Investor Briefing Pack - MailChimp€¦ · Analysis has indicated this step increases alignment of the top 100 with investors portfolios 3. Rank by emissions: Identify the top 100

Investor Briefing PackOverview of the Climate Action 100+ and how to join

23 October 2017 CONFIDENTIAL AND NOT FOR CIRCULATION

Content

3 Overview of Climate Action 100+

7 Which companies are we focusing on?

13 What are we looking to achieve and how will we track progress?

16 How will the initiative be organised?

22 How can investors join the Climate Action 100+?

26 Appendix A: Investor Sign-On Statement

29 Appendix B: Frequently Asked Questions

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CONFIDENTIAL AND NOT FOR CIRCULATIONThis document is intended for use by investors that are considering signing up to the Climate Action 100+ only. This document will be made available to investors only. Please do not circulate this document.

FAQs we need to cover

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Overview

Overview

Global investors driving business transitionThe Climate Action 100+ is a new five-year investor-led initiative to engage more than 100 of the world’s largest corporate greenhouse gas emitters* to curb emissions, strengthen climate-related financial disclosures and improve governance on climate change risks.

The initiative has been developed to build on the commitments laid out in the 2014/2015 Global Investor Statement on Climate Change, supported by 409 investors representing more than US $24 trillion, which stated:

“As institutional investors and consistent with our fiduciary duty to our beneficiaries, we will: […] work with the companies in which we invest to ensure that they are minimising and disclosing the risks and maximising the opportunities presented by climate change and climate policy.”

* Taking into account emissions across the value chain (scope 1 to 3) 4

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Overview

Global network behind regional leadership – connects investors from around the world behind investors leading engagement in different regions

A clear engagement agenda – makes sure company boards and senior management receive a consistent message from investors

Amplifying the investor voice – ensures wider society is made aware of the position of investors on climate-related risks and opportunities

Performance tracked – provides an assessment on the progress companies are making towards delivering FSB Taskforce on Climate-Related Disclosures (TCFD) aligned disclosure and meeting the goal of the Paris Agreement

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How does the Climate Action 100+ aim to support investors and implementation of the Paris Agreement?

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Who is involved?

Initially proposed by CalPERS in 2016, the initiative builds on the investor engagement pioneered since 2012 by the regional investor networks who together form the Global Investor Coalition on Climate Change. It is coordinated by these networks and the Principles for Responsible Investment (PRI):

Building on existing engagement workThis new initiative aims to bring together, connect and align engagement work taking place through the five networks. An organisation chart setting out the different working groups that will be contributing to the Climate Action 100+ is shown on page 18 of this document.

Asia Investor Group on Climate Change

(Asia)

Institutional Investor Group on Climate

Change (Europe)

Investor Group on Climate Change

(Australia/New Zealand)

Principles for Responsible Investment

(Multi-region)

Ceres Investor Network on Climate Risk and

Sustainability (North America)

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Which companies will we be focusing on?

Which companies will we be focusing on?

The objective of the Climate Action 100+ is to focus investor action on the most substantial greenhouse gas emitters (considering emissions across the value chain), as well as those companies that investors believe present the greatest climate-related risk to their portfolios.

These companies present risk to investors in two ways: 1. Failure to adapt their operations and activities to policy,

physical or technological changes related to climate change could impact revenues, expenditures, assets and liabilities or financing activities (see figure 1)

2. By creating systemic economy-wide impacts that may harm the financial markets (e.g. rapid repricing as a consequence of a sudden and prolonged extreme weather event)

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Figure 1: TCFD Supplemental Guidance sector analysis of exposures to climate-related financial risk or opportunity by financial impact area. The Climate Action 100+ will focus on the 100 largest emitters from across these sectors plus those that participating investors view as riskiest.

https://www.fsb-tcfd.org/wp-content/uploads/2017/06/FINAL-TCFD-Annex-062817.pdf , page 6

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Step Rationale

1. Start universe: begin with a company universe that is relevant to most investors; MSCI ACWI

Index covering 47 Markets and covering 85% of global investable equity

2. Truncate universe: Cut universe to largest 1000 companies by market capitalisation

Analysis has indicated this step increases alignment of the top 100 with investors’ portfolios

3. Rank by emissions: Identify the top 100 by scope 1 to 3 emissions using CDP data. Details on CDP’s modelling techniques are available here.

