1
The Future
of Reporting
CDP FTSE 350 Climate Change Report 2012
On behalf of 655 investors
with assets of US$ 78 trillio...
2
Contents
Important Notice
The contents of this report may be used by anyone providing acknowledge-
ment is given to Carb...
3
The pressure is growing for companies to build long-term
resilience in their business. The unprecedented debt crisis
tha...
4
Executive summary
Companies today are facing calls for greater transparency
and accountability. The Leveson Inquiry into...
5
Being able to tell a positive story is important to manage
stakeholders’ expectations and win new business
opportunities...
6
CDP Investor Members 2012
Aegon
AKBANK T.A.Ş.
Allianz Global Investors
Aviva Investors
AXA Group
Bank of America Merrill...
7
655 financial institutions with
assets of US$78 trillion were
signatories to the CDP 2012
information request dated
Febr...
8
Fundação Sistel de Seguridade Social (Sistel)
Fundação Vale do Rio Doce de Seguridade Social - VALIA
FUNDIÁGUA - FUNDAÇÃ...
9
Resolution
Resona Bank, Limited
Reynders McVeigh Capital Management
RLAM
Robeco
Robert  Patricia Switzer Foundation
Rock...
10
I am pleased to introduce the CDP FTSE 350 Report
2012. As a responsible long term investor, the
London Pensions Fund A...
11
Building greater accountability to shareholders
It is increasingly important to shareholders that companies
be accounta...
12
Types of Reporting
Investor requested reporting: Investor requested reporting is the provision of information
by a comp...
13
Climate change reporting: drivers and content
Companies are increasingly aware that they need to tell
a comprehensive s...
14
However, regulations can also lead to opportunities, as
outlined by 72% of respondents (2011: 76%).
For example, Kier n...
15
in consumer behaviour, or both. There are good reasons
for why companies will consider reputational impacts
an increasi...
16
estimates that the global market for low-carbon energy
solutions in 2020 could be over US$2.2 trillion.
In addition, in...
17
The Future of Reporting
The culmination of several factors coming together has
helped drive greater levels of carbon di...
18
The years since CDP started asking organisations for
climate change-related information have seen significant
developme...
19
Taking the next
step in reporting
Over the last few years, we have seen sustainability and
climate change move more tow...
20
By leading on emissions reductions activities and CO2
accounting, as well as driving this through our value chain,
we b...
21
22
2012 Leaders
Introduction to the Carbon Disclosure Leadership
Index (CDLI) and the Carbon Performance
Leadership Index ...
23
Sector Company Name
Disclosure
Score2012
Consecutive
yearsinthe
CDLI
Performance 
Band
Consumer Discretionary Reed Else...
24
•	 80% of the CDLI companies already include information
on climate change in their annual reports (non-CDLI:
49%).
Ove...
25
F8	 Average disclosure score for
regulatory and physical risks
•	CDLI
•	Non-CDLI
F9	 Average disclosure score for
regul...
26
The criteria to enter the CPLI was more stringent in 2012:
companies had to obtain a performance score above
85, achiev...
27
Appendix I
Table of emissions, scores and
sector information by company
Please refer to the Key on page 45 for further ...
28
Associated British
Foods
United
Kingdom
CS 57 D AQ 3,606,296 2,504,154 1,102,142 VAR S1, S2 Int
AstraZeneca United
King...
29
Blackrock World (see
Blackrock - Global 500)
United
Kingdom
FIN AQ(SA) SA AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA)
Blu...
30
CAPE United
Kingdom
IND AQ(L) X AQ(L) AQ(L) AQ(L) AQ(L) AQ(L) AQ(L)
Capita Group United
Kingdom
IND DP AQ DP DP DP DP D...
31
Daily Mail  General
Trust
United
Kingdom
CD 47 AQ 69,400 13,900 55,500 2 Abs
Dairy Crest Group United
Kingdom
CS 62 D A...
32
Electrocomponents United
Kingdom
IT 77 B AQ 20,315 3,729 16,586 1
Elementis United
Kingdom
MAT DP IN DP DP DP DP DP DP
...
