A vanguard group of 34 investors with US$7.6 trillion in assets including Aviva Investors, CCLA Investment Management and Scottish Widows Investment Partnership (SWIP) are making this first request for company action which will be sent by the Carbon Disclosure Project (CDP) this week to the world’s largest companies in the FTSE Global Equity Index Series (Global 500). The efficient management of energy and lower carbon emissions not only helps investors to mitigate financial risk, but also has the potential to reduce costs for business.
CDP, an independent not-for-profit organization, gathers primary corporate climate change information from thousands of businesses around the world so that it can be incorporated into business, investment and policy decision making. Through this new Carbon Action initiative companies will be encouraged by investors to:
Make year-on-year emissions reductions;
Identify and implement investment in greenhouse gas emissions reduction initiatives which have a satisfactory positive return on investment; and finally,
Any companies that do not already have an emissions reduction target will be asked to set and publicly disclose this.
Companies will be asked to demonstrate these actions by disclosing them, including any examples of best practice, through the same established CDP system to ensure ease of reporting.
Steve Waygood, head of sustainability, research and engagement at Aviva Investors, the global asset manager and a founding signatory to Carbon Action, said: “Eighteen months ago, Aviva Chairman, Lord Sharman, called for the CDP to go beyond disclosure and challenge companies to take action that mitigates their climate change emissions. We warmly welcome the response of the CDP and thoroughly support the action that they and others are taking with us today. We believe that the external costs of greenhouse gas emissions will become internalised into company cash flows and profitability. We encourage companies to consider what action that they can take now to reduce emissions.”
CCLA, a specialist investment manager, is moving towards divestment in instances where companies fail to disclose targets. Its head of Ethical & Responsible Investment Helen Wildsmith said: “From 2013 CCLA’s charity clients intend to divest from developed-world Energy, Utility, Industrial and Materials companies in the Global 500 that have not yet disclosed reduction targets to the Carbon Disclosure Project. We believe that management of the carbon challenge is a key part of achieving sustainable and strong shareholder returns.”
Leading businesses are already seeing tangible commercial benefits from implementing quantifiable, sustainable processes and practices to manage carbon. Carbon Action will serve to highlight examples of best practice in emissions reduction activity.
“This initiative focuses on cases where companies do not need to make a choice between emissions reductions or higher financial returns,” says Craig Mackenzie, head of sustainability at Scottish Widows Investment Partnership, an asset management company. “In the face of rising energy costs, reducing a company’s emissions often means higher profits. Efficient management of energy offers a huge win-win: lower carbon emissions, higher returns for shareholders.” Research by McKinsey and others finds that most companies have options to reduce carbon emissions at negative cost – across the overall economy there is the potential to save as much as 12Gt CO2e, 25% of the global total annual emissions in this way by 2030*.
“UPS is a long-time supporter of the Carbon Disclosure Project, which has proven that information and data do drive change and corporate responsibility,” said Scott Wicker, chief sustainability officer at global logistics company UPS. “The CDP’s Carbon Action program is the latest way for corporations to address climate change in a systematic, quantitative and credible way.”
“An economic revolution is needed to decouple financial growth from growth in emissions,” concludes Paul Dickinson, executive chairman of CDP. “Rising oil prices, energy supply risks and brand reputation issues are all making the reduction of carbon a strategic imperative. Carbon Action is about accelerating companies’ mitigation efforts in order to reduce the major long-term threat to the global economy which climate change represents.”