Using scope 1, 2 and 3 emissions ensures value chain impacts are taken into consideration. CDP modelling process ensures that non-disclosing companies are also included.

4. Investor Risk Perception Survey: Investors will be invited to vote for a maximum of ten companies that they believe should be added to the list from the original universe. A minimum of five companies will be added by region to ensure appropriate global coverage.

This step will be carried out via this survey. The complete list of companies to be added will be finalised during January 2018.

This step ensures we cover companies that are important at a regional level, whose impact hasn’t been realised yet or because of physical risks that aren’t captured by greenhouse gas emissions.

5. Considerations (as required): The initiative steering committee will review the potential exclusion of companies on a case by case basis, when a case has been made that a company is not relevant (e.g. in the case a part listed subsidiary of another company featuring in the list is also included, only one of the company might be retained in the list).

This step would be taken, for example, in the case of a heavily state-owned company (>95% state owned) being included in the focus list. All exclusions will be disclosed.

Focus list methodology

A five step process has been developed to identify the focus list companies.

100 companies will be included on the basis of their scope 1 to 3 emissions, using CDP modelled data for scope 3 emissions and non-reporters (steps 1 to 3).

Additional (“+”) companies will be identified via an investor survey, which will ask initiative participants to identify the companies they believe present risk to their portfolios (step 4).

Each year the list will be revised to account for mergers and acquisitions. Additionally companies may be removed if they are considered to have demonstrated sufficient progress implementing the goals of the initiative. New companies may be voted into the focus list during the annual progress review.

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Africa1%

Europe38%

Latin America4%

North America

28%

Asia28%

Australia1%

Oil & Gas31%

Utilities20%

Mining16%

Industrials14%

Transporation14%

Other5%

The top 100 by region

Composition and impact of the top100 Focus List Companies

The top 100 by sector

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The top 100 companies account for US$ 5.5 tr. in Market Cap which is equivalent to c.11% of the Market Cap of the MSCI ACWI All Cap Index of more than 14,000 stocks

Statistics are based on a mixture of reported and modelled CDP, IEA and MSCI data. References:

CDP: Company data & scope 3 modelling data (see here)

IEA: Global GHG Emissions from fossil fuel combustion only were 32.3Gt CO2e in 2014 (see here)

MSCI: MSCI ACWI data (see here)

15% 85% $5.5tn

The scope 1 (direct) emissions of the top 100 companies are equal to c.15% of annual greenhouse gas emissions from fossil fuel combustion

Overall, although some double-counting is inevitable, the total emissions of the top 100 companies are equal to c.85% of annual greenhouse gas emissions from fossil fuel combustion

The top 100 companies are located across multiple regions and sectors and account for a major proportion of global greenhouse gas emissions.

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Climate Action 100+ Focus List Companies

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Companies featuring in the top 100 as are listed below. Additional companies will be voted into the focus list by investors that have signed on to the initiative (see page 9).

Organisation ISIN Organisation ISIN Organisation ISIN Organisation ISIN

A.P. Moller - Maersk DK0010244425 Ecopetrol Sa COC04PA00016 Lukoil OAO RU0009024277 Rosneft Oil Company RU000A0J2Q06

Airbus Group NL0000235190 EDF FR0010242511 LyondellBasell Industries Cl A NL0009434992 Royal Dutch Shell GB00B03MLX29

American Electric Power Company, Inc. US0255371017 ENEL SpA IT0003128367 Marathon Petroleum US56585A1025 Saic Motor Corporation CNE000000TY6

Anglo American GB00B1XZS820 ENGIE FR0010208488 Martin Marietta Materials, Inc. US5732841060 Sasol Limited ZAE000006896

Anhui Conch Cement CNE1000001W2 Eni SpA IT0003132476 MMC Norilsk Nickel OSJC RU0007288411 Siemens AG DE0007236101

ArcelorMittal LU0323134006 Exelon Corporation US30161N1019 Nestlé CH0038863350 SK Innovation Co Ltd KR7096770003

