We must all lead if international climate negotiations are to succeed

There were few surprises at COP18 and little consensus. The second commitment period of the Kyoto Protocol (KP2) was secured following an agreement from the EU, Australia and a handful of others comprising less than 15% of all global emissions. However, this is unlikely to result in new and necessary mitigation objectives in addition to existing national agreements. In a concerning development, Belarus threatened to withdraw from KP2 and it is predicted that the Ukraine and the Republic of Kazakhstan may follow.

More positively, the impact of climate change on developing countries has for the first time been written into an international legal document. Developed nations have formally recognized that developing countries should receive funds to repair “loss and damage from climate change.” The draft decision “requests developed country parties to provide developing country parties with finance, technology and capacity-building” in order to deal with climate impacts. The exact source of these funds and how they will be disbursed is yet to be established.

There is hope for the advancement of two financing initiatives. For the longer-term, the Green Climate Fund (GCF) is designed to have $100 billion per year by 2020 to support verified results on mitigation and adaptation. In the short-term, Fast Start has led to contribution commitments by European countries and other nations including Japan of over $30 billion. Established in 2009, Fast Start is designed to enable “readiness” for the post 2012 period and may start flowing funds as early as 2014. However, no major new financial commitments have been made given the challenges facing the global economy. Continued discussion of leveraging public funds to raise private finance may keep the private sector energized and engaged on the issue but billions of dollars of potential investment could be at risk if progress is not seen to accelerate soon.

The future of Clean Development Mechanism (CDM) was another focus at COP. As part of his role on the High Level Panel for the CDM policy dialogue, CDP's CEO Paul Simpson presented an overview of the CDM report and recommendations at a business briefing session. Paul also participated in a CDM ministerial meeting held by the United Nations Framework Convention on Climate Change (UNFCCC). Chaired by Lord Stern, Chair of the Grantham Research Institute, the briefing was attended by ministers from Australia, China, the EU, Grenada, Japan and South Africa. Over 500 people attended and each stressed the importance of and continued support for the CDM. It is hoped that China will link its pilot Emission Trading Scheme to the Chinese CDM once launched.

CDP held an official side event in conjunction with the Global Canopy Programme (GCP), Making Sustainable Forests a Reality. This interactive event brought together a panel of experts from the realms of science, business and policy to tackle multiple questions on how to move forward on reducing greenhouse gases from deforestation and forest degradation, with a focus on the role of investors and the private sector. Paul Simpson moderated the event which included speakers from the European Investment Bank, Tata, UN Environment Programme Finance Initiative and the World Bank.

COP18 demonstrated that international climate agreements continue to move slowly. There remains a lot to be agreed if a deal is to happen in 2015. As Ms Figueres said at the UNGC Caring for Climate meeting, "we must no longer fan the fires of the catch 22 situation - where national governments don't feel they can act alone for risk of losing competitiveness whilst companies claim they can't do more without regulation - we must all lead and do everything we can now, most of us are not yet able to say we are."

COP19 will be held next year in Warsaw, Poland. Progress on the UN's REDD+ program, designed to protect forests, will be a key topic, alongside finance and the future structure of a new climate deal. The international community recognizes that now is the time for the private sector to lead progress. The role of CDP in accelerating this progress through both public and private sector engagement using our unique data set to inform decision making remains critical. If we are to reach a deal in 2015 national governments, investors, companies and wider society must have meaningful dialogue that focuses on practical mechanisms for progress.

Extreme weather events drive climate change up boardroom agenda in 2012

Fifteen speakers from some of the most powerful organizations and international institutions around the world took part in CDP's 2012 Global Climate Change Forum to establish how business can succeed in an uncertain, resource constrained world. Participants including high level representatives from the World Bank, the International Energy Agency, L'Oreal, PwC UK, Schroders and Aviva Investors took part in the event, which was broadcast from CISCO TelePresence suites in locations across six continents.

