloses an internal price of carbon?
204. Management Quality and Carbon
Performance of electric utilities
This TPI assessment includes 41 electricity utilities Carbon Performance, because they have a
from both the conventional electricity and multi- significant electricity generation business (the
utilities sub-sectors. We select companies mainly remaining four utilities are specialised in
on the basis of large market capitalisation. These electricity transmission and distribution).
companies usually constitute the largest
holdings in investor portfolios. We also include an Overall results for Management
additional two smaller companies, which are Quality
subject to investor engagement as part of the
Climate Action 100+ Initiative: KEPCO and EDF. Figure 7 shows where the 41 companies sit on the
These companies are systemically important for TPI Management Quality staircase. The TPI online
climate change. tool provides a question-by-question assessment
Of the 41 electricity utilities we assess on of each company.
Management Quality, 37 can also be assessed on
Figure 7. Management Quality of 41 large and high-emitting electricity utilities
Level 0 Level 1 Level 2 Level 3 Level 4
Unaware Awareness Building Integrating into Strategic
capacity operational assessment
decision making
4* AGL Energy
NEW
4* National
American Grid NEW
Electric Power
↔
Alliant Energy CLP Holdings ↔
NEW
CMS Energy NEW E.ON NEW
Ameren NEW
Chubu Electric Con Edison NEW EDF NEW
Power NEW CenterPoint
DTE Energy ↔ Enel ↔
Energy NEW
Edison Engie NEW
None Dominion Eversource
International ↔
Energy ↑1 Energy ↔ Entergy ↔
Power Assets ↓1
Duke Energy Exelon ↑1 Fortum NEW
Tenaga Nasional NEW
NEW
Firstenergy ↑2 Iberdrola ↔
Fortis ↔ KEPCO NEW
Orsted NEW
NextEra RWE NEW PG&E ↑1
Energy ↔ Sempra Energy Pinnacle West
Origin Energy NEW
Capital NEW
NEW
WEC Energy Red Electrica
PPL ↔ Group NEW NEW
Southern ↔ SSE ↔
XCEL Energy ↔
↑Up from last year ↓ Down from Last year ↔ no change on previous assessment
21There are no electricity utilities on Level 0. Two electricity utilities are 4* companies that
satisfy all 16 criteria applying to the sector:
Four companies are on Level 1 – Acknowledging AGL Energy and National Grid.
Climate Change as a Business Issue. Of these
four companies, Edison International fails to With an average level score of 2.9, electricity has
progress as it does not have a policy the highest Management Quality of any sector
commitment to act on climate change, while the assessed by TPI to date, with the next highest
other three companies have a policy being the automobile manufacturing sector,
commitment to act, but fail to demonstrate that which scored 2.6 on average when assessed in
they explicitly recognise climate change as a February 2018.
relevant business risk/opportunity.
An average level score of 2.9 puts the typical
Ten companies are on Level 2 – Building electricity utility closest to Level 3, integrating
Capacity. Of these, three companies disclose climate change into operational decision-
their Scope 1 and 2 emissions, but fail to progress making. This means the typical company in this
because they have not yet set an emissions sector has at least done all of the following:
reduction target: Ameren, Fortis and Origin established a climate change policy; explicitly
Energy. Conversely Alliant Energy, Dominion recognised climate change as a relevant business
Energy and Duke Energy have set emissions risk/opportunity; disclosed Scope 1 and 2
targets, but fail to progress due to not disclosing emissions; and set an emissions reduction target
their Scope 1 and 2 emissions. The remaining four of some form. Most utilities go well beyond this
companies satisfy neither of these Level 2 in the areas of policy, disclosure, targets and/or
criteria. strategy.
Twelve (12) companies are on Level 3 –
Integrating into Operational Decision Making.
The reasons for these companies failing to
progress to Level 4 are diverse. The question on
which these 12 companies are most commonly
assessed as No is: has the company had its
operational (i.e. Scope 1 and/or 2) emissions
data verified? Only five of 12 companies have
done so. The remaining Level 3 criteria are met
by most of the 12 companies and all 12
companies have a process to manage climate-
related risks. Question 12 does not apply to the
electricity sector as most of the lifecycle
emissions of a utility are within Scopes 1 and 2.
Fifteen (15) companies, more than one third of
the sample, are on Level 4 – Strategic
Assessment. All 15 of these companies have set a
quantitative, long-term emissions target and
incorporated ESG issues into executive
remuneration. However, in line with the coal
mining and oil and gas sectors, relatively few
companies have incorporated climate change
risks/opportunities into their strategy, undertake
climate scenario planning, or disclose an internal
carbon price.
22Trends in company Management company explicitly recognise climate change as a
relevant risk and/or opportunity for the
Quality business?”
