Corporates that lead on climate—such as Philips and HP—perform better financially, CDP report shows
- 12 September 2013
LONDON: Companies that integrate successful climate strategies perform better financially, according to CDP’s latest index which was launched at the non-profit's yearly Global Climate Forum today in London.
Leading corporates demonstrating a strong commitment to managing their impact on the environment, the top 12 of which includes members of The Climate Group Philips and HP, are generating better financial results than their peers. These are among the conclusions of the Global 500 Climate Change Report 2013, an annual report co-written by CDP and PricewaterhouseCoopers.
The top 12 companies are BMW, Daimler, Philips Electronics, Nestlé, BNY Mellon, Cisco Systems, Gas Natural SDG, Honda Motor, Nissan Motor, Volkswagen, Hewlett-Packard and Samsung.
Two leadership indices are included in the report, the Climate Performance Leadership Index (CPLI) which lists companies implementing robust climate and emissions reduction strategies, and the Climate Disclosure Leadership Index (CDLI), which lists the most ‘climate transparent’ companies. The index covers only those that score in the top 10% for the quality of data they disclose.
Based on companies past leadership positions on the CDLI and the CPLI plus Global 500 revenue data sourced from Bloomberg for financial year 2012, the report’s authors suggest that: “[…] companies that achieve leadership positions in climate change generate superior stock performance. Since 2005, CDLI companies delivered total returns of 82.8%, outperforming the Global 500 (49.6%) by more than two thirds. Moreover, CPLI companies generated average total returns of 31.9% since 2010, outperforming the Global 500 (24.8%) by more than a quarter.”
The report is based on analysis of climate and energy data from 389 companies that are listed on the FTSE Global 500 Equity Index, which is collated by CDP at the request of 722 institutional investors representing US$87 trillion in invested capital. These indices are used by investors to inform their decisions on climate risks and opportunities.
Companies from Germany, Switzerland and the UK dominate the CPLI relative, but the number of US companies in the CPLI has more than doubled since 2012. New to the index are India, Norway, South Africa, South Korea and Sweden.
Paul Simpson, chief executive, CDP, said in a statement: "Many countries are demonstrating signs of recovery following the global economic downturn. However, clear scientific evidence and increasingly severe weather events are sending strong signals that we must pursue routes to economic prosperity whilst reducing emissions of greenhouse gases. It is imperative that big emitters improve their performance in this regard and governments provide more incentives to make this happen. The corporate world is an aggregator of both risks and opportunities from this challenge, so this report is written for businesses, investors and policy makers that want a clear understanding of how the world’s largest listed companies can transform themselves in order to protect our natural capital."
The report also shows companies that offer its employees monetary incentives related to energy consumption and carbon emissions are 18% more successful at accomplishing emission reductions.
Malcolm Preston, global lead, sustainability and climate change, PwC says: "The report underlines how customers, suppliers, employees, governments and society in general are becoming more demanding of business. It raises questions for some organizations about whether they are focused on sustaining growth in the long term, or just doing enough to recover growth until the next issue arises. With the initial IPCC report only weeks away corporate emissions are still rising. Either business action increases, or the risk is regulation overtakes them."
The report also shows that 500 of the largest listed companies in the world are responsible for almost 75% of this group of companies’ 3.6 billion metric tons of greenhouse gas emissions a year.
Currently, CDP warns that there is a lack of detailed reporting and information of GHGs from sources related to company activities (Scope 3 emissions), as opposed to those from sources owned or directly controlled by them, which can lead companies to underestimate their full carbon impact.
Commenting on Google's 9% drop in carbon emissions in 2012, Mark Kenber, CEO, The Climate Group, noted in August: “As CDP’s research has shown before, there is obvious investor demand for consistency of carbon disclosure among businesses. Investing in renewables and transparent emissions reporting is a prerequisite of climate leadership and essential to achieving a prosperous, low carbon future for all.”
HP, which appeared in the top 12 companies in CDP's index, is the Lead Sponsor of Climate Week NYC, taking place from September 23, 2013.