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December 06, 2011
Largest South African Companies are Responding to Climate Change but Need to do More
    by Robert Kropp

With the COP17 climate change conference occurring in South Africa, EIRIS analyzes the climate change performance of the 40 largest companies listed on the Johannesburg Stock Exchange.


Representatives from more than 190 of the world's governments are currently meeting at the COP17 climate change conference in Durban, South Africa. Like most of the continent, South Africa is highly vulnerable to the effects of climate change, and since 2009 the nation's government has been implementing mitigation strategies, which include a National Climate Change Response Policy.

Speaking at COP17, Environment Minister Edna Molewa said that negotiations should "pave the way for a comprehensive multilateral, rules-based climate regime."

One South African organization that has been instrumental in addressing climate change and other sustainability issues is the Johannesburg Stock Exchange (JSE). Since last year, the exchange has mandated that its more than 450 companies produce integrated reports, in which environmental, social, and corporate governance (ESG) information is included in corporate financial reports.

The JSE recently commissioned EIRIS, the investment research firm, to assess the corporate responses to climate change of the 40 largest companies listed on the exchange. EIRIS published its report today.

EIRIS noted "encouraging signs of progress" among the companies, finding that 95% of them "demonstrate at least some form of response to climate change." Seventy-five percent of companies successfully address eleven key indicators measuring performance in the areas of governance, strategy, and disclosure.

In addition, 95% of companies are disclosing absolute CO2 emissions, and 85% are disclosing normalized emissions. According to the Climate Disclosure Standards Board (CDSB), normalized emissions, or emissions intensity, refer to "the ratio of GHGs (greenhouse gases) produced to a financial measure or a measure of activity."

However, while 60% of companies have set short-term GHG emissions targets, only 23% have set long-term targets, EIRIS found, "leaving considerable room for improvement."

Furthermore, only 30% of the companies have reduced their operational GHG emissions over the past two years.

"Overall South African companies are responding to climate change risks," EIRIS concluded. "JSE Top 40 companies should expand their management of climate change risks beyond climate change mitigation to also include adaptation strategies. Companies should also consider the climate change impacts arising from their supply chains."

EIRIS recommended that investors "engage with companies on climate change and to encourage them to link board/senior management remuneration to climate change mitigation targets, establish long-term GHG emissions reduction targets and quantitative climate change risks."

 

 
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