BASF SE DE000BASF111 Exxon Mobil Corporation US30231G1022 Nippon Steel & Sumitomo Metal Corporation JP3381000003 Southern Copper Corporation US84265V1052

Bayer AG DE000BAY0017 Fiat Chrysler Automobiles NV NL0010877643 Nissan Motor Co., Ltd. JP3672400003 Statoil ASA NO0010096985

Berkshire Hathaway US0846707026 Ford Motor Company US3453708600 NTPC Ltd INE733E01010 Suncor Energy Inc. CA8672241079

BHP Billiton AU000000BHP4 Formosa Petrochemical TW0006505001 Oil & Natural Gas INE213A01029 Suzuki Motor Corporation JP3397200001

Boeing Company US0970231058 Gas Natural SDG SA ES0116870314 OMV AG AT0000743059 Teck Resources Limited CA8787422044

BP GB0007980591 General Electric Company US3696041033 PACCAR Inc US6937181088 Tesoro Corporation US8816091016

Canadian Natural Resources Limited CA1363851017 General Motors Company US37045V1008 Panasonic Corporation JP3866800000 The Dow Chemical Company US2605431038

Caterpillar Inc. US1491231015 Glencore plc JE00B4T3BW64 PepsiCo, Inc. US7134481081 The Southern Company US8425871071

Centrica GB00B033F229 Hitachi, Ltd. JP3788600009 PETROCHINA Company Limited CNE1000003W8 thyssenkrupp AG DE0007500001

Chevron Corporation US1667641005 Hon Hai Precision Industry TW0002317005 Petróleo Brasileiro SA - Petrobras BRPETRACNPR6 Toray Industries, Inc. JP3621000003

China Petroleum & Chemical Corporation CNE1000002Q2 Honda Motor Company JP3854600008 Phillips 66 US7185461040 Total FR0000120271

China Shenhua Energy CNE1000002R0 Imperial Oil CA4530384086 PJSC Gazprom RU0007661625 Toyota Motor Corporation JP3633400001

CNOOC HK0883013259 Ingersoll-Rand Co. Ltd. IE00B6330302 POSCO KR7005490008 United Technologies Corporation US9130171096

Coal India INE522F01014 International Paper Company US4601461035 Procter & Gamble Company US7427181091 Vale BRVALEACNOR0

ConocoPhillips US20825C1045 JX Holdings, Inc JP3386450005 PTT TH0646010007 Valero Energy Corporation US91913Y1001

Cummins Inc. US2310211063 Koninklijke Philips NV NL0000009538 Reliance Industries INE002A01018 Vedanta Ltd INE205A01025

Daikin Industries, Ltd. JP3481800005 Korea Electric Power Corp KR7015760002 Repsol ES0173516115 Volkswagen AG DE0007664039

Duke Energy Corporation US26441C2044 LafargeHolcim Ltd CH0012214059 Rio Tinto GB0007188757 Volvo SE0000115446

E.ON SE DE000ENAG999 Lockheed Martin Corporation US5398301094 Rolls-Royce GB00B63H8491 Wesfarmers AU000000WES1

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What are we looking to achieve and how will we track progress?

What are we looking to achieve?

Climate Action 100+ Engagement AgendaThe initiative aims to secure commitments from the boards and senior management to: 1. Implement a strong governance framework which clearly articulates the board’s accountability and oversight of

climate change risk

2. Take action to reduce greenhouse gas emissions across their value chain, consistent with the Paris Agreement’s goal of limiting global average temperature increase to well below 2 degrees above pre-industrial levels.

3. Provide enhanced corporate disclosure in line with the final recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and sector-specific GIC Investor Expectations on Climate Change (when applicable) to enable investors to assess the robustness of companies’ business plans against a range of climate scenarios, including well below 2 degrees and improve investment decision-making.*

Investors signing on to the initiative are requested to support a public statement outlining these goals. We will collectively track the progress of companies subject to the initiative in delivering the high level goals.*GIC stands for Global Investor Coalition on Climate Change. See here for more information on the GIC. The existing GIC Investor Expectations sector guides cover oil and gas, mining, utilities and auto manufacturers which provide additional sector specific disclosure recommendations, particularly regarding the oversight of public policy positions and activity. The series will cover steel, chemicals and cement by Q3 2018.

