Investors call on companies to reduce their greenhouse gas emissions
A new investor-led CDP initiative, Carbon Action, was recently launched calling on companies to accelerate action on carbon reduction activities. A group of 35 investors with US$7.6 trillion assets under management requested that the 500 largest companies in the world take concrete action to reduce their emissions. Companies are specifically being encouraged to:
– Make year-on-year emissions reductions;
– Identify and implement investment in emissions reduction initiatives which have a satisfactory payback period; and
– Set and publicly disclose an emissions reduction target (if they are not already doing so).
Companies will be asked to demonstrate these actions by disclosing them, including any examples of best practice, through the established 2011 CDP system to ensure ease of reporting.
With business currently generating 70% of global greenhouse gas emissions and industrialised countries expected to make emissions reductions of 80% by 2050 (against 1990 levels), it is vital that business and investors step up to the challenge now to help countries meet their targets. Governments must also do their bit to help encourage and enable companies to report their greenhouse gas emissions.
Find out more about CDP Carbon Action.
Policy makers and regulators should introduce policy measures to improve environmental investing
In a period of intense concern for the stability of capital markets, regulators are increasingly recognising the importance of requiring financial institutions, such as pension funds and insurance companies, to take into account environmental considerations in their investment strategies, so the institutions are better placed to manage investment risks. In a study commissioned by the UK Department for Environment, Food and Rural Affairs (DEFRA), investors claimed to use company carbon reports frequently, even though some are not fit for purpose – with irrelevant and inconsistent data – which is not always assured or independently verified. ‘Financial Institutions: Taking Greenhouse Gas Emissions into Account’ was published by the Climate Disclosure Standards Board (CDSB). It encourages policy makers and regulatory agencies to:
– Introduce policy measures to improve environmental investing, such as disclosing relevant, consistent and assured data;
– Provide clearer signals on the gravity of portfolio exposures to climate change and environmental risks; and
– Require financial institutions to disclose how their exposure to environmental risk influences portfolio risk.
CDP acts as Secretariat to CDSB, which was formed in response to increasing demands for standardised reporting guidelines on the inclusion of climate change information in mainstream reports. CDSB has developed a globally accepted framework, based on existing standards, for corporate reporting on climate change.
Find out more about the CDSB report.
Corporate climate change performance is a high priority for the Indian government
According to Jairam Ramesh, Minister of State for Environment and Forests in India, efforts to curb greenhouse gas emissions in India are beset with two unique challenges: legacy issues of ageing and inefficient plants and the massive numbers of small and medium enterprises. These have prevented greater emission reduction targets from being achieved and are high on the government’s priorities.
The Minister spoke about India’s climate change performance at a Business and Climate Change Conclave in New Delhi, where he recognised the importance of CDP’s work, which highlighted that since 2007 there have been some interesting trends from Indian companies that have responded through CDP, including:
– Significant increase in GHG data reported - by scope and total amount;
– Shift in awareness from risks to opportunities;
– Increased senior management engagement on climate change;
– Growing number of responding companies that have reduction targets in place; and
– World class leaders emerging.
Find out more about the Indian companies that report to CDP.
Business should engage with policymakers on climate change
It is important for businesses to engage with governments on policy development, informing them about the regulations that would help companies to achieve their climate change goals and targets, as well as increasing policy-makers’ understanding about the challenges business face in the transition to a low carbon economy. This was a key area of discussion at CDP’s US Spring Workshop. To be most effective, the panel agreed that (where possible) the business community needs to be united in their goals and that companies should engage with policymakers as part of a continuous process - over the long-term - with a consistent and coherent message.
Listen to CDP’s US Spring Workshop and Panel Discussion.
CDP in the Media
Greater engagement between investors and policymakers to reduce potential policy risk
Speaking in the Financial Times, Paul Simpson, Chief Executive of CDP explained that “The investment community is becoming more vocal on what regulation is required” and that “governments are more interested to hear the investor voice on climate change”. Spain’s announcement to go ahead with plans to slash pre-agreed subsidies in the solar photovoltaic industry is an example of what many institutional investors fear about investing in climate change solutions – the so-called “policy risk” of a sudden reversal in government policy. According to the FT, the growing recognition of this risk partly explains a quiet revolution in the way many investors have organised themselves to respond over the past few years and that the structures they have created are starting to influence regional and national governments.
Read the FT article