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
"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."
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."