33
Genesis Emerging
Markets Fund
United
Kingdom
FIN NR NR NR NR NR NR NR NR
Genus United
Kingdom
HC NR NR NR NR NR NR NR N...
34
Homeserve United
Kingdom
CD NR NR NR NR NR NR NR NR
Howden Joinery Group United
Kingdom
CD NR NR NR NR NR NR NR NR
HSBC...
CDP Climate Disclosure Project 350 Climate Change Report 2012
CDP Climate Disclosure Project 350 Climate Change Report 2012
CDP Climate Disclosure Project 350 Climate Change Report 2012
CDP Climate Disclosure Project 350 Climate Change Report 2012
CDP Climate Disclosure Project 350 Climate Change Report 2012
CDP Climate Disclosure Project 350 Climate Change Report 2012
CDP Climate Disclosure Project 350 Climate Change Report 2012
CDP Climate Disclosure Project 350 Climate Change Report 2012
CDP Climate Disclosure Project 350 Climate Change Report 2012
CDP Climate Disclosure Project 350 Climate Change Report 2012
CDP Climate Disclosure Project 350 Climate Change Report 2012
CDP Climate Disclosure Project 350 Climate Change Report 2012
CDP Climate Disclosure Project 350 Climate Change Report 2012
CDP Climate Disclosure Project 350 Climate Change Report 2012
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CDP Climate Disclosure Project 350 Climate Change Report 2012

  1. 1. 1 The Future of Reporting CDP FTSE 350 Climate Change Report 2012 On behalf of 655 investors with assets of US$ 78 trillion Global Advisor and Report Writer
  2. 2. 2 Contents Important Notice The contents of this report may be used by anyone providing acknowledge- ment is given to Carbon Disclosure Project (CDP). This does not represent a license to repackage or resell any of the data reported to CDP or the contribut- ing authors and presented in this report. If you intend to repackage or resell any of the contents of this report, you need to obtain express permission from CDP before doing so. CDP has prepared the data and analysis in this report based on responses to the CDP 2012 information request. No representation or warranty (express or implied) is given by CDP or any of its contributors as to the accuracy or com- pleteness of the information and opinions contained in this report. You should not act upon the information contained in this publication without obtaining specific professional advice. To the extent permitted by law, CDP and its contributors do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reli- ance on the information contained in this report or for any decision based on it. All information and views expressed herein by CDP and any of its contributors is based on their judgment at the time of this report and are subject to change without notice due to economic, political, industry and firm specific factors. Guest commentaries where included in this report reflect the views of their respective authors; their inclusion is not an endorsement of them. CDP and its contributors, their affiliated member firms or companies, or their respective shareholders, members, partners, principals, directors, officers and/or employees, may have a position in the securities of the companies discussed herein. The securities of the companies mentioned in this document may not be eligible for sale in some states or countries, nor suitable for all types of investors; their value and the income they produce may fluctuate and/or be adversely affected by exchange rates. Carbon Disclosure Project’ and ‘CDP’ refer to Carbon Disclosure Project, a United Kingdom company limited by guarantee, registered as a United King- dom charity number 1122330. © 2012 Carbon Disclosure Project. All rights reserved. CDP CEO Foreword Paul Simpson, CEO, Carbon Disclosure Project 3 Executive Summary 4 CDP Investor Members 6 CDP Signatory Investors 2012 7 Guest Foreword Mike Taylor, CEO, London Pension Fund Authority 10 Key Themes and Highlights of 2012 Responses Building greater accountability to shareholders Climate change reporting: drivers and content The Future of Reporting 11 11 13 17 Guest Commentary Lois Guthrie, Executive Director, Climate Disclosure Standards Board 18 Taking the next step in reporting Alan McGill, Partner, PwC 19 The Future of Reporting – A Company Perspective Tony Chanmugam, Group Finance Director, BT 20 2012 Leaders CDLI CPLI 22 23 26 Appendix I Table of emissions, scores and sector information by company 27 Appendix II Using CCRF for your future reporting 46 “We have long believed that including environmental costs in reporting, reduces risk and will strengthen society’s ability to deliver a global economic model which balances efficiency and resiliency.” BT