Of the 19 electricity utilities that were also
assessed by TPI in 2017, 14 stay on the same level, Indicator by indicator
while four move up by at least one level: Figure 8 looks at how the 41 electricity utilities
Dominion Energy progresses from Level 1 to 2 perform against the 16 individual Management
by demonstrating explicit recognition of Quality criteria/questions that apply to this
climate change as a business sector. Performance is strong across the board,
risk/opportunity. compared with other sectors TPI has assessed. A
Exelon progresses from Level 2 to 3 by setting particularly large proportion of electricity utilities
an emissions reduction target. have set emissions targets and incorporate ESG
Firstenergy moves up two levels from 1 to 3 by into executive remuneration.
introducing a policy commitment to action
Only on one criterion is the electricity sector
on climate change and publishing
outperformed: relatively more oil and gas
information on its Scope 1 and 2 emissions.
producers have had their operational emissions
PG&E progresses from Level 3 to 4 by setting a
data verified. Only in three cases does a majority
quantitative emissions target.
of companies in the electricity sector fail to meet
Power Assets moves down from Level 2 to 1 due
a criterion. These are: (i) integrating climate
to being assessed as No on question 2 this year.
risks/opportunities in company strategy, (ii)
This may reflect a change in methodology, as
undertaking climate scenario planning and (iii)
question 2 has evolved from “Does the company
disclosing an internal carbon price. They also
explicitly recognise climate change as a
proved challenging for coal mining companies
significant issue for the business?” to “Does the
and oil and gas producers to meet.
23Figure 8. Number of electricity utilities scoring Yes (blue) against individual questions, and No
(red)
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40
L0|1. Acknowledge?
L1|2. Explicitly recognise as risk/opportunity?
L1|3. Policy commitment to act?
L2|4. Emissions targets?
L2|5. Disclosed Scope 1&2 emissions?
L3|6. Board responsibility?
L3|7. Quantitative emissions targets?
L3|8. Disclosed any Scope 3 emissions?
L3|9. Had operational emissions verified?
L3|10. Support domestic and intl. mitigation?
L3|11. Process to manage climate risks?
L4|12. Disclosed use of product emissions? Not applicable
L4|13. Long-term emissions targets?
L4|14. Incorporated ESG into executive remuneration?
L4|15. Climate risks/opportunities in strategy?
L4|16. Undertakes climate scenario planning?
L4|17. Discloses an internal price of carbon?
24Global Carbon Performance intensity of electricity generation that is below
the benchmarks can be said to be aligned with
Table 2 summarises Carbon Performance data those benchmarks and therefore with the
for the 37 electricity utilities covered by this international commitments underpinning
report, which have a significant electricity them. A company whose emissions intensity is
generation business.6 The traffic light scheme above the benchmarks is not aligned.
indicates that a company with an emissions
Table 2. Company emissions intensity pathways and global electricity sector benchmarks,
2014-2030
Company Emissions intensity of electricity generation (tCO2/MWh)
2014 2015 2016 2017 2020 2025 2030
AGL Energy 0.958 0.948 0.968
Alliant Energy 0.839 0.831 0.807 0.767 0.727
Ameren 0.688 0.660 0.675 0.667 0.644 0.605 0.566
American Electric Power 0.763 0.723 0.693 0.677 0.629 0.550 0.470
Chubu Electric Power 0.489 0.492 0.498 0.489 0.462 0.416 0.371
CLP 0.840 0.810 0.820 0.800 0.600 0.550 0.500
CMS Energy 0.920 0.910 0.793 0.771 0.703 0.591
Dominion Energy 0.361 0.348 0.339 0.336 0.327 0.313 0.298
DTE Energy 0.690 0.707 0.669 0.586 0.489
Duke Energy 0.454 0.440 0.435 0.409 0.366 0.322
E.ON 0.430 0.400 0.041 0.044 0.041 0.037 0.032
EDF 0.102 0.095 0.077 0.082 0.081 0.079 0.076
Edison International 0.176 0.195 0.146
Enel 0.388 0.404 0.388 0.377 0.342 0.285 0.228
Engie 0.434 0.447 0.395 0.385 0.354
Entergy 0.197 0.203 0.179 0.272 0.315
Eversource Energy 0.693 0.722 0.513
Exelon 0.084 0.038 0.049 0.050 0.053
Firstenergy 0.525 0.502 0.488 0.444 0.371 0.298
Fortis 0.679 0.640 0.641 0.635 0.612 0.573 0.534
Fortum 0.177 0.166 0.173 0.173
Iberdrola 0.212 0.225 0.177 0.187 0.240 0.194 0.149
KEPCO 0.471 0.464 0.477
NextEra Energy 0.242 0.249 0.216
Origin Energy 0.746 0.688 0.698
Orsted 0.227 0.162 0.176 0.111 0.079
PG&E 0.083 0.093 0.067
Pinnacle West Capital 0.533 0.539 0.404 0.439 0.406 0.350 0.294
Power Assets
PPL 0.950 0.890 0.850 0.870 0.832 0.769 0.706
RWE 0.745 0.708 0.686 0.655 0.620
Sempra Energy 0.315 0.294 0.254 0.246 0.223
Southern Company 0.590 0.544 0.528
SSE 0.474 0.397 0.304 0.293 0.260 0.205 0.150
Tenaga Nasional 0.539
WEC Energy Group 0.917 0.853 0.810 0.799 0.767 0.714 0.660
XCEL Energy 0.713 0.707 0.650 0.638 0.602 0.492 0.349
Below 2 Degrees 0.572 0.546 0.521 0.497 0.430 0.330 0.229
2 Degrees 0.572 0.549 0.527 0.506 0.447 0.361 0.245
Paris Pledges 0.572 0.557 0.543 0.529 0.492 0.439 0.402
Key Aligned with Below 2°C Aligned with 2°C Aligned with Paris Pledges Not aligned
6
Four companies are excluded on this basis: CenterPoint Energy, Con Edison, Red Electrica and National
Grid. These companies are engaged in electricity transmission and distribution, but not generation.
