Legal & General Investment Management (LGIM) has committed to "ratchet up" the stringency of its standards and sanctions regarding sustainability in its annual Climate Impact Pledge.
Climate ratings for over 1,000 companies in key sectors will be made public under a "traffic light system" on LGIM's website, which marks more than a ten-fold increase in the number of firms covered by the investment house.
Those selected are responsible for over 60% of the greenhouse gas emissions from listed firms.
Companies that are identified as falling short of LGIM's minimum standards, which includes lacking "comprehensive disclosure" of emissions or key sustainability certifications, will be subject to both votes against decisions and potential divestment.
Firms which take positive steps to improve their climate standings will be celebrated by LGIM, with Subaru, for example, now being reinstated in the firm's Future World funds after previously being excluded, following improvements in emission targets and disclosures.
Companies which remain on the exclusion list include ExxonMobil, Hormel, Kroger, Sysco, Rosneft Oil, KEPCO, Loblaw, MetLife, Japan Post Holdings and China Construction Bank.
Since 2019, seven out of the ten firms that have recorded the largest improvements in their climate ratings were companies previously named by LGIM as "laggards", while Australia, Japan and South Korea have seen the highest average year-on-year improvement on a regional scale.
Michelle Scrimgeour, CEO of LGIM, said: "As governments around the world are set to announce new and ambitious climate policies ahead of next year's COP26 conference, investors must also step up.
"Through our engagement programme renewed to align with the net zero challenge, we want to help steer companies and our clients towards success in a low-carbon world."
Meryam Omi, head of sustainability and responsible investment strategy at LGIM, added: "Inaction on climate change threatens the long-term stability of the market, but we know engagement with consequences can get companies to change.
"The challenge is having more speed and scale. That is why we are combining cutting-edge data with in-depth research into key sectors to support companies that are building resilient strategies, and systematically hold to account those that are not.
"Transparency is key - companies must be consistent in what they declare publicly and how they lobby governments behind the scenes. And investors must be transparent about how they assess companies.
"By making our climate ratings publicly available, we want to encourage companies to address gaps in their disclosures and strategies, whilst adding a layer of public accountability."