Policy Engagement And Climate Disclosure Regulations

This briefing was co-authored by leading global think tank InfluenceMap and a group of institutional investors at the forefront of efforts towards corporate climate policy engagement reform: BNP Paribas Asset Management (France), Railpen (UK), AkademikerPension (Denmark) and Storebrand (Norway) with a combined $1 trillion of assets under management.

The purpose of this briefing is to make the case for requiring reporting on corporate climate policy engagement in emerging mandatory disclosure regulations globally. The following investor perspectives are covered:

• Investors’ work to embed climate policy engagement in sustainability reporting initiatives and standards.
• The key elements investors expect to see in reporting and different disclosure frameworks.
• How policy engagement can be incorporated as regulators adopt mandatory disclosure regulations.

The global sustainability reporting landscape has evolved in recent years from a range of purely voluntary initiatives to include an emerging set of consolidated international standards and regulatory regimes. As part of this process, investors have developed reporting guidance for companies to provide material and decision-useful information on their direct and indirect climate policy engagement.

Investors’ expectations are based on the understanding that comprehensive, science-aligned policy and regulations are critical to limiting global average temperature to 1.5 degrees above pre-industrial levels, a point emphasized by the Intergovernmental Panel of Climate Change (IPCC), the UN body responsible for representing the global scientific consensus on climate change, in its 2022 Mitigation of Climate Change report. Not achieving that goal threatens the stability of economies and financial markets, which in turn will substantially undermine the ability of investors to deliver long-term returns to clients.

Accurate information on corporate climate policy engagement is considered important to investors for a variety of reasons and use-cases. These can broadly be categorized as:

• Company-level risks and opportunities: Information on a company’s policy positions, its direct and indirect (through trade associations) political engagement, and how this activity is governed, provides investors with an important insight into the coherence of its approach to tackling climate change and transitioning its business model, and the overall quality of its climate governance. Legal and reputational risks are also increasingly relevant, especially in cases where there may be a discrepancy between the company’s public statements and commitments and its policy engagement.

• Systemic risks and opportunities: Large and diversified investors consider policy engagement of companies in their portfolios to be critical to delivering a conducive policy environment for the economic transition, which is in turn critical to minimize climate risks to the entire financial system. Support for climate policy therefore gives investors the regulatory confidence to make larger investments in the transition to a net-zero global economy sooner.

The Global Standard on Responsible Corporate Climate Lobbying was instigated by institutional investors to drive a step-change in corporate action and reporting. The process to create the Global Standard considered input from more than 150 diverse stakeholders including investors, corporates, academics, and civil society across several continents. The result, published in 2022, is a set of indicators covering the commitments, governance, actions and disclosures investors expect from companies. The Global Standard is now being used regularly to inform investor engagement with issuers. It is supported by major investor initiatives focused on climate that between them represent tens of trillions of dollars of assets under management, including AIGCC, Ceres, ICCR, IIGCC, IGCC, SHARE and UNPRI.

Climate policy engagement is also a strategic element of the Climate Action 100+ (CA100+) Net Zero Company Benchmark. CA100+ is an investor collaborative engagement initiative which brings together over 600 investors to engage around 170 of the world’s largest corporate greenhouse gas emitters. The IIGCC Net Zero Engagement Initiative and Climate Engagement Canada are other examples of finance-led initiatives which include policy engagement assessment criteria where increased scrutiny of policy engagement is paired with stewardship. According to the Ceres SICS shareholder proposal tracker, more investors filed proposals on corporate lobbying and political activities than any other climate topic in 2024, with around 40 proposals submitted. A number of funds have introduced exclusions for reasons including climate policy engagement, including the Government Pension Fund Global of Norway and AP7.

A number of investors have also set voting policies which require lobbying disclosures. For example, Railpen’s 2025 Voting Policy states it will consider a vote against the re-election of an appropriate responsible director where the company fails to meet the climate policy engagement criteria of CA100+.

In recent years, climate policy engagement disclosure requirements have also been incorporated with support from investors into the EU Corporate Sustainability Reporting Directive, the Transition Plan Taskforce Disclosure Framework and the ISO Net Zero Guidelines (due to evolve into an international standard). Of seven disclosure regimes assessed by Oxford Net Zero, only one – IFRS – does not include an explicit requirement on lobbying disclosure.

