March 10, 2009
Investors Want More Disclosure of Climate Risk Data from Corporations
by Robert Kropp
CDP survey of signatory investors finds that integration of climate risk considerations into
investment decisions is growing.
Investors that are signatories of the Carbon
Disclosure Project (CDP), a nonprofit organization which acts as an intermediary between
shareholders and corporations on climate change issues, want the companies in which they invest to
do more than just disclose climate and carbon information. The CDP signatories, who manage $55
trillion in assets, want companies to take such additional actions as adopting emissions reductions
targets and developing low carbon solutions as well.
This was among the findings of
a survey of institutional investors by the CDP. Among the 80 respondents were asset managers,
pension funds, insurers and socially responsible investment funds. Mercer, a global provider of consulting and investment services,
analyzed the survey results and compiled the report. The report, entitled "Investor use of CDP
data," is posted on the CDP website.
While 77% of institutional investors surveyed by the
CDP indicated that they factor climate change information into their investment decisions, only 11%
of respondents have yet to fully incorporate CDP data into financial analysis. However, more than
80% of the respondents who do factor climate change information into investment decisions indicated
that climate change is an important factor, and responses indicate that investors expect CDP data
to increase in significance and applicability.
Jane Ambachtsheer, Mercer's global head of
SRI, told SocialFunds.com, "While a majority of investors haven't yet adjusted their model to their
formal investment decision- making framework, 64% of survey respondents did say they intended to
use CDP data more in the future."
Ambachtsheer continued, "Even if a majority is not yet
using CDP data in a systematic way, the fact that 77% of respondents do use the data indicates that
it is part of their toolkit."
According to the report, "As climate change regulation
matures and expands around the globe, members of the investment community will be increasingly
compelled to analyze climate risks and opportunities in detail."
The report concludes
with a number of recommendations for investors to consider. Investors are advised to utilize
training to ensure that CDP data is leveraged in a meaningful way, to encourage their service
providers to incorporate CDP data, and to hold companies to a standard of disclosure that utilizes
standardized and comparable metrics.
One of the sponsors of the CDP report was the Calvert Group, a fund company that includes a
number of prominent SRI funds. Rebecca Henson, Senior Analyst at Calvert, told SocialFunds.com,
"Calvert co-sponsored the CDP report because we have been involved in climate risk integration, and
this report helps us gauge how other investors worldwide are becoming more sophisticated in their
integration of climate risk data."
"Considering the reputation of CDP around the world, we
also considered it important that companies be made aware that investors are becoming more
sophisticated," Henson continued. "Even with the economy in the state that it is at present, the
report indicates that investors are increasingly incorporating climate risks and opportunities into
their investment decisions."
Ambachtsheer of Mercer presented the report to an audience of
corporate representatives at CDP's Spring Workshop for companies that reply to the CDP. In her
presentation, she noted additional investor actions that indicate an ongoing emphasis on climate
risks and opportunities despite the current economic crisis.
In February, a group of 35
investors with over $3 trillion in assets called on Congressional leaders to pass strong
legislation to advance a clean energy, low-carbon economy. Among the investors' recommendations
were the adoption of a mandatory national climate policy to reduce greenhouse gas emissions, and a
low-carbon fuel standard to reduce reliance on oil and greenhouse gas emissions.
December 2008, 152 global investors worth over $9 trillion called on world leaders to negotiate a
strong and binding successor to the Kyoto Protocol. Among the recommendations was that governments
agree upon a binding global target for reducing greenhouse gas emissions.
At the workshop,
Ambachtsheer informed companies that corporate engagement was the leading area in which investors
were using CDP data. Investors find that CDP information helps fuel discussions with management and
leads to engagement via dialogue or shareowner resolutions with non-responding companies outside
the CDP process.
"The workshop provided companies with an opportunity to understand
exactly what investors are doing with the information that the companies are trying so
painstakingly to provide," Ambachtsheer said.
"Having companies and investors in the same
room was helpful. We found that companies would like to receive more information from investors as
to how climate risk factors play into their buy/sell decisions," continued Ambachtsheer.
Ambachtsheer noted that the CDP currently has 475 signatory investors with a combined $55
trillion of assets under management.
"Investor involvement in the CDP has been
overwhelming, even without a clear regulatory framework," she said. "Imagine the investor response
when there is a clear regulatory framework."