Despite progress through our Climate Engagement Escalation Programme, more action is needed from the world’s 30 systemically important carbon emitters, as Sora Utzinger and Louise Wihlborn explain.

Read this article to understand:

  • The gulf between climate commitments and the governance to deliver them
  • The progress to date in our Climate Engagement Escalation Programme
  • Why we are extending engagement to the demand side, focusing on hard-to-abate sectors

In early 2021, we launched our Climate Engagement Escalation Programme (CEEP), focused on 30 systemically important carbon emitters around the world. At launch, the programme targeted significant global polluters in the oil and gas, metals and mining and utilities sectors, requiring them to deliver net-zero Scope 3 emissions by 2050 and establish robust transition roadmaps.1

We set a three-year timeframe for engagement, incorporating clear escalation measures for non-responsive businesses or those that do not address climate-related issues quickly enough. At the end of the period, we stated our commitment to divest bond and equity exposure in companies that fail to meet our climate expectations.

Our key asks of these companies included:

  • Setting 2050 net-zero Scope 3 emissions targets that cover the whole value chain
  • Integrating climate roadmaps into their corporate strategy, including near-term transition targets
  • Evidencing effective board oversight and alignment of incentives
  • High-quality reporting aligned with Task Force on Climate-related Financial Disclosures (TCFD) recommendations, and carrying out scenario analyses
  • Providing transparency over and Paris-alignment of all lobbying activities

Two years on, Sora Utzinger (SU), our head of ESG corporate research, and Louise Wihlborn (LW), ESG analyst, update on progress and explain why the programme is being expanded to the demand side.

Can you summarise progress under CEEP?

SU: We have carried out over 200 company engagements since CEEP began, including one-on-one meetings, conference calls and taking part in industry events and workshops. That process is part of our information gathering, which allows us to score and rank companies against our evaluation framework.

From this, we categorise companies as climate leaders, progressives, companies making limited progress with decarbonisation or laggards, according to whether they are committed to making positive steps towards decarbonisation (see Figure 1).

We won’t reveal names at this point, but our five poorest performers are all listed in emerging markets.

Figure 1: Assessment to reflect net-zero alignment

Level Alignment status
Laggard The company is inactive and not considered aligned towards a net-zero pathway
Limited The company is reactive and appears committed to aligning towards a net-zero pathway
Progressive The company is proactive and in the process of aligning towards a net-zero pathway 
Leader The company leads peers and is aligned towards a net-zero pathway 

Source: Aviva Investors, 2023

Overall, companies have been receptive in our discussions. On each occasion we engage, we set out specific asks and define what we would regard as a“win”. For example, we might suggest remuneration is aligned with climate targets, that milestones are set to align with longer-term climate ambition and that financial disclosures are aligned with TCFD guidelines. We then revisit these subjects after – say – 12 months, to monitor progress.

We have recorded more than 200 “wins” from our CEEP engagements, where we have seen real changes in behaviour in line with our asks (Figure 2).2 There has been progress on many fronts. Twenty two companies from our target group have set out or strengthened formal ambitions to deliver on net-zero targets by 2050, or earlier. Despite this, we believe overall scores are disappointing; even our climate leaders are not Paris-aligned. Much more needs to be done.

Figure 2: CEEP engagement – expectations and wins

Source: Aviva Investors Responsible Investment Review, December 2022

  • Lobbying: Transparency over and Paris-alignment for all lobbying activity
  • Climate disclosures: High-quality TCFD disclosures including scenario analysis
  • Governance: Effective board oversight of management incentives and climate targets in variable pay plans for senior leadership and wider business
  • Transition plans: Integrate decarbonisation roadmap into corporate strategy including near-term targets
  • Climate targets: 2050 net-zero Scope 3 targets for entire business operations, validated by the Science-based Targets Initiative

What are the obstacles inhibiting progress?

LW: The first issue is the scale of Scope 3 emissions from the value chain. While most of our focus companies have agreed to target net-zero by 2050 or sooner, almost one third do not consider Scope 3 at all, which are the most material emissions.

Secondly, transition plans are often disconnected from business fundamentals. We expect more detailed strategies setting out how net-zero goals will be met through milestones along specific timelines.

