In recent years, an increased focus on sustainability-related issues has caused even the most mainstream investors to question whether companies are effectively addressing the potential risks posed by their operational impact on environmental, social and governance (ESG) issues. The UK’s Transition Plan Taskforce (TPT) marks another example of increasing focus on ESG, and climate change in particular.

In partnership with the Financial Conduct Authority, the TPT will work to establish market-wide and sector-specific standards for companies pursuing a transition to net-zero emissions. The project is part of the UK’s push to become the world’s first net zero-aligned financial centre. Last year, the government announced new Sustainability Disclosure Requirements and published a roadmap for Phase 1 of its strategy to green the financial system.

For public companies, particularly those in the financial sector, that will mean disclosing a transition plan for how they intend to reach net-zero emissions. Initially, companies will have the option to comply or explain — however, the Chancellor has indicated that net-zero transition plans will be mandatory for certain sectors and companies by 2023.

The TPT’s role is to develop one cohesive framework for UK companies, including new requirements that are intended to reflect emerging best practice. The project goes beyond the transition plans themselves; the TPT will also provide guidance for a range of stakeholders on how this all works in practice, including oversight and assurance.

That’s all easier said than done, given that there is currently no widely accepted template for what a transition plan looks like or how it would be developed, communicated, implemented or overseen. A central component will be coordinating with a range of organisations to build on the existing global standards that have emerged in recent years. The TPT has specifically referenced the Taskforce on Climate-related Financial Disclosures (TCFD), and investor groups such as Climate Action 100+, Institutional Investors Group on Climate Change (IIGCC), and the Glasgow Financial Alliance for Net Zero (GFANZ).

  • TCFD was established in 2015 by the Financial Stability Board, the G20’s financial policy body; its recommendations have received wide industrial and academic support, and the UK regulator has stated that it expects public interest entities to report under TCFD.
  • IIGCC is the European membership body for investor collaboration on climate change, including over 370 asset managers and other firms across 22 countries; the organisation helps its members promote sustainable policies amongst regulators and within invested companies, and provides support for aligning investment decisions and practices with the Paris Agreement and climate considerations.
  • GFANZ was launched in partnership with Race to Zero, the UN-backed global campaign calling on non-state actors to take immediate action to halve global net-zero carbon emissions by 2030. It’s a finance sector-specific group focused on net-zero transition planning, promoting sustainable public policy, and ensuring that emerging markets and developing economies aren’t left behind.

The organisations take different approaches, but their common focus demonstrates the increasing interest in climate and broader ESG issues from investors and other stakeholders.

Glass Lewis ESG Profile

The Glass Lewis ESG Profile and its associated score (ESG Score) are designed to provide investors with a short-hand evaluation of companies’ ESG policies, performance, and disclosures. The Glass Lewis ESG Score represents a company’s alignment with a core set of ESG factors that we believe are most important to companies and their shareholders:

  • Board Accountability
    The Board Accountability module is designed to provide a picture of how well companies are governing environmental and social issues and to provide information concerning the mechanisms in place to ensure that shareholders are able to hold boards accountable.
  • ESG Transparency
    The ESG Transparency module assesses the comprehensiveness of a company’s ESG reporting and evaluates how companies’ reporting incorporates standardized and commonly used reporting frameworks, such as those established by the Global Reporting Initiative (GRI) or the Task Force on Climaterelated Financial Disclosures (TCFD).
  • ESG Targets and Alignment
    The ESG Targets and Alignment module looks beyond disclosure, evaluating the policies companies have implemented in order to determine how they are taking action on environmental and social issues.
  • Climate Risk Mitigation (Climate Action 100+ companies only)
    The Climate Risk Mitigation module is designed to provide an overview of how companies are managing and mitigating climate-related risks.

To promote its accuracy and timeliness for proxy voting, ESG Profile data is collected by Glass Lewis analysts approximately 20-30 days prior to the company’s annual meeting, so investors can rely on the most up to date information when making a vote decision. This year, the ESG Profile and Score are included in the Proxy Paper for roughly 1,800 global, large-cap companies, including all companies on the Climate Action 100+ focus list.

For more information, visit the ESG Profile product page or send an inquiry to info@glasslewis.com.