Broadcast live via the CDP and Bloomberg TV websites, the CDP Global Climate Change Forum established solutions for raising investments in low-carbon technologies and energy efficiency during economic uncertainty, managing operating costs in response to fluctuating energy costs and extreme weather, adapting to resource scarcity, shifting from short-term to long-term models and political leadership on climate change.

Complementing the event theme, a new publication from CDP, Business resilience in an uncertain, resource-constrained world, was launched at the Forum. It reveals that this year climate change has climbed the boardroom agenda of companies listed on the Global 500 index following the record-breaking weather events of 2011.

Findings show that more than 80% of the largest listed companies from around the world reporting to CDP now identify physical risk from climate change. This follows a backdrop of the hottest US summer on record, fires in Russia and flooding in the UK, Japan and Thailand. 37% perceive these risks as an immediate danger, up significantly from 10% in 2010, demonstrating the real and present threat of climate change to businesses. This is likely to have contributed to a 10% rise in companies integrating climate change into their business strategies, a figure which now stands at 78%.

This new report, co-written by CDP and professional services firm PwC on behalf of 655 institutional investors representing $78 trillion, provides an annual update on greenhouse gas emissions data and climate change strategies in the world's largest public corporations and is available on the CDP website. A full recording of the Global Climate Change Forum can also be found on our website.

Governments globally can benefit from new CDP insights

Following the publication of CDP's Global 500 Climate Change Report a series of specialised country-specific analyses has been released, identifying corporate trends and best practices in carbon management, as well as responses to climate and energy policy around the globe. CDP reports are freely available on our website and we frequently work with governments looking to benefit from the unique bank of primary corporate climate data.

Speaking at the London launch of the UK CDP FTSE 350 Climate Change Report 2012, Lord de Mauley, Parliamentary Under-Secretary for Resource Management and Environmental Science, acknowledged the pioneering role that CDP has played in corporate climate reporting and confirmed the growing interest of the investment community in material climate data, remarking that "CDP has led the way for reporting. The FTSE 350 report shows how important this subject is to the investment community."

Dr. Janez Potocnik, European Commissioner for the Environment, used his foreword to CDP's European Climate Change reports, CDP Europe Adaptation Report 2012 and the CDP Europe Mitigation Report 2012 to reinstate the urgency of the global issue of declining natural resources.

CDP hosted an event titled 'International Best Practice on Green Procurement' for the Chinese Ministry of Finance. Opened by the Director General for the Chinese Ministry of Finance and John Edwards, Prosperity Counsellor for the British Foreign & Commonwealth Office (FCO), the audience of procurement officials benefitted from hearing first hand experiences to help advance green procurement in China.

All CDP's 2012 country-specific climate change reports can be freely downloaded from the CDP website. If you would like to learn more about how we can support governments that would like to lean more about corporate and government policy on climate change adaptation and mitigation, please visit the how we work with governments and policy makers section of our website or contact Sarah Roberts.

Board rooms slow to act despite increasing water-related risk

Since 2011 there has been a 40% increase of the percentage of Global 500 companies reporting that they have already experienced detrimental impacts from water-related incidents. These include business interruption due to increasing water regulation and property damage from flooding, with associated costs reaching up to US$300 million. Furthermore, over two thirds of respondents report that water-related issues pose substantial risks to their business, the majority of which are anticipated to impact businesses within the next five years. Despite this, there has been little increase in the number of companies with board level oversight of water strategies and no rise in the number of corporations providing transparent water-related risk assessments to investors. These are some of the key findings from analysis of the largest listed companies globally as released in the CDP Global Water Report 2012.

The report helped inform debate at CDP Global Water Forum, which included expert insight from speakers such as Nancy Stoner, Acting Assistant Administrator for Water, US Environmental Protection Agency and Rachel Kyte, Vice President of Sustainable Development, The World Bank. The event was hosted by our Lead Sponsor and Report Writer Deloitte, with a panel discussion chaired by GreenBiz Editor, Joel Makower and can now be watched online.