Investors have identified the following key elements for policy engagement reporting (summarized from the Global Standard on Responsible Corporate Climate Lobbying):

Commitment and governance

Commit to ensure all direct and indirect climate policy engagement is science-aligned, and ensure leadership is responsible for oversight.

Assess and address

Assess policy engagement positions, identify misalignment with the 1.5 degree goal of the Paris Agreement, and take action to address these.

Disclose and report

Publish a detailed annual review of direct and indirect climate policy engagement and spending.

Emerging disclosure regulations take a range of different approaches, but three main frameworks dominate the emerging landscape: CSRD, transition planning and IFRS. Here we assess the extent to which each incorporates guidance on climate policy engagement, summarized in the table below (alongside voluntary standards for comparison). Although policy engagement is only explicitly addressed under some frameworks, full disclosure under each system, including IFRS, appears to entail reporting relevant information on policy engagement.

CSRD

• The EU Corporate Sustainability Reporting Directive (CSRD) requires companies to report not only on the risks they face but also on their impacts on the environment and society (the ‘double materiality’ framework). The European Sustainability Reporting Standards (ESRS, for use by all companies subject to CSRD) currently includes Disclosure Requirement G1-5 on ‘Political influence and lobbying activities’.
• Requirement G1-5 specifically includes disclosure of:
  • the topics, positions and oversight of lobbying activities;
  • how these positions interact with the entity’s material risks, impacts and opportunities.
• G1-5 does not, however, explicitly require reporting on how science-aligned those positions are, nor a review of the entity’s indirect lobbying through trade associations, which are two key indicators under the Global Standard on Responsible Corporate Climate Lobbying. Further details of each of the ESRS required data points are available here.
• The European Commission's proposed Omnibus Simplification Package would reduce the scope of CSRD significantly, but not remove requirement G1-5 as it currently stands.
• The inclusion of policy engagement under CSRD stemmed from the view of many large, diversified investors (such as pension funds) that regard climate policy engagement as a systemic risk, given that it can significantly impact the speed of governments’ adoption and implementation of policies to reduce the impacts of climate change. For example, AP7 has stated that the "importance of climate lobbying has become firmly established as a new norm on the sustainability agenda, but there is still much to do before negative climate lobbying is brought to an end." The fund has excluded ExxonMobil, among others, from its portfolios, based on climate policy engagement criteria.

Transition Plan Disclosure

• Net-zero transition plans are emerging as the leading format for relevant climate information disclosure. At COP27 the UN High-Level Expert Group (HLEG) Integrity Matters report on the net-zero commitments of non-state entities called on companies to provide information on external policy and engagement efforts in the context of these plans.
• The Transition Plan Taskforce Disclosure Framework, the gold standard for transition plans, building on the Glasgow Finance Alliance for Net Zero (GFANZ), states that information on policy engagement “will play an important part in an entity’s transition plan … and helps users to understand an entity’s advocacy position relative to its peers and the ways in which government or non-corporate policy is impacting the entity and vice versa”.
• Companies’ successful implementation of their transition plans and climate targets will depend heavily on the regulatory and economic environment, and therefore in turn the company’s engagement with governments to influence policy is a key part of its transition risk management strategy. Investors need to understand which policy changes are required to make a transition plan viable, and how the company plans to help bring about that regulatory environment.
• The TPT Disclosure Framework section on Engagement Strategy (under 3.3) includes disclosure of “current and planned engagement with government, public sector and communities” and how this contributes towards the ambition of a company’s transition plan. The disclosure considerations explicitly reference both direct policy engagement and indirect engagement through trade associations, and sector guidance directs companies to the Global Standard on Responsible Corporate Climate Lobbying. The IFRS Foundation has now assumed responsibility for TPT materials, which will help guide disclosures of transition plans where they exist (as required by IFRS S2).
• The UK Government has committed to making transition plan implementation (i.e. not just disclosure) mandatory for the largest companies, while the Corporate Sustainability Due Diligence Directive (CSDDD) did the same for large EU companies. However, the proposed 'Omnibus' package removes the requirement to implement transition plans under CSDDD, and has made implementation of both directives uncertain. Draft guidance published for the ESRS on developing a transition plan made reference to the importance of policy engagement reflecting a company’s transition goals.
• Policy engagement is included under leading transition planning assessment tools and investor guidance including the ACT Framework, ATP-Col and IIGCC Investor Expectations of Corporate Transition Plans.

