The problem 

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1. The financial system has huge power over the fossil fuel value chain. If the world is to avert catastrophic climate change, greenhouse gas emissions have to halve by 2030, before reaching net-zero by 2050. Publicly listed companies are responsible for around a quarter of global emissions and stand at the frontier of climate innovation. It is predominantly the financial system that holds ownership rights and powers over these companies.
 

2. Institutional investors increasingly rely upon engagement to influence their portfolio on climate change. The rise of passive investing and diversification of many of these institutions make ‘exit’ impossible. There is also a growing academic consensus that the principal alternative to engagement, capital allocation, can only influence companies under limited conditions.

3. Yet there is currently no way of measuring engagement impact. We have no reliable way to distinguish between successful and unsuccessful engagements, and no evidence base from which to derive conclusions about best practice. An investor cannot optimize their engagements, or answer the growing legal expectation that they be able to verify their impact claims. Asset owners, stakeholders, and civil society cannot currently hold investors to account on climate.

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4. The ESG market has grown exponentially as has government regulation. In March 2021, President Biden set up a 22-person enforcement team to scrutinize sustainable products for greenwashing. In July 2021, the UK Financial Conduct Authority (FCA) circulated a letter warning asset managers that ESG funds must be able to evidence real-world impact. 2Dii research finds that while 52% of funds make environmental impact claims, almost none are able to evidence those claims in line with regulation.

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Our solution 

We have developed a novel methodology to empirically verify investors' engagement impact. This can help investors to demonstrate the value of their stewardship to stakeholders and civil society.

Our knowledge of the consumer protection landscape in Australia, the U.K., the E.U., and the U.S., combined with our climate expertise, allows us to help investors to meet growing regulatory scrutiny of impact claims. This issue has been brought starkly into focus by a damaging probe launched by the U.S. SEC and German regulators into DWS for exaggerating its ESG claims.

Collaboration & our assessment 

We have developed a robust procedure for assessing investors' climate impact and the legitimacy of their claims. We bring our data, analysis, and conclusions together in an independent report.