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September 24, 2010
Carbon Disclosure Project Issues 2010 Reports on Climate Change Disclosure by Companies in Global 500 and S&P 500
    by Robert Kropp

Reports find that while companies in the US continue to lag behind their global counterparts, improvement has been recorded, and the top companies continue to improve disclosure.


It has been ten years since the Carbon Disclosure Project (CDP) was launched. In 2003, the first year that the CDP requested climate change information from organizations, the number of respondents was 235.

Seven years after that initial request for information, it is difficult to fully convey the authority and influence that the CDP has earned, as climate change considerations have moved into the mainstream of both investment decision-making and business strategy. In 2010, CDP requests for climate change information were sent to more than 4,700 of the world's largest corporations, on behalf of 534 institutional investors with $64 trillion in assets under management. Also in 2010, almost 2,500 organizations responded.

Another measure of the CDP's influence can be found also in the recent launch of two index products by the CDP, which, according to Paul Dickinson, the CEO of CDP, "Give investors exposure to companies better positioned in the transition to a low carbon economy." The
FTSE CDP Carbon Strategy Index series uses data supplied to CDP, as well as other sources, to assess the exposure of companies to costs associated with greenhouse gas (GHG) emissions.

The
Markit Carbon Disclosure Leadership Index bases its stock selection on CDP's annual corporate Carbon Disclosure Leadership Index (CDLI) data. To qualify for inclusion in the CDLI, companies must be rated by the CDP as top-scoring, based on the comprehensiveness of their responses. Companies must also make their responses publically available.

The degree to which such pressure on companies to provide data to the CDP on GHG emissions and mitigation strategies can be discerned by remarks made by Dickinson in a
webcast announcing the 2010 versions of CDP's reports on the responses of companies in the FTSE Global 500 and S&P 500 indexes.

In the webcast, Dickinson said, "Climate change is moving out of the CSR department and getting into procurement and finance, and into the boardroom. Eighty-five percent of Global 500 companies have board-level responsibility for climate change, and half the companies are embedding climate change into their corporate strategies."

"Eighty-six percent of global corporations now say they see opportunities from climate change," Dickinson continued.

The
2010 Global 500 Report confirmed that the world's largest companies have continued their commitment to allocating resources to carbon reporting and management, as 410 companies, or 82%, responded to the CDP despite the current economic downturn and ongoing policy uncertainty. Furthermore, while global emissions decreased by one percent in 2009 due to the downturn, the Scope 1 emissions reported by Global 500 companies rose to 3.4 billion metric tons.

In 2010, 187 global companies, or 48%, reported that they are "embedding climate change and carbon management into group business strategy," according to the report. As this number contrasts markedly with the 85% of companies reporting board-level responsibility for climate change, significant room for improvement remains. Companies identified by the CDP as leaders include in their disclosures "consideration of business-specific risks and potential opportunities related to climate change," as well as effective "internal data management practices for understanding GHG emissions."

A notable finding of this year's Global 500 report is that the 48 companies included in the CDLI have increased their average disclosure score from 84 in 2009 to 91, "Highlighting," the report states, "That the leaders continue to raise the bar." The highest scores in 2010 were recorded by Siemens, Deutsche Post, and BASF.

The largest non-respondents among companies in 2010, measured by market capitalization, were Berkshire Hathaway, Bank of China, and Rosneft, a leading Russian petroleum company. The only other representative of high-emitting industry sectors included among the largest non-respondents was Reliance Industries of India, another company in the oil and gas sector. Reliance Industries ranked fourth among the largest non-respondents.

Given that policy uncertainty is identified by CDP as a particular challenge for effective corporate climate change mitigation strategies, and considering the failure of the US Senate to pass comprehensive climate change legislation, it comes as little surprise that fewer companies in the S&P 500 provided responses to CDP than did their global counterparts. That said, respondents among S&P companies did increase, from 332 in 2009 to 350, or 70%, in 2010, according to the
2010 S&P 500 Report.

In 2010, disclosure of GHG emissions by S&P 500 companies increased to 59%, as did making emissions data publicly available; 54% of companies now include such information in their annual corporate reports.

On the other hand, board or executive-level oversight of climate change management in the US continues to trail the Global 500 by a significant degree, with only 226 companies, or 46%, in the S&P 500 reporting high-level involvement. Thirty-four percent now disclose emissions reduction targets, compared to half of Global 500 companies, and only 23% verify emissions through third parties, while 46% of global companies do so.

Furthermore, even though 70% of S&P 500 companies now disclose "how they plan to capitalize on commercial opportunities related to climate change," according to the report, the number lags behind the 86% recorded by global companies.

The top US companies included on the CDLI were Consolidated Edison, News Corporation, and Spectra Energy. Companies from high-emitting industry sectors that were included in the top ten performers were Exelon, PG&E, and Xcel Energy.

The largest non-respondents among US-based companies were Amazon.com, Visa, and Comcast. The Southern Company, an owner of electric utilities in four states, is also included among the largest non-respondents.

Noting that regulatory uncertainty continues to affect the efforts of US companies to address climate change, the report does detail a number of initiatives launched by the Obama administration in an effort to provide regulatory guidance. The initiatives include requirements for GHG emissions reporting by heavy-emitting industries under the Clean Air Act, President Obama's directive that the Federal government reduce its own emissions by 28% by 2020, and the Securities and Exchange Commission (SEC) guidance for climate change disclosure by publicly listed companies.

In a commentary included in the 2010 S&P 500 Report, Lisa Jackson, Administrator of the Environmental Protection Agency (EPA), addressed the new requirement that heavy-emitting industries report their GHG emissions.

"That new rule will allow the EPA and the public to track approximately 85 percent of total U.S. emissions while requiring only a small percentage of facilities about 10,000 out of tens of millions of American businesses to report," Jackson wrote. "We will now know with greater accuracy how much carbon is polluting our atmosphere and where energy-efficiency investments and new technologies can be particularly effective at reducing greenhouse gases."

 

 
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