
Converging on climate lobbying: Aligning corporate practice with investor expectations
This report details the importance of climate lobbying for the long-term interests of institutional investors. It covers recommendations for future engagement and case studies, and is primarily aimed at investment professionals. The report does not have any specific focus on discussing a list of companies, rather, it is an investor initiative that advocates for climate lobbying practices and investor expectations for companies globally.
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OVERVIEW
Preamble to the Principles
The report begins with a preamble to the six principles that institutional investors should follow to incorporate environmental, social, and governance (ESG) issues into their investment analysis and decision-making processes. These principles suggest that the integration of ESG issues can affect the performance of investment portfolios and better align investors with broader societal objectives.
Engagement with investee companies
The report lays out several reasons why investors should engage with investee companies on climate policy lobbying. It outlines how companies’ climate change positions and indirect lobbying practices can cause legal and reputational risks and long-term portfolio volatility. The report provides an investor expectations statement that highlights policies and practices of companies on climate issues. Investors can use this statement to engage with companies on their policy positions on the issue and monitor the positions of their third-party organisations.
Examples of corporate practice
The report provides several examples of corporate practice and PRI signatory case studies that showcase investor action. These case studies highlight how investors can engage with companies effectively on climate policy lobbying. Appendix B provides investors with questions to ask investee companies on financial and sustainability aspects regarding climate policy and lobbying measures.
Why climate lobbying matters
Since the creation of the United Nations Framework Convention on Climate Change (UNFCCC) in 1992, policies and programmes for climate action have continued to develop across the globe. Corporate requirements for climate action have also increased. However, the rate at which policies and legislation are implemented varies across countries. Appendix A provides an overview of how companies communicate their policy positions on climate and how they monitor third-party organizations’ policy positions. The report suggests that investors need to incorporate climate lobbying practices into their ownership policies and practices and incorporate ESG issues into their investment analysis and decision-making processes.
Governance
The report suggests that investors should seek to understand companies’ governance practices on climate and lobbying-related issues. Investors should seek answers to questions on the company’s corporate climate position, direct lobbying practices, indirect lobbying through association, and managing alignment. The questions aim to establish the involvement of the board and the company’s public disclosure on lobbying activities related to climate.
Recommendations for future engagement
The report provides recommendations for driving climate lobbying practice performance further, including greater focus on improved governance measures, evidence of supporting public policy to limit temperature rise to 2 degrees Celsius, and increased transparency.
Conclusion
In conclusion, this report highlights how investors should incorporate ESG issues, particularly climate lobbying practices, into their investment analysis and decision-making processes. The report provides investors with a framework for engaging with investee companies on climate policy lobbying and highlights corporate practices that investors can use as examples. It also provides investors with recommendations on how to drive climate lobbying practice performance further. By following these guidelines, investors can better align their long-term interests with broader societal objectives and encourage adoption of ESG practices among investee companies.