  3. 3. 3 The pressure is growing for companies to build long-term resilience in their business. The unprecedented debt crisis that has hit many parts of the world has sparked a growing understanding that short-termism can bring an established economic system to breaking point. As some national economies have been brought to their knees in recent months, we are reminded that nature’s system is under threat through the depletion of the world’s finite natural resources and the rise of greenhouse gas emissions. Business and economies globally have already been impacted by the increased frequency and severity of extreme weather events, which scientists are increasingly linking to climate change1 . Bad harvests due to unusual weather have this year rocked the agricultural industry, with the price of grain, corn and soybeans reaching an all time high. Last year, Intel lost $1 billion in revenue and the Japanese automotive industry were expected to lose around $450 million of profits as a result of the business interruption floods caused to their Thailand-based suppliers. It is vital that we internalize the costs of future environmental damage into today’s decisions by putting an effective price on carbon. Whilst regulation is slow, a growing number of jurisdictions have introduced carbon pricing with carbon taxes or cap-and-trade schemes. The most established remains the EU Emissions Trading Scheme but moves have also been made in Australia, California, China and South Korea among others. Enabling better decisions by providing investors, companies and governments with high quality information on how companies are managing their response to climate change and mitigating the risks from natural resource constraints has never been more important. CDP has pioneered the only global system that collects information about corporate behaviour on climate change and water scarcity, on behalf of market forces, including shareholders and purchasing corporations. CDP works to accelerate action on climate change through disclosure and more recently through its Carbon Action program. In 2012, on behalf of its Carbon Action signatory investors CDP engaged 205 companies in the Global 500 to request they set an emissions reduction target; 61 of these companies have now done so. CDP continues to evolve and respond to market needs. This year we announced that the Global Canopy Programme’s Forest Footprint Disclosure Project will merge with CDP over the next two years. Bringing forests, which are critically linked to both climate and water security, into the CDP system will enable companies and investors to rely on one source of primary data for this set of interrelated issues. Accounting for and valuing the world’s natural capital is fundamental to building economic stability and prosperity. Companies that work to decouple greenhouse gas emissions from financial returns have the potential for both short and long-term cost savings, sustainable revenue generation and a more resilient future. Paul Simpson CEO Carbon Disclosure Project CEO Foreword “CDP has pioneered the only global system that collects information about corporate behaviour on climate change and water scarcity, on behalf of market forces, including shareholders and purchasing corporations.” 1: The State of the Climate in 2011 report, led by the National Oceano-graphic and Atmospheric Administration (NOAA) in the US and published as part of the Bulletin of the American Meteorological Society (BAMS)