25Data availability: TPI’s Carbon Performance benchmarks. E.ON is projected to have the
assessment is based on companies’ public lowest 2020 emissions intensity of all, at just
disclosures of their historical emissions, as well 0.041 tCO2/MWh,8 while PPL is projected to have
as quantitative targets they have set to reduce the highest, at 0.832 tCO2/MWh.
their emissions in the future (see Appendix 3 for
further details). Historical Carbon Performance 2030 Carbon Performance: in 2030, five
data are available for 36 out of 37 companies. companies remain aligned with Below 2 Degrees:
The exception is Power Assets. Twenty-six E.ON, EDF, Enel, Iberdrola and SSE, all European-
companies have also set company-wide, headquartered utilities. Six companies are
quantitative targets for their future emissions, aligned with the Paris Pledges: Chubu Electric
which we can use to estimate Carbon Power, Dominion Energy, Duke Energy,
Performance in 2020. Nineteen companies have Firstenergy, Pinnacle West Capital and XCEL
useable targets extending to at least 2030. Energy. Five of these utilities are based in the
United States. The remaining eight utilities have
In our 2017 assessment of electricity utilities’ an emissions intensity of electricity generation
Carbon Performance,[4] we found that nine of above the Paris Pledges benchmark.
the 20 companies we assessed had set emissions
targets extending to 2020 or beyond, which we 2 Degrees versus Below 2 Degrees: the different
could use. We see a larger share this year (26 out interpretations of the overall goal of the Paris
of 37), and, of the 19 companies assessed in both Agreement, i.e. whether it be 2 Degrees or Below
2017 and 2018, the number of companies with 2 Degrees, do not seem to make a substantial
useable 2020 targets has risen from nine to 13, difference to company alignment between now
while the number of companies with useable and 2030. Only five companies fall between
2030 targets has risen from six to 11. these scenarios at any point, being aligned with
2 Degrees, but not Below 2 Degrees, and they
Historical emissions intensity: 21 of the 37 never do so for more than three consecutive
companies had a historical emissions intensity7 years. There is a larger difference between 2
under the global Below 2 Degrees benchmark. On Degrees and the Paris Pledges and eight
average, the 36 utilities providing data had a companies are aligned with the Paris Pledges,
historical emissions intensity of 0.502 tCO2/MWh, but not with 2 Degrees, at some point between
which is also under the global Below 2 Degrees 2014 and 2030.
benchmark over the historical period (2013-17).
Regional Carbon Performance
2020 Carbon Performance: assuming company
targets are met, 13 out of the 26 utilities with The fact that a majority of utilities assessed in
2020 performance data will be aligned with the this report had a historical emissions intensity
global Below 2 Degrees benchmark. Firstenergy under the global Below 2 Degrees benchmark
will be aligned with the 2 Degrees benchmark, partly reflects the predominance of US and
but not with the Below 2 Degrees benchmark, European utilities in the sample. Indeed, 20 of
while the Japanese utility Chubu Electric Power the 37 utilities we assess on Carbon Performance
will be aligned with the Paris Pledges, but neither are based in the USA and nine are based in the
with the 2 Degrees nor the Below 2 Degrees EU.
7
This is calculated as the (unweighted) average of a company’s disclosed emissions intensities between
2013 and 2017. Some companies do not disclose data for every year in this period. Some companies are yet
to disclose their 2017 emissions intensity. This can be estimated by interpolating between a year prior to
2017 and the company’s target year, but we do not include such estimates in the figures reported in this
paragraph.
8
E.ON recently separated its fossil fuel assets into a new company, Uniper, leaving E.ON with renewable
power assets only.
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