Wall Street Climate Tactic Called ‘Engagement’ Yields Results
Companies asked by investors to disclose their environmental impacts were twice as likely to do so than those that weren’t asked directly
A smokestack in Lyon, France.
Photographer: Philippe Desmazes/AFP/Getty Images
Wall Street’s preferred tool for pushing portfolio companies to decarbonize is getting some results, according to a report from environmental nonprofit CDP.
Companies that were asked by investors to disclose their environmental impacts were 2.3 times more likely to do so than those that weren’t asked directly, CDP said. The findings are from CDP’s 2022 Non-Disclosure Campaign, an initiative that saw 260 financial institutions with about $30 trillion in assets—including HSBC Holdings Plc and Schroders Plc—encourage 1,466 global companies to report environmental data.
Engagement, also known as stewardship, is the process by which investors are supposed to have constructive dialogue with a portfolio company’s management on matters material to its future outlook. That includes plans related carbon emissions. It’s a core tenet of asset managers’ ESG strategies and is credited by some for having pushed companies to improve environmental standards and cease sales of harmful products.