  4. 4. 4 Executive summary Companies today are facing calls for greater transparency and accountability. The Leveson Inquiry into press standards and the investigations in to LIBOR-fixing highlight the increased scrutiny of corporate actions by regulators, shareholders and other stakeholders. Companies are increasingly being challenged to demonstrate how they are responding to the financial risks posed by climate change. In 2012, the Carbon Disclosure Project (CDP) sent its annual request to FTSE 350 companies on behalf of 655 investors with US$78 trillion in assets, asking them to measure and disclose what climate change means for their business. For more than a decade, CDP has pioneered carbon reporting; it has established itself as the global platform through which organisations disclose investor-relevant climate change data. When CDP launched its first FTSE 350 report in 2006, only 49% of companies responded (83% of FTSE 100). This year, 69% (240) of the FTSE 350 did so, including 96% of the FTSE 100. The analysis in this report is based on 238 responses received by 30th June2 and shows the quality of reporting by UK companies and their preparedness for impending regulation. In the summer of 2012, the UK Government announced it would be the first in the world to require all companies listed on the main market of the London Stock Exchange to disclose their gross global emissions (not just those from UK-based operations) in their annual reports. Although the proposed legislation currently covers Scope 1 and 2 emissions only, it is likely this will expand in the future. In the UK, reporting emissions from Scopes 1 and 2 has become standard practice – almost all (93%) CDP respondents report Scopes 1 and 2 – however, only 64% of respondents include this emissions data in financial reports. CDP’s information request already goes beyond the basic requirement of the proposed legislation to provide information that is of real value to investors, quantifying, for example, the extent to which a company is at risk from factors related to climate change. There is growing pressure for these annual reports, traditionally built on historic financial data and focusing on short term performance, to reflect a company’s exposure to all risks, including those from climate change and wider environmental issues. As a result of this, there is an increasing call for a change in the conventional reporting model towards Integrated Reporting. This system aims to better demonstrate the relationship between an organisation’s strategy, governance and financial performance and the social, environmental and economic context within which it operates. To this end, the Climate Disclosure Standards Board (CDSB), a special project of CDP, has developed the Climate Change Reporting Framework, which is designed to link financial and climate change related reporting in annual reports (see page 46). It is clear that the future of carbon reporting will increasingly be driven by regulation: 84% of responding companies believe upcoming regulations pose a risk and 32% believe these are linked to emissions reporting obligation. However, 74% also see regulation as an opportunity and 20% see reporting obligations in the same light. The most commonly reported impact from this is an increase in demand for an existing product or service (28% of reporting opportunities). We do however expect leading companies to take action ahead of regulation; indeed, already 80% of the Carbon Disclosure Leadership Index (CDLI) include climate change information in their annual reports (non-CDLI: 49%) (see page 23).
  5. 5. 5 Being able to tell a positive story is important to manage stakeholders’ expectations and win new business opportunities. Diageo highlights that 2011 was a record year for total number of shareholder resolutions related to environmental issues, including climate change. Electrocomponents notes that reporting obligations can make its customers more aware of energy conservation opportunities which may increase the demand for its products and services. BT notes that, in 2012, its sustainability credentials were requested in £2.7billion of customer bids. Financial auditors hold a responsibility to read all information in the annual report, including the data that will be reported by companies next year as part of the UK’s proposed mandatory reporting regulations. Any apparent discrepancies or disparities may impact the financial audit opinion. Encouragingly, this year there was an increase in companies