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Goal three: what do mean by enhanced disclosure?

The Climate Action 100+ seeks enhanced disclosures in line with the FSB Task Force on Climate-Related Disclosure. The TCFD has sets out four core recommendations, which each have a number of supporting recommendations. The supplemental guidance annex sets out further disclosure recommendations for key financial and non-financial sectors. Recommendations are also made on the location of disclosure. The core disclosure recommendations and supporting recommendations are: 1. Governance: Disclose the organization’s governance around climate-related risks and opportunities.

a) Describe the board’s oversight of climate-related risks and opportunities.b) Describe management’s role in assessing and managing climate-related risks and opportunities.

2. Strategy: Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material.

a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planningc) Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower

scenario.3. Risk Management: Disclose how the organization identifies, assesses, and manages climate-related risks.

a) Describe the organization’s processes for identifying and assessing climate-related risksb) Describe the organization’s processes for managing climate-related risks.c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk

management. 4. Metrics and Targets: Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such

information is material.a) Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management

process. b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.c) Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.

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How will we track progress?

Progress trackingWe will track how each company is performing with the respect to the high level goals. There are two ways that we will track progress: 1. Bi-annual investor updates: we will request that the Lead Investor for each company

provides an update to other members of the initiative on that company’s progress. In practice this would include observed areas of improvement and one or two next steps that the company should be focusing on. A digital progress tracker will be available for participants in the initiative summarising the updates.

2. Third party assessments: each year of the initiative, assessments of progress will be produced. An indicator framework is being devised around the high level goals and against which we will benchmark progress. During Q1 2018, a small investor-led working group, reporting to the steering committee, will develop an approach to assessment for the initiative and identify what bespoke, sector specific assessments will be needed to enable effective tracking. Discussions are ongoing with a range of service providers.

Investor-led annual report: Once per year, a report detailing the progress observed by the initiative, comprised of information from the third party assessments and selected investor perspectives on companies, with permission. (See Investor Climate Compass: Oil and Gas example.)

The Investor Climate Compass on Oil & Gas

summarising investor engagement progress

provides an example of the type of reporting that may be published.

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How will the initiative be organised?

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Implementationlevels

What is the role of the group?Who is involved? FacilitationActivities

Global Forum(Ensuring global

alignment)

Ensure investors across all networks and regions are aligned on the engagement activities going on in different regions, particularly ahead of AGM season

Open to all signatories to the initiative

Facilitated by representatives of the networks

1. Bi-annual calls/events2. Sector and regional calls, events and webinars3. Reports on the annual progress benchmark

Network Working Groups

(Conducting engagement)

Provide appropriate forums for the detailed company level work required to deliver effective engagement.

Open to those investors that join the Climate Action 100+ in the ‘Participant’ category

Facilitated by each network, sometimes in combination.

1. Each working group will be responsible for engagement with a sub-set of the focus list. 2. Meet / have calls as required with companies

Steering Committee

Set up of initiative and coordination of inter-regional elements of the initiative

Network CEOs and an investor representative for each network

Network staff1. Quarterly call

How is the initiative being organised?

The Climate Action 100+ has three implementation tiers which are summarised in the chart below.

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The initiative will be delivered through a set of working groups operating across regions and sectors.

ASIA MULTI-REGION

STEERING COMMITEE

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Climate Action 100+ Organisation Chart

GLOBAL FORUM

AUSTRALASIAEUROPE NORTH AMERICA

NETWORK WORKING GROUPS Investors can sign-up to join engagements coordinated across these working groups

Forum for all Climate Action 100+ participants can join to receive updates on engagements across the regions. Meetings will be at least biannual and focused on progress in different regions and sectors.