World's largest natural capital disclosure system

The Forest Footprint Disclosure Project (FFD), a project pioneered by the Global Canopy Programme (GCP) with the support of the UK Government, was launched in 2009 to assist companies and their investors worldwide in understanding and addressing their exposure to forest risk commodities. Today, investors with over USD $7 trillion in assets under management back FFD.

In 2012, CDP and GCP announced an alliance that will see GCP's FFD merge with CDP over two years. This strategic merger by CDP and GCP will bring corporate disclosure on carbon, climate, water and forests under one roof, resulting in the world's largest and most comprehensive natural capital disclosure system, and will provide companies and investors with a single, integrated source of information on this.

A transition process has already begun and CDP will operate FFD from February 2013, leading to full integration by February 2014.

Andrew Mitchell, Executive Director of GCP and chairman of FFD says: “By bringing forest disclosure together with carbon and water, we're going to be making it easier for companies to understand how they are impacting on the world's natural capital – and how they can do something about it... I'm delighted that we've announced this exciting alliance and I look forward to working with CDP to help protect the earth's natural capital.”

CDP and CDSB active in corporate reporting space

CDP and CDSB have responded to the most recent consultations on narrative and mandatory corporate greenhouse gas (GHG) reporting by the UK Department for Business, Innovation and Skills (BIS) and the UK Department for the Environment, Food and Rural Affairs (Defra).

CDP supports the BIS objectives to provide clarity on narrative disclosure requirements and to streamline existing arrangements as the department has detailed in The Future of Narrative Reporting: A new structure for Narrative Reporting in UK. The consultation could benefit, however, from taking a more holistic review of the emerging trends in corporate governance, corporate social responsibility, environmental, integrated and financial reporting.

CDSB's and CDP's joint response to the Defra consultation on greenhouse gas emissions reporting draft regulations for quoted companies expressed strong support for the regulation to mandate carbon reporting by listed UK businesses next year. Our response details some of the potential challenges of the legislation and suggests solutions to overcome them.

'Friends of Paragraph 47'

CDP and CDSB support the principles of Paragraph 47 as included in the outcome document of the Rio +20 United Nations Conference on Sustainable Development. The Paragraph acknowledges the importance of corporate sustainability reporting and encourages companies to integrate such data into their existing reporting cycle. Although specific guidance and timing could be stronger, Paragraph 47 is a positive first step towards more ambitious, international reforms. CDP and CDSB also form part of the Corporate Sustainability Reporting Coalition, which takes a keen interest in maintaining the momentum of Rio+20, including expected EU legislative reforms on narrative reporting. CDP will actively engage with governments involved in Paragraph 47 and the proposed EU regulations over the coming months, respond to relevant consultations, as well as engage in outreach activities in order to advance environmental corporate reporting and drive policy in this area.

For more information about any of the news items in this newsletter please contact Sarah Roberts.

EVENTS

Green Growth: Transforming economies for competitiveness and resilience, 25 and 26 February 2013, London

Join policymakers, business leaders, expert thinkers and commentators at Chatham House to discuss the potential for ‘green growth’:

– Priorities and policy proposals for adopting green growth policies;
– The role of innovation – technological, business and economic;
– Competitiveness and first movers: who will be winners and losers?; and
– What policies would channel cash to long term sustainable and resource efficient investments?

Speakers include: Karl Falkenberg, Director General, DG Environment, European Commission; Dieter Helm CBE, Chair, Natural Capital Committee, Department for Environment, Food and Rural Affairs, UK; Enrique Lendo Fuentes , Director, Foreign Affairs, Mexico Secretariat of the Environment and Natural Resources; and CDP’s Executive Chairman, Paul Dickinson.

The CDP network can enjoy a 10% discount on the cost of entry by using the code 10OFFGGCDP when booking. Please visit the Chatham House website to register and for further information.