reporting to CDP some form of verification or assurance of their Scope 1 and 2 emissions from 25% in 2011 to 31% in 2012, although the proportion jumps to 89% for the CDLI companies. Companies are increasingly aware that they need to provide a complete story to all stakeholders and report on all factors which could affect their long term prosperity. The process of reporting through CDP, as shown by the highest scoring companies, brings about strategic change: although only 33% of responding companies consider themselves to have a strategic advantage relating to climate change, the proportion increases to 74% when looking at the companies listed on the CDLI. For example, United Utilities believes that an experience in delivering a business strategy which integrates climate change and a transparent strategic narrative around climate change puts it at an advantage. Similarly, while the percentage of companies who integrate climate change into their business strategy remains low (56%), 95% of CDLI companies have an integrated strategy. The examples from CDLI companies show how regulation requiring more integrated reporting may help other companies close the gap on the leaders. In the past decade, government regulation, from building standards and the EU ETS to the recently proposed mandatory reporting legislation, have helped drive carbon measurement and disclosure. Pressure from investors and customers, as seen by the work of CDP, has helped prepare companies for regulation. As the tools and frameworks (such as CDSB’s Climate Change Reporting Framework) for reporting become available and improve, the private sector has found that disclosure becomes easier and more valuable. Future developments in climate change reporting will focus on retaining global consistency, improving the quality of data and demonstrating an integration of climate change into wider business strategy. Mandatory reporting in the UK will continue to drive more companies to report emissions and include this information in their annual reports. Reporting through CDP will provide more detailed information for companies to determine what is material to their business, and for investors to use in their research and analysis of future risks. There will also be an expectation that the information reported is verified and assured. 2: Companies that submitted responses after the analysis cut-off date of 30th June 2012 are marked “AQ(L)” in Appendix I Company Sector DisclosureScore PerformanceScore Diageo Consumer Staples 98 A Anglo American Materials 94 A Reckitt Benckiser Consumer Staples 93 A Mondi Materials 88 A Morgan Crucible Industrials 86 A Unilever Consumer Staples 84 A T1 Top companies BY DISCLOSURE AND PERFORMANCE Respondents Disclose GHG emissions Publicly available F1 Year on year disclosure levels for the FTSE 350 • 2008 • 2010 • 2012 • 2009 • 2011 0 50 100 200 250 300150 236 234 236 243 240 194 163 199 206 205 158 128 170 174 183 Number of responding companies 5
  6. 6. 6 CDP Investor Members 2012 Aegon AKBANK T.A.Ş. Allianz Global Investors Aviva Investors AXA Group Bank of America Merrill Lynch Bendigo and Adelaide Bank Blackrock BP Investment Management California Public Employees Retirement System - CalPERS California State Teachers Retirement Fund - CalSTRS Calvert Asset Management Company Catholic Super CCLA Daiwa Asset Management Co. Ltd. Generation Investment Management HSBC Holdings KLP Legg Mason London Pension Fund Authority Mongeral Aegon Seguros e Previdência S/A Morgan Stanley National Australia Bank NEI Investments Neuberger Berman Newton Investment Management Ltd Nordea Investment Management Norges Bank Investment Management PFA Pension Robeco Rockefeller Co. SAM Group Sampension KP Livsforsikring A/S Schroders Scottish Widows Investment Partnership SEB Sompo Japan Insurance Inc Standard Chartered TD Asset Management Inc. and TDAM USA Inc. The RBS Group The Wellcome Trust CDP works with investors globally to advance the investment opportunities and reduce the risks posed by climate change by asking almost 6,000 of the world’s largest companies to report on their climate strategies, GHG emissions and energy use in the standardized Investor CDP