AIGCC-PRI Asia Engagement Group

IIGCC European Engagement Group

Ceres-PRI North America

Engagement Group

IGCC Australasia Engagement Group

PRI Climate Engagement

Groups

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Climate Action 100+ Lead Investors

Coordinating specific company engagement• Climate Action 100+ Lead(s): One or two investors will be identified for each

of the companies on the initiative focus list. The role of the Climate Action 100+ Lead is to:• Be the main point of contact between the company and the initiative,

including sending the company the initial initiative letter• Co-ordinate at least one collaborative meeting with the company each year• Provide bi-annual updates on progress (via a simple digital tracking form)• Where possible and with the support of network staff, ensure that

company engagement by other investors is aligned• Identifying each Climate Action 100+ Lead: at least one of each company’s

leads should be based in the same country or region as the company. Leads will be identified by the following process:

1. Investors leading company engagements in an existing engagement group have first option to become the Climate Action 100+ Lead

2. Other investors will be asked to indicate which companies they would like to lead. The Steering Committee will allocate the lead role to an investor with a history of engagement with the given company and strong relationships with senior decision makers.

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Conducting and coordinating company engagements

Coordinating each company engagementInvestors participating in the initiative will be encouraged to engage with companies both collaboratively and individually:

• Collaborative company engagements: the Climate Action 100+ Company Leads, working through one of the initiatives working groups, will organise at least one collaborative engagement open to participants in the initiative. Investors that wish to be part of these collaborative engagements should indicate which companies they wish to engage with using the sign on form (although you will be able to update your preferences at any time through the initiative).

• Individual investor engagements: We believe collaborative engagements will benefit from other investors continuing to engage unilaterally with the same companies. Accordingly, we encourage investors to engage with companies in alignment with the strategy identified by the Climate Action Lead as part of the bi-annual updates. Investors conducting individual engagements are encouraged to notify the Climate Action Lead to ensure coordination.

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Climate Action Lead

Company A

Collaborating Investors engaging with Company A

Dialogue

Investor doing an aligned engagement

via Climate Action 100+

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Approach to engagement and tactics

Approach to engagement

• Building partnerships with companies: where possible, we will seek to build positive dialogues with companies, aiming to support their transition to the low carbon economy. In the event that companies are not open to dialogue, some investors may choose to use different engagement tactics.

• Using engagement tools to drive action and disclosure: A central message of each engagement will be that that inaction by investee companies following engagement may result in investors taking further action, such as using the tools noted in the box to the right. The use of such tools will be at the discretion of individual investors. Climate Action 100+ will only facilitate information sharing regarding the tools investors may consider using.

• Representation of assets: Investors participating in each engagement meeting will only represent the assets that they own; engagements will not be presented as being on behalf of the full AUM participating in the initiative.

The Engagement ToolboxInvestors participating in this initiative may employ the following ‘tools’:

AGM StatementsSupporting appropriate shareholder resolutions on climate change riskVoting for the removal of directors who have failed in their accountability of climate change riskVoting against annual reports and accountsLegal recourses Divestment

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How can investors join the Climate Action 100+?

How may investors join the initiative?

There are two Climate Action 100+ categories of participation through which investors may join – as a Participant or Supporter.

Participants may be asset owners, managers or engagement service providers* and are requested to: • Publicly support the sign-on-statement, initiative objectives and agenda (see Appendix A).• Commit to engage with at least one company during each year of the initiative, either via an existing collaborative

engagement group or individually.• Provide a high level report back to other participants of the initiative on the progress and next steps of their

engagement.

Supporters may be asset owners only and are requested to:• Publicly support the sign-on-statement and the initiative objectives and agenda (see Appendix A). • Request that their managers or service provider with responsibility for engagement join the initiative.

Note: Supporters are not requested to participate in engagement activity. We do however ask that asset owners with capacity to engage, join as Participants (see above) where possible.*Engagement service providers must be formally representing assets.

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How may investors join the initiative?

Step-by-step: how to sign on to the Climate Action 100+

1. Review materials: review the materials contained within the sign-on pack, and ensure you organisation: • Supports the sign-on statement (see page 26) • In the case of Investor Participants, is committed to engagement with at least one Focus List Company through

each year of the initiative• In the case of Investor Supporters: confirm you are able to request that your manager(s) or service providers will

participate in the initiative

2. Complete the sign-on form: complete the sign on form, indicating which companies you would like to engagement with. You may access the sign-on form here.

3. Participate in voting for the additional “+” Company Focus List (optional): Once you have joined the initiative, you will be able to vote for companies that you think should be added to the focus list. You can vote using the form here.