IFRS

• Following financial market demand, in 2021 the IFRS announced that the International Sustainability Standards Board (ISSB) would develop a comprehensive global baseline for sustainability disclosures. The first two standards were launched in 2023 as IFRS S1 (sustainability disclosures) and S2 (climate disclosures). Each requires disclosure of information on the risks and opportunities that could be expected to affect an entity’s financial prospects, and how entities are managing those risks and opportunities. These standards are now being adopted by jurisdictions around the world.
• IFRS requires reporting on the sustainability- and climate-related risks to a companies’ financial performance and position, as well as opportunities. Risks are categorized under IFRS as either physical risks or transition risks, with the latter including policy, legal, technological, market and reputational risks.
• ISSB board member Richard Barker stated in July 2024 that “good disclosure would necessarily incorporate” information on climate policy engagement; investors have called for explicit criteria to be included as IFRS S1 and S2 are adopted into jurisdictional regimes.
• A company's ability to navigate and take advantage of the numerous risks and opportunities presented by the climate transition will depend heavily on its understanding of, and engagement with, the shifting regulatory environment. Many investors therefore consider climate policy to be a material risk factor that companies should be reporting on under this framework. This should include how the company is likely to be impacted by known and emerging climate policy but also how it might be impacted by prospective climate policy scenarios, where the introduction of different types of policies would have significant bearing on a company’s ambitions.
• However, importantly, the disclosure should also encompass how the company is aiming to influence climate-related policy because, should those policies be introduced, they are likely to impact the company’s financial performance and position.
• Policy engagement can open significant economic opportunities for firms. General Electric, for example, was a longstanding advocate for the U.S. Production Tax Credit, which successfully incentivized investment in wind energy and thus benefitted General Electric’s wind turbine business (since spun off as GE Vernova). Sony joined the RE100 business alliance in 2018, which advocates for renewable energy policy globally. Its recent success in lobbying Thailand's Industry Ministry for investment incentives for companies with 100% renewable electricity targets is now supporting Sony’s plans to install sonar panels at its manufacturing plants in Thailand.
• There are many cases of companies lobbying against policy measures aligned with the prevailing science and the Paris agreement, or trying to water them down. Companies need to provide a full account of their direct and indirect lobbying activities to provide investors with the information they need to identify any mismatch between companies’ stated position on climate and emissions reduction, their strategy and investment plans. This misalignment can lead to various types of risk, from the reputational damage linked to claims of greenwashing to stranded asset risk or even legal risks.
• Thus, given investors’ clear signals of their need for information on climate lobbying disclosures, companies should include this information when reporting against the IFRS standards.

There are a number of opportunities on the horizon to shift from voluntary to mandatory disclosures that include this important information on climate policy engagement.

The IFRS Foundation has now assumed responsibility for Transition Plan Taskforce materials and has published guidance to support companies with their reporting. This recognizes policy action as a key assumption relevant to transition planning, but investors and companies would benefit from the creation of specific educational materials in this area – based on the Global Standard on Responsible Corporate Climate Lobbying, and making use of the Disclosure Recommendations and considerations the Transition Plan Taskforce has already published – to help guide high quality reporting in this area.

As the Glasgow Financial Alliance for Net Zero Secretariat has noted, national regulators should also “engage with and ensure alignment” with transition planning materials as they are developed and incorporated by the IFRS Foundation. In the longer term, the IFRS Foundation has said it will “consider the need” to formally enhance application guidance within IFRS S2. This exercise would be a valuable opportunity to provide clarity to companies on the extent to which there is ‘interoperability’ - or alignment - between IFRS and mandatory disclosure regimes that already specifically reference climate policy engagement, such as CSRD.

In time, and taking advantage of investors’ access to a growing body of climate policy engagement disclosures, the application guidance within IFRS S2 could be enhanced to specifically include climate policy engagement disclosure guidance that builds on TPT materials, and meets with investor’s information needs and expectations by embedding the requirements of the Global Standard on Responsible Corporate Climate Reporting.