format. To learn more about CDP’s member offering and becoming a member, please contact us or visit the CDP Investor Member section at https://www.cdproject. net/investormembers 2012 Signatory Investor Breakdown 259 Asset Managers 220 Asset Owners 143 Banks 33 Insurance 13 Other CDP Investor Signatories Assets (US$ Trillion) against time • Investor CDP Signatories • Investor CDP Signatory Assets 39+33+22+4+26 39% 33% 21% 5% 2% 1 CDP INVESTOR SIGNATORIES ASSETS (US$ TRILLION) AGAINST TIME • Investor CDP Signatories • Investor CDP Signatory Assets 35 95 155 225 315 385 475 534 551 655 4.5 10 21 31 41 57 55 64 71 78 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 700 600 500 400 300 200 100 0 80 70 60 50 40 30 20 10 0 Assets(US$Trillions) NumberofSignatories
  7. 7. 7 655 financial institutions with assets of US$78 trillion were signatories to the CDP 2012 information request dated February 1st, 2012 Aberdeen Asset Managers Aberdeen Immobilien KAG mbH ABRAPP - Associação Brasileira das Entidades Fechadas de Previdência Complementar Achmea NV Active Earth Investment Management Acuity Investment Management Addenda Capital Inc. Advanced Investment Partners AEGON N.V. AEGON-INDUSTRIAL Fund Management Co., Ltd AFP Integra AIG Asset Management AK Asset Management Inc. AKBANK T.A.Ş. Alberta Investment Management Corporation (AIMCo) Alberta Teachers Retirement Fund Alcyone Finance AllenbridgeEpic Investment Advisers Limited Allianz Elementar Versicherungs-AG Allianz Global Investors Kapitalanlagegesellschaft mbH Allianz Group Altira Group Amalgamated Bank AMP Capital Investors AmpegaGerling Investment GmbH Amundi AM ANBIMA – Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais Antera Gestão de Recursos S.A. APG AQEX LLC Aquila Capital Arisaig Partners Asia Pte Ltd Arma Portföy Yönetimi A.Ş. ASM Administradora de Recursos S.A. ASN Bank Assicurazioni Generali Spa ATI Asset Management ATP Group Australia and New Zealand Banking Group Limited Australian Ethical Investment AustralianSuper Avaron Asset Management AS Aviva Investors Aviva plc AXA Group Baillie Gifford Co. BaltCap BANCA CÍVICA S.A. Banca Monte dei Paschi di Siena Group Banco Bradesco S/A Banco Comercial Português S.A. Banco de Credito del Peru BCP Banco de Galicia y Buenos Aires S.A. Banco do Brasil S/A Banco Espírito Santo, SA Banco Nacional de Desenvolvimento Econômico e Social - BNDES Banco Popular Español Banco Sabadell, S.A. Banco Santander Banesprev – Fundo Banespa de Seguridade Social Banesto Bank Handlowy w Warszawie S.A. Bank of America Merrill Lynch Bank of Montreal Bank Vontobel Bankhaus Schelhammer Schattera Kapitalanlagegesellschaft m.b.H. BANKIA S.A. BANKINTER BankInvest Banque Degroof Banque Libano-Francaise Barclays Basellandschaftliche Kantonalbank BASF Sociedade de Previdência Complementar Basler Kantonalbank Bâtirente Baumann and Partners S.A. Bayern LB BayernInvest Kapitalanlagegesellschaft mbH BBC Pension Trust Ltd BBVA Bedfordshire Pension Fund Beetle Capital BEFIMMO SCA Bendigo Adelaide Bank Limited Bentall Kennedy Berenberg Bank Berti Investments BioFinance Administração de Recursos de Terceiros Ltda BlackRock Blom Bank SAL Blumenthal Foundation BNP Paribas Investment Partners BNY Mellon BNY Mellon Service Kapitalanlage Gesellschaft Boston Common Asset Management, LLC BP Investment Management Limited Brasilprev Seguros e Previdência S/A. British Airways Pension Investment Management Limited British Columbia Investment Management Corporation (bcIMC) BT Investment Management Busan Bank CAAT Pension Plan Cadiz Holdings Limited Caisse de dépôt et placement du Québec Caisse des Dépôts Caixa Beneficente dos Empregados da Companhia Siderurgica Nacional - CBS Caixa de Previdência dos Funcionários do Banco do Nordeste do Brasil (CAPEF) Caixa Econômica Federal Caixa Geral de Depositos CaixaBank, S.A California Public Employees’ Retirement System California State Teachers’ Retirement System California State Treasurer Calvert Investment Management, Inc Canada Pension Plan Investment Board Canadian Friends Service Committee (Quakers) Canadian Imperial Bank of Commerce (CIBC) Canadian Labour Congress Staff Pension Fund CAPESESP Capital Innovations, LLC CARE