Once you have joined the initiative, one of the initiative coordinators will be in touch with you. You will also receive an invitation to the global initiative kick-off call to be scheduled in December or early January.

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27 September: Call to Action at PRI in Person

From 27 September: Investor registration of interest commenced.

23 October: Full set of sign-on materials distributed. Investor sign-on commences.

23 October to January: Participants in Climate Action 100+ to vote for additional companies and finalisation of the focus list.

11-12 December: Public launch

December 2017: Global Initiative Kick-Off Calls, welcoming investors to the initiative and setting out year one plans

December 2017: Engagement under the initiative will begin

Q3 2018: First progress report

7. Key dates

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Appendix A: Investor Sign-On Statement

Climate Action 100+ Sign-on Statement

The Climate Action 100+ is a collaborative five-year initiative that requires participating investors to sign-on to a public statement of action. This public statement (below) sets out the commitment from investor signatories and expectations of the companies on the focus list.

INVESTOR SIGN ON STATEMENT: BackgroundWe, the institutional investors that are signatories to this statement, are aware of the risks climate change presents to our portfolios and asset values in the short, medium and long term. We therefore support the Paris Agreement and the need for the world to transition to a lower carbon economy consistent with a goal of keeping the increase in global average temperature to well below 2°Celsius above pre-industrial levels.

Through this initiative, we aim to fulfil the commitment made by 409 investors representing more than US $24 trillion under management set out in the “2014/15 Global Investor Statement on Climate Change” which stated that “…as institutional investors and consistent with our fiduciary duty to our beneficiaries, we will work with the companies in which we invest to ensure that they are minimising and disclosing the risks and maximising the opportunities presented by climate change.”

CommitmentWe believe that engaging and working with the companies in which we invest – to communicate the need for greater disclosure around climate change risk and company strategies aligned with the Paris Agreement – is consistent with our fiduciary duty and will contribute to achieving the goals of the Paris Agreement.

The initiative aims to secure commitments from the boards and senior management to: 1. Implement a strong governance framework which clearly articulates the board’s accountability and oversight of climate change risk and opportunities. 2. Take action to reduce greenhouse gas emissions across their value chain, consistent with the Paris Agreement’s goal of limiting global average temperature increase to well below 2 degrees

above pre-industrial levels.3. Provide enhanced corporate disclosure in line with the final recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and sector-specific GIC Investor Expectations* on

Climate Change (when applicable) to enable investors to assess the robustness of companies’ business plans against a range of climate scenarios, including well below 2 degrees and improve investment decision-making.

Working through AIGCC, Ceres, IGCC, IIGCC and PRI, we will together monitor the progress that companies make towards these towards these goals. We are committed to working collaboratively through this initiative, using a range of engagement approaches to ensure fulfilment of the above mentioned goals.

*GIC stands for Global Investor Coalition on Climate Change. The Global Investor Coalition on Climate Change (GIC) is a joint initiative of four regional groups that represent investors on climate change and the transition to a low carbon economy: AIGCC (Asia), Ceres (North America), IGCC (Australia/NZ) and IIGCC (Europe). See here for more information on the GIC. The existing GIC Investor Expectations sector guides cover oil and gas, mining, utilities and auto manufacturers and provide additional sector specific disclosure recommendations, particularly regarding the oversight of public policy positions. The series will cover steel, chemicals and cement by Q2 2018.

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Sign-on-Statement Appendix – FSB TCFD Recommendations

The FSB Task Force on Climate-Related Disclosure sets out four core recommendations, which each have a number of supporting recommendations. In addition, the supplemental guidance annex sets out further disclosure recommendations for key financial and non-financial sectors. Recommendations are also made on the location of disclosure. The Climate Action 100+ seeks enhanced disclosures in line with core disclosure recommendations and supporting recommendations which are:

1. Governance: Disclose the organization’s governance around climate-related risks and opportunities.a) Describe the board’s oversight of climate-related risks and opportunities.b) Describe management’s role in assessing and managing climate-related risks and opportunities.

2. Strategy: Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material. a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning.c) Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.

