Economy fails to derail CDP response

www.environmental-finance.com
24 September

Dire economic conditions did not dissuade companies from voluntarily disclosing climate change risks and mitigation strategies, as a record number of top corporations replied to an annual survey conducted by the Carbon Disclosure Project (CDP).

Eighty-two% of companies in the Global 500 index responded to the CDP information request, up from 77% last year, driven by a doubling of response rates in the BRIC countries (Brazil, Russia, China and India). Sixteen out of 36 Global 500 companies located in BRIC countries responded to the CDP, including all the companies based in Brazil.

The increased response from the BRIC countries suggests that corporations in these regions "are in fact ahead of their governments on climate change policy", said Abyd Karmali, a London-based managing director at Bank of America Merrill Lynch and president of the Carbon Markets & Investors Association.

Meanwhile, the S&P 500 also generated the highest response rate ever, with 332 corporations, or 66%, responding, up from 64% last year, 56% in 2007 and 47% in 2006. The upward response trend continued despite a severe economic crisis that led to substantial changes in the composition of the S&P 500 due to acquisitions and bankruptcies, according to the report.

"Given the economic crisis in the past year, the [steadily increasing] response rate shows continued commitment by the market overall to this important issue," said Robert Moritz, New York-based chairman and senior partner at PricewaterhouseCoopers, which produced a report analysing the responses.

Of the responding companies in the S&P 500, 79% disclosed corporate greenhouse gas (GHG) emissions, up from 73% last year. The sectors with the highest disclosure levels were utilities, materials and consumer staples, which all face potential challenges if carbon regulations are implemented, according to the report.

The survey also showed a sharp spike in the number of respondents disclosing emission reduction targets, to 52% from 32% last year. But this represents only 169 of all S&P 500 companies, or 34%, Moritz noted. "There are some disconnects between action and attention, which suggests what is needed is regulatory certainty," Karmali said.

Of the Global 500 companies, 51% reported emission reduction targets, up from 41% in 2008. But only 36% of the targets extend beyond 2012 because a global agreement is needed to provide sufficient certainty for global companies to set medium and long-term reduction targets, according to respondents.

Many reporting companies emphasised the importance of creating the right regulatory framework and incentives, particularly in light of the upcoming international negotiations in Copenhagen, said James Cameron, CDP board member and London-based vice-chairman of asset manager Climate Change Capital. "We know if that's done right, regulation creates investment opportunity," he said. "We know if we act now, the costs are manageable over time."

The CDP also launched a pilot programme to establish performance scores that measure corporations' actual performance in responding to and reducing their contribution to climate change, with an eye toward formally incorporating the information into a more in-depth analysis next year. "It will help show where risks are being managed and opportunities maximised, and provide investors with insight into how well companies are preparing to compete in a low-carbon environment," said Paul Dickinson, CEO of the London-based CDP.

The scores are intended to complement the Carbon Disclosure Leadership Index (CDLI), which rates firms according to the level and quality of their disclosure and reporting on GHG emissions and climate change strategy data. Banking group HSBC received the top score at 92 from the Global 500, while financial services company Comerica received the highest CDLI score at 91 among the S&P 500. "The financial sector is pretty adept at identifying risks and opportunities from climate change," Karmali said.