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January 10, 2009
New Climate Risk Profiles Assess Corporate Greenhouse Gas Emissions
    by Robert Kropp

ICCR and Trucost collaborate to provide credible assessments for investors to use in the reduction of climate risk in their portfolios.

For years, responsible investors have called on corporations to disclose detailed information about their greenhouse gas (GHG) emissions. As a central part of environmental, social and governance (ESG) considerations, corporate reporting on greenhouse gas emissions remains largely voluntary, but faces the possibility of increased regulation in the near future.

To date, much of the voluntary reporting by corporations on emissions has been fashioned by the corporations themselves. Initiatives such as the Carbon Disclosure Project (CDP), a UK-based investor network whose goal is to assemble the world's largest database of corporate greenhouse gas emissions, have contributed to the standardization of such information, but without regulatory imperatives too few corporations choose to disclose in an objective manner.

In order to provide its members and the public with credible information on corporate environmental practices, the Interfaith Center on Corporate Responsibility (ICCR), a coalition of nearly 300 faith-based institutional investors representing over $100 billion in invested capital, has posted on its web site independent climate risk profiles on more than 150 corporations that are the subjects of 2009 shareholder resolutions filed by faith-based investors, public pension funds, and other responsible investors.

The independent data used by ICCR in the development of the climate risk profiles was provided by Trucost, an environmental research organization working with companies, investors, and government agencies to understand the impacts companies have on the environment. According to THE ICCR press release, Trucost maintains the world’s largest record of greenhouse gas emissions, as well as over 700 environmental indicators including water use, waste disposal and pollutants that cause smog and acid rain.

The climate risk profiles take into account whether or not a company discloses the greenhouse gas emissions from its operations and provides the sector relative performance of a company’s GHG emissions based on its deviation from the average performance of companies in the same business sector.

ICCR also provides more detailed climate risk reports that go into greater depth about the activities of individual companies.

The climate risk profiles also include links to the shareowner resolutions filed by ICCR and other responsible investors for the 2009 proxy season. The shareholder resolutions cover a wide range of issues, including climate change, and were filed with companies in all sectors of the economy.

Dr. James Salo, Vice President of Strategy and Research at Trucost, spoke with to explain in more detail the methodology used by Trucost in compiling the climate risk profiles.

"First of all, the information that we provided to ICCR indicates whether a company is disclosing the greenhouse gas emissions of its global operations in a meaningful way," Salo said. "We go through the company's public disclosures, as well as information provided by the company in other ways, such as on its web site. It's preferable, of course, that a company engage in public disclosure. But less than half of the S&P 500 companies, for example, do so."

Salo continued, "Over the last eight years we have developed environmental profiles for 464 industry sectors. Using information we have learned about business activities in each sector, we apply a metric to those activities. In the case of banks and financial companies, for instance, the majority of emissions are going to come from companies in which they have holdings."

On Thursday, February 5, ICCR and Trucost held a telenews conference to publicize the creation of the climate risk profiles. In addition to Salo, the speakers included Leslie Lowe, Director of the Energy and the Environment program at ICCR, and Laura Berry, executive director of ICCR. A recording of the conference is available on ICCR's web site.

Lowe spoke of the urgent need for the information provided in the profiles.

"We are squarely faced with the need for business to become engaged in reducing greenhouse gas emissions," she said. "Each company has an obligation to reduce its greenhouse emissions, and everyone in society has to exert pressure on companies for them to do so."

"Investors must be made aware of climate risk in their portfolios in order to reduce carbon exposure without changing sector diversification investment strategies," Lowe continued.

Salo added, "These new profiles provide an essential opportunity for investors to learn about climate risks in their portfolios. They indicate whether companies adequately disclose greenhouse gas emissions. By accessing credible and totally independent assessments of climate risk, investors will not have to rely totally on what companies disclose and they will still have information on exposure even if companies do not disclose."

Berry said, "Faith-based investors have flagged a number of key issues that could have been dealt with sooner. For nearly three decades, ICCR members have addressed companies on the need to respond to climate change. Much more work is yet to be done, and that is where we expect these new climate risk profiles to make a real difference for all investors."

"New valuation models are needed as we work together to rebuild our economy," Berry concluded.


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