There is a lack of disclosure and we see little scenario analysis

Third, there is a lack of disclosure. Although most companies being monitored are committed to align disclosures with TCFD guidelines, we see little scenario analysis. Including energy demand assumptions is particularly important, as are the carbon pricing regimes being considered for testing asset resilience.

Fourth, we do not see evidence of adequate incentives to encourage rapid transition. Companies are taking steps to strengthen their ESG governance structures at a board and senior management level, but most are not linking remuneration with their climate transition planning. Given the urgency of the climate crisis, aligning incentives and emissions reduction plans with material and quantifiable targets must be a priority. There are also cases where financial and non-financial outcomes are not synchronised, so there may still be generous pay-outs to management while financial underperformance persists.

This lack of coherence can also be seen in public policy. Some of the major carbon emitters we are tracking have stated their ambition around net zero while continuing to lobby against carbon pricing and support industry bodies whose activity is clearly not Paris-aligned. To bridge the gaps between what is being said and done, we want greater transparency over activities and the outcomes.

We have now expanded the programme to the demand side, focusing on hard-to-abate sectors. Why?   

SU: Adding renewables like wind and solar into the energy mix has not diminished the use of fossil fuels. There has been no obvious displacement effect. Instead, the overall pool of energy has continued to grow. We must ensure the pattern does not continue and need a concerted effort to create an energy system where new sources genuinely replace existing ones. That’s why we need to focus on achieving a full transition from fossil fuels to renewables.

If we use a systems lens, it’s obvious engaging with the supply-side alone won’t be enough. It is impossible to decarbonise when demand for hydrocarbons persists and there has been limited progress decarbonising sectors like heavy industry and aviation. If few low-carbon alternatives are viable, it will be hard to significantly reduce emissions. So, we have decided to extend the CEEP to encompass hard-to-abate industries, including chemicals, aviation, cement and steel, which all stimulate fossil-fuel demand. We must engage with stakeholders in the wider energy system, not just one constituent part.

We must engage with stakeholders in the wider energy system

While more oil and gas companies are presenting strategies to service hard-to-abate segments – developing low-carbon products and digital solutions, and repurposing existing energy infrastructure for low-carbon fuels, for example – end markets and end consumers need to be ready to take them if they are to have an impact. This is the starting point of our expanded programme (see Figure 3). 

We are concentrating on decarbonisation strategies for each of these sectors and evaluating how much companies are investing in research and development and capital expenditure. For example, our early engagements in aviation have mainly been concerned with sustainable aviation fuels (SAFs), the most feasible way to decrease aviation emissions. It looks as if having multiple SAF suppliers will be critical for airlines due to predicted supply shortages. In the next wave of our engagement, we will put forward specific change requests to companies.

We will look to replicate this approach in other hard-to-abate sectors later this year, starting with chemicals, and then expanding into transport, steel and cement. There are numerous obstacles to decarbonisation in all these areas. Thin margins, nascent approaches to carbon-reducing processes that are more expensive than their predecessors…they exist. The challenge is how we try to address them through carefully selected targets.

Figure 3: Expanding engagement into hard-to-abate sectors  


Aviation is not a major contributor to global warming, accounting for around 2.5 per cent of global emissions, but is controversial as more than three quarters of the world’s population cannot afford to fly. Unlike road transport, there are no viable alternatives to decarbonise yet. The most feasible options are through SAFs, made from feedstocks like cooking oil, animal waste fat and potentially waste wood or algae.


The chemical industry plays a vital role in the modern world but is heavily reliant on fossil fuels and faces challenges to switch production to environmentally friendly solutions. The cost of decarbonisation (short- and long-term) is estimated at more than $1 trillion.


The steel industry is one of the top three contributors to CO2 emissions worldwide. More than 70 per cent are directly linked to the use of coal as fuel and reducing agent in blast furnaces. Alternative production processes are possible but not competitive. Change is likely to need a regulatory shift and agreement over the definition of near-zero production.

Maritime transport

Shipping is heavily dependent on oil to meet its energy needs. Ships typically have a 25-to-35-year lifespan, impeding the uptake of eco-friendly technologies. Retrofitting ships to run on hydrogen-based fuels is an option but will require significant investments from multiple stakeholders. Other efficiency measures (wind kites, rotor sails) can also help reduce fuel consumption.