3. Risk Management: Disclose how the organization identifies, assesses, and manages climate-related risks.a) Describe the organization’s processes for identifying and assessing climate-related risks.b) Describe the organization’s processes for managing climate-related risks.c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management.

4. Metrics and Targets: Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.a) Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process. b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.c) Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.

In addition to the TCFD recommendations, companies in relevant sectors should take note of the GIC Investor Expectations which provide additional sector specific disclosure recommendations, particularly regarding the oversight of public policy positions and activity. The existing GIC Investor Expectations sector guides cover oil and gas, mining, utilities and auto manufacturers. The series will cover steel, chemicals and cement by Q2 2018.

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Appendix B: Frequently Asked Questions

FAQs

Why should I join this initiative?The Climate Action 100+ represents a step change in investor active ownership on climate change risks. By publicly naming more than 100 companies responsible for a large degree of emissions, it will encourage greater efforts by companies to align their business with a low carbon world. By joining the initiative, you signal your organisation’s commitment to addressing climate risks through engagement with investee companies. In addition, joining the initiative and participating in the information sharing meetings and relevant engagement working groups will help ensure that companies hear a strong and unified message from their shareholders. Additionally, for asset owners, your participation and/or support for the Climate Action 100+ can help demonstrate the importance of engagement on climate change to your investment managers and engagement service providers.

What won’t the initiative do?The Climate Action 100+ will not undertake in any of the following activities:

• Act or speak on behalf of the investors participating in the initiative • Facilitate collective decision-making regarding an investment decision or shareholder vote• Provide recommendations to investors to divest, make any other investment decision or vote in a particular way• File a shareholder resolution or require participants to support a shareholder resolution

What next? What are the first steps after joining?As a first step, once you have joined, please vote for the additional companies that you believe present financially material climate-related risks that are not in the top 100 Focus List using the form here. In the near future, you will receive an invite to global kick-off calls that will take place during December. Network Working Groups of the initiative will be holding their first formal Climate Action 100+ meetings during December and January focused on company level engagement strategies. Finally, a year one programme overview will be circulated in early January. 30

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FAQs

How is information being tracked, and where can I find this information as a participant in the initiative?Individual engagement working groups will retain their own tracking processes, but in addition a centralised tracking tool will be developed. For each company, this tool will show:• The Climate Action 100+ Lead(s)• Investors who have committed to engage with the company• High level history of recent dialogue• High level focus areas for future dialogue• Contact details for the Climate Action 100+ Lead and/or the relevant staff member within the investor network responsible• Information on how investors can get involved in dialogue if they are not already

How do I express an interest to take part in a collaborative engagement with a specific company? If you are signing up as a full participant, you will be able to indicate which companies you wish to engage with via the sign-on form. At any point you can join a company engagement or express an interest to join an engagement. Once the initiative has commenced, youcan do this by contacting a representative of one of the Network Working Groups or the Climate Action 100+ Investor Lead. Additionally, an engagement tracker with contacts for each company will be circulated after the launch to help you identify relevant contacts. Page 18 sets out the key working groups that will be contributing to the initiative and provides an email link to the working group coordinators. Contact the working group coordinator to join a group.

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FAQs

How does this Climate Action 100+ fit with existing engagement groups? The initiative will bring together a number of existing and new engagement groups focused on different segments of the focused list. Existing engagement groups that will contribute to Climate Action 100+ include, for instance: the Ceres Carbon Asset Risk Working Group; the IIGCC collaborative engagement group; the PRI Methane collaborative engagement; and, the Ceres/PRI Deforestation Working Group. In addition, a number of new engagements are expected to be launched to support the initiative. In general, engagement working groups will follow the normal methods and governance arrangements as previously for that coordinating network(e.g. Ceres, PRI, IIGCC), although some additional flexibility is planned to allow Climate Action 100+ participants to be involved in different groups. See page 18 for a diagram showing the structure of the initiative.

How will engagements be coordinated?One or two Climate Action 100+ Lead Investors will be identified for each company on the Focus List. Lead Investors will be responsible for coordinating engagement with their respective company. Climate Action 100+ Lead Investors will work through one of the Network Working Groups. See page 18 for details regarding the Climate Action 100+ Lead Investor role and page 19 which explains how engagements will be coordinated.

