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May 31, 2002
Institutional Investors Press Largest Companies to Disclose Greenhouse Gas Emissions
    by William Baue

A group of institutional investors requested information on environmental performance from the 500 largest companies in the world.

Today, the Carbon Disclosure Project, which represents a consortium of institutional investors with $4 trillion in assets, sent a letter to the world's 500 largest quoted companies by market capitalization asking them to disclose information on their greenhouse gas emissions. The correlation between corporate environmental performance and shareowner value has gained increasing validation, prompting investors to request greater transparency on environmental issues from their companies.

"There are potential business risks and opportunities related to actions stemming from the perception of climate change that have implications for the value of shareholdings in corporations worldwide," said Paul Dickinson, coordinator of the Carbon Disclosure Project, which is sponsored by the Philanthropic Collaborative of Rockefeller Philanthropy Advisors in New York. "Examples of such actions are political and regulatory momentum moving against significant carbon emitters; emissions-sensitive technologies, products and services superseding those existing today; and shifts in consumer sentiment due to a corporation's stance on climate change."

New York-based Innovest Strategic Value Advisors will analyze the information received from the companies, who have a half-year window in which to respond to the questionnaire. Innovest will organize its report thematically and comparatively, with risk and opportunity presented by sector and by geographic region. The Carbon Disclosure Project will distribute this report to the corporations, which consists of those included on the Financial Times Global 500 list, to the sponsoring shareholding institutions, and to the public via its World Wide Web site in February 2003.

Innovest has been performing sector analyses that demonstrate superior shareowner returns from companies with stronger environmental performance. Yesterday, Innovest released another study in this series, this time focusing on the U.S. electric utility sector. The report found that the strongest environmental performers in the sector outperformed the poorer environmental performers, generating ten percent greater shareowner returns as a group over the past three years. These results replicate Innovest's findings in nearly every other sector--almost across the board, strong environmental performance correlates to strong shareowner returns.

The Carbon Disclosure project encourages companies to use an existing structure, the Greenhouse Gas Protocol Initiative, which operates under the umbrella of the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI). The protocol offers standards, guidance, and tools for identifying, calculating, and assessing corporate greenhouse gas emissions.

"A short story of what we're doing is persuading people to use that excellent protocol," said Mr. Dickinson, contrasting the GHG Protocol with the current status of information availability and relevance. "The data to assess [climate change risks and opportunities] are not always available and sometimes lack comparability or are of poor quality. This exercise is part of a general investment analysis and the signatories have supported a joint information request to reduce costs for the corporations."

The Coalition for Environmentally Responsible Economies (CERES), one of the project's signatories, recently released a report entitled "Value at Risk: Climate Change and the Future of Governance," which demonstrated the direct connection between climate change, fiduciary responsibility, and shareowner value.

"Portfolios and companies contain embedded climate risk that they are ignoring," explained Ariane Van Buren, senior manager of the investor track for CERES' Sustainable Governance Project. "Companies and investors need to look at their exposure and risk."

Mr. Dickinson echoed these sentiments, pointing out that the Carbon Disclosure Project does not adopt an adversarial stance, but rather a collaborative one.

"This is really about a happy alignment between the natural interests of corporations and the natural interests of investors," he said. "Greenhouse gas emissions are a mainstream issue that are likely to face regulation or taxation. So it is quite easy for investors to decide that they would like more information in this area."


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