Cement production relies on a wider range of energy sources than steel, although coal represents nearly half of total energy consumption. Carbon capture, utilisation, and storage (CCUS) is the only method that can prevent energy and process-related emissions; integrating CCUS will be a vital step to decarbonise.

Source: Aviva Investors, March 2023

What are your engagement priorities for 2023 with the 30 original companies on the CEEP?

LW: We want to see sharper focus on just transition planning. Transition will impact millions of employees in established industries, so we expect union engagement and/or communication with the appropriate worker forums. We know we must address multiple factors while the energy demand- and supply-sides adjust. We will collaborate with other stakeholders to accelerate change, including working with our sovereign and macro-stewardship teams to engage with governments and regulators.

You are engaging in multiple jurisdictions. Are there regional nuances?

SU: The nuances are important. Countries and regions with strong regulations and incentives to reduce GHG emissions are more likely to see swifter progress with decarbonisation, and the availability of renewable energy and appropriate infrastructure will also impact the pace of change. In some countries, activity is dominated by state-owned enterprises, which may not have the same incentives for progress as listed companies.

Our climate engagement has evolved to address the complexities of the transition

Our climate engagement has evolved to address the complexities of the transition. The initial focus was on setting ambitious emissions reduction targets, but we have now shifted to execution and developing specific roadmaps. We need to move beyond general target setting, to discuss exactly how goals will be met.

We want to work closely with companies to understand their challenges and opportunities, with the objective of identifying the right set of technologies and approaches that will reduce emissions. The same goes for governance; we want to work with them to develop robust governance and reporting frameworks for transparency and accountability.

Progress is being monitored bi-annually, at which point you consider the need to escalate. What actions have been taken?  

LW: The outcome of our assessments and the responsiveness of the company shape our engagement and determine next steps, case-by-case. It might include coordinating with other stakeholder networks and partnerships, attending company AGMs to ask questions of the board and using our voting powers.

During the 2022 AGM season, we sanctioned 18 companies for failing to meet key measures of climate ambition and risk management. Our actions included supporting a shareholder resolution at Chevron calling for it to cut Scope 3 emissions and voting in favour of ConocoPhillips’ shareholder proposal on emissions reduction targets. The objective of all these actions is to ensure corporate practices are scrutinised.  

Every system has leverage points where targeted interventions can work

Another lever we have is our market reform activity, which is intended to enhance the integrity of financial system, because no-one acts within a vacuum. Every system has leverage points where targeted interventions can work.

Our sovereign engagement programme includes central banks and finance ministries in 49 jurisdictions. Our asks include strengthening Nationally Determined Contributions (NDCs), supporting the adoption of International Financial Reporting Standards corporate climate disclosures and future International Public Sector Accounting Standards Board sovereign climate and nature disclosures, and building capacity within finance ministries so climate and nature-related data is considered rigorously.

There is symbiosis in our micro- and macro-engagement work, particularly as some of CEEP’s poorest scorers are government-controlled entities in emerging markets.

Figure 4: Our escalation process and key levers

Our escalation process and key levers

Source: Aviva Investors, 2023

Is Aviva Investors still committed to divest if companies fail to meet expectations after engagement?

SU: Yes, but that is a last resort, as we believe robust, persistent engagement is a powerful agent for change. Having a seat at the table can have a more positive impact on real-world emissions than divesting. It is certainly more constructive than leaving heavy emitters with shareholders that do not see improving climate characteristics as a priority.

We want our engagement to help companies evolve their climate strategies and enhance reporting

We know change takes time. That is why we set a three-year period for companies to make progress, hoping this will allow us to cultivate relationships built on mutual trust. We want our engagement to help companies evolve their climate strategies and enhance reporting, and the progress we have seen so far is testament to this. We are particularly pleased with the turnaround from companies in countries that do not have a traditional culture of shareholder engagement.

Having said this, we need climate action urgently. The financial risks posed by climate change are real. We have an obligation to our clients and society not to fund activity that could potentially contribute to catastrophic outcomes. So, where momentum falls short of our expectations, we will become more forceful and escalate, and ultimately will not hesitate to divest to drive the necessary change.

For companies that fail to respond and adapt, the investment case is broken.

More detail on CEEP activities can be found in Aviva Investors’ Responsible Investment Review 2022.

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