Why are the recommendations of the FSB Taskforce on Climate-Related Disclosure so important?Mark Carney has stated that the TCFD Recommendations “set out the disclosures that a wide range of users and preparers of financial filings have said are essential to understanding a company’s climate-related risks and opportunities.” Accordingly, by seeking disclosure aligned to the TCFD framework investors secure more complete, meaningful, reliable, and consistent information. Philippe Désfosses, CEO of French pension scheme ERAFP states it simply, ensuring implementation of TCFD is crucial as “the more companies reporteffectively on climate related risks and opportunities, the easier it becomes for investors to allocate the substantial amounts of capital required to implement the Paris Agreement and to work on their own climate risk disclosure.” 32

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FAQs

How is the Climate Action 100+ different from other engagements on climate change?The Climate Action 100+ is an umbrella initiative. It brings together, rather than replaces, existing engagement working groups as well as engagement conducted individually by investors. The initiative will ensure engagement with the 100+ companies has a common agenda and objectives, and is coordinated when conducted by different investors and/or different engagement working groups.In addition, as participants will be publicly named, the Climate Action 100+ will signal an increased focus on climate risks by the investment community to policymakers and companies more broadly.

How will the initiative address the financial sector?The initial top 100 list of companies included in the Climate Action 100+ will not include any banks, investors or insurance companies. However, investors are free to nominate firms in the financial sector as part of the additional “+ list”, and should they receive enough votes they would also be included in the initiative. While it is unlikely that any investors will be included in the final list, participating investors are themselves encouraged to align their disclosure on climate risks to the TCFD’s recommendations for investment managers and asset owners. For PRI signatories, the annual reporting framework will begin to capture TCFD-aligned disclosure in Q1 2018.

Will the initiative focus on operational emissions or emissions across the value chain? Climate Action 100+ is focused on ensuring that companies take into consideration risks associated with their most material sources of emissions. This means, that we will be asking companies to address and disclose how they manage emissions across their value chain (scope 1, scope 2 and scope 3 emissions).

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Some analysis shows that the largest emitters may be aligned to a 2 degree world. Are the largest emitters necessarily the most exposed to climate risk? The Steering Committee has noted that some analysis shows that some large fossil fuel companies could be aligned to the 2 degreescenario. For example, recent research carried out by Carbon Tracker suggests that more than 90% of Petrobras’ reserves will be required in a 2 degree scenario because they are low cost reserves relative to the reserves of the rest of the market and therefore, Petrobras may not need to alter its business model significantly to be in alignment. We believe that if it is the case that such companies’ business plans are consistent with the Paris Agreement’s goal of limiting global average temperature increase to well below 2 degrees above pre-industrial levels that (as per goal two of the initiative), at the least, they should provide disclosures that give investors confidence that this is in fact the case. If companies are able to conclusively demonstrate that their business is consistent with the below 2 degree scenario, they may be de-listed from the Climate Action 100+ initiative. We hope that this will act as an incentive for companies to improve disclosures.

What are the consequences for companies at the end of five years if no progress has been made?Through inclusion in the Climate Action 100+ focus list, companies are in effect put on notice by investors that their practice and disclosure around climate risk needs to align with the transition to a low carbon economy. Should progress not be sufficient at the end of the five year programme, investors participating in the Climate Action 100+ may choose to take further action with companies in their portfolio, such as divestment or through voting decisions. As noted above, any such action will be at the discretion of the investor individually, and will not be coordinated by the Climate Action 100+.

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Oliver Grayer Project Manager

IIGCC (Europe)

E: [email protected]: +44 (0) 7733 444 941

Emma HerdCEO

IGCC (Australia/NZ)

E: [email protected]: +61 2 8027 3501

Rebecca Mikula WrightDirector

AIGCC (Asia)

E: [email protected]: +61 2 8027 3502

Chris DavisSenior Director, Investor Network

Ceres (North America)

E:[email protected]: +1 617 247 0700 x109

Paul ChandlerHead of Environmental Issues

PRI (Multi-Region)

E: [email protected]: +44 20 3714 3180

climateaction100.org

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