Super Carmignac Gestion Catherine Donnelly Foundation Catholic Super CBF Church of England Funds CBRE Cbus Superannuation Fund CCLA Investment Management Ltd Celeste Funds Management Limited Central Finance Board of the Methodist Church Ceres CERES-Fundação de Seguridade Social Change Investment Management Christian Brothers Investment Services Christian Super Christopher Reynolds Foundation Church Commissioners for England Church of England Pensions Board CI Mutual Funds’ Signature Global Advisors City Developments Limited Clean Yield Asset Management ClearBridge Advisors Climate Change Capital Group Ltd CM-CIC Asset Management Colonial First State Global Asset Management Comerica Incorporated COMGEST Commerzbank AG CommInsure Commonwealth Bank Australia Commonwealth Superannuation Corporation Compton Foundation Concordia Versicherungsgruppe Connecticut Retirement Plans and Trust Funds Co-operative Financial Services (CFS) Credit Suisse Daegu Bank Daesung Capital Management Daiwa Asset Management Co. Ltd. Daiwa Securities Group Inc. Dalton Nicol Reid de Pury Pictet Turrettini Cie S.A. DekaBank Deutsche Girozentrale Delta Lloyd Asset Management Deutsche Asset Management Investmentgesellschaft mbH Deutsche Bank AG Development Bank of Japan Inc. Development Bank of the Philippines (DBP) Dexia Asset Management Dexus Property Group DnB ASA Domini Social Investments LLC Dongbu Insurance DWS Investment GmbH Earth Capital Partners LLP East Sussex Pension Fund Ecclesiastical Investment Management Ecofi Investissements - Groupe Credit Cooperatif Edward W. Hazen Foundation EEA Group Ltd Elan Capital Partners Element Investment Managers ELETRA - Fundação Celg de Seguros e Previdência Environment Agency Active Pension fund Epworth Investment Management Equilibrium Capital Group equinet Bank AG Erik Penser Fondkommission Erste Asset Management Erste Group Bank Essex Investment Management Company, LLC ESSSuper Ethos Foundation Etica Sgr Eureka Funds Management Eurizon Capital SGR Evangelical Lutheran Church in Canada Pension Plan for Clergy and Lay Workers Evangelical Lutheran Foundation of Eastern Canada Evli Bank Plc FC Investments FACEB – FUNDAÇÃO DE PREVIDÊNCIA DOS EMPREGADOS DA CEB FAELCE – Fundacao Coelce de Seguridade Social FAPERS- Fundação Assistencial e Previdenciária da Extensão Rural do Rio Grande do Sul FASERN - Fundação COSERN de Previdência Complementar Fédéris Gestion d’Actifs FIDURA Capital Consult GmbH FIM Asset Management Ltd FIM Services FIPECq - Fundação de Previdência Complementar dos Empregados e Servidores da FINEP, do IPEA, do CNPq FIRA. - Banco de Mexico First Affirmative Financial Network, LLC First Swedish National Pension Fund (AP1) Firstrand Group Limited Five Oceans Asset Management Florida State Board of Administration (SBA) Folketrygdfondet Folksam Fondaction CSN Fondation de Luxembourg Forma Futura Invest AG Fourth Swedish National Pension Fund, (AP4) FRANKFURT-TRUST Investment-Gesellschaft mbH Fukoku Capital Management Inc FUNCEF - Fundação dos Economiários Federais Fundação AMPLA de Seguridade Social - Brasiletros Fundação Atlântico de Seguridade Social Fundação Attilio Francisco Xavier Fontana Fundação Banrisul de Seguridade Social Fundação BRDE de Previdência Complementar - ISBRE Fundação Chesf de Assistência e Seguridade Social – Fachesf Fundação Corsan - dos Funcionários da Companhia Riograndense de Saneamento Fundação de Assistência e Previdência Social do BNDES - FAPES FUNDAÇÃO ELETROBRÁS DE SEGURIDADE SOCIAL - ELETROS Fundação Forluminas de Seguridade Social - FORLUZ Fundação Itaipu BR - de Previdência e Assistência Social FUNDAÇÃO ITAUBANCO Fundação Itaúsa Industrial Fundação Promon de Previdência Social Fundação Rede Ferroviária de Seguridade Social - Refer FUNDAÇÃO SANEPAR DE PREVIDÊNCIA E ASSISTÊNCIA SOCIAL - FUSAN CDP Signatory Investors 2012
  8. 8. 8 Fundação Sistel de Seguridade Social (Sistel) Fundação Vale do Rio Doce de Seguridade Social - VALIA FUNDIÁGUA - FUNDAÇÃO DE PREVIDENCIA COMPLEMENTAR DA CAESB Futuregrowth Asset Management Garanti Bank GEAP Fundação de Seguridade Social Generali Deutschland Holding AG Generation Investment Management Genus Capital Management Gjensidige Forsikring ASA Global Forestry Capital SARL GLS Gemeinschaftsbank eG Goldman Sachs Group Inc. GOOD GROWTH INSTITUT für globale Vermögensentwicklung mbH Governance for Owners Government Employees Pension Fund (“GEPF”), Republic of South Africa GPT Group Graubündner Kantonalbank Greater Manchester Pension Fund Green Cay Asset Management Green Century Capital Management GROUPAMA EMEKLILIK A.Ş. GROUPAMA SIGORTA A.Ş. Groupe Crédit Coopératif Groupe Investissement Responsable Inc. GROUPE OFI AM Grupo Financiero Banorte SAB de CV Grupo Santander Brasil Gruppo Bancario Credito Valtellinese Guardians of New Zealand Superannuation Hanwha Asset Management Company Harbour Asset Management Harrington Investments, Inc Hauck Aufhäuser Asset Management GmbH Hazel Capital LLP HDFC Bank Ltd Healthcare of Ontario Pension Plan (HOOPP) Helaba Invest Kapitalanlagegesellschaft mbH Henderson Global Investors Hermes Fund Managers HESTA Super HIP Investor Holden Partners HSBC Global Asset Management (Deutschland) GmbH HSBC Holdings plc HSBC INKA Internationale Kapitalanlagegesellschaft mbH HUMANIS Hyundai Marine Fire Insurance. Co., Ltd. Hyundai Securities Co., Ltd. IBK Securities IDBI Bank Ltd Illinois State Board of Investment Ilmarinen Mutual Pension Insurance Company Impax Asset Management IndusInd Bank Limited Industrial Alliance Insurance and Financial Services Inc. Industrial Bank (A) Industrial Bank of Korea Industrial Development Corporation Industry Funds Management Infrastructure Development Finance Company ING Group N.V. Insight Investment Management (Global) Ltd Instituto de Seguridade Social dos Correios e Telégrafos- Postalis Instituto Infraero de Seguridade Social - INFRAPREV Instituto Sebrae De Seguridade Social - SEBRAEPREV Insurance Australia Group IntReal KAG Investec Asset Management Investing for Good CIC Ltd Irish Life Investment Managers Itau Asset Management Itaú Unibanco Holding S A Janus Capital Group Inc. Jarislowsky Fraser Limited JOHNSON JOHNSON SOCIEDADE PREVIDENCIARIA JPMorgan Chase Co. Jubitz Family Foundation Jupiter Asset Management Kaiser Ritter Partner (Schweiz) AG KB Kookmin Bank KBC Asset Management NV KBC Group KCPS Private Wealth Management KDB Asset Management Co., Ltd. KDB Daewoo Securities KEPLER-FONDS Kapitalanlagegesellschaft m. b. H. Keva KfW Bankengruppe Killik Co LLP Kiwi Income Property Trust Kleinwort Benson Investors KlimaINVEST KLP Korea Investment Management Co., Ltd. Korea Technology Finance Corporation (KOTEC) KPA Pension Kyrkans pensionskassa La Banque Postale Asset Management La Financiere Responsable Lampe Asset Management GmbH Landsorganisationen i Sverige LBBW - Landesbank Baden-Württemberg LBBW Asset Management Investmentgesellschaft mbH LD Lønmodtagernes Dyrtidsfond Legal General Investment Management Legg Mason Global Asset Management LGT Capital Management Ltd. LIG Insurance Co., Ltd Light Green Advisors, LLC Living Planet Fund Management Company S.A. Lloyds Banking Group Local Authority Pension Fund Forum Local Government Super Local Super Logos portföy Yönetimi A.Ş. London Pensions Fund Authority Lothian Pension Fund LUCRF Super Lupus alpha Asset Management GmbH Macquarie Group Limited MagNet Magyar Közösségi Bank Zrt. MainFirst Bank AG MAMA Sustainable Incubation AG Man MAPFRE Maple-Brown Abbott Marc J. Lane Investment Management, Inc. Maryland State Treasurer Matrix Asset Management MATRIX GROUP LTD McLean Budden MEAG MUNICH ERGO AssetManagement GmbH Meeschaert Gestion Privée Meiji Yasuda Life Insurance Company Mendesprev Sociedade Previdenciária Merck Family Fund Mercy Investment Services, Inc. Mergence Investment Managers Meritas Mutual Funds MetallRente GmbH Metrus – Instituto de Seguridade Social Metzler Asset Management Gmbh MFS Investment Management Midas International Asset Management Miller/Howard Investments Mirae Asset Global Investments Co. Ltd. Mirae Asset Securities Mirvac Group Ltd Missionary Oblates of Mary Immaculate Mistra, Foundation for Strategic Environmental Research Mitsubishi UFJ Financial Group Mitsui Sumitomo Insurance Co.,Ltd Mizuho Financial Group, Inc. Mn Services Momentum Manager of Managers (Pty) Limited Monega Kapitalanlagegesellschaft mbH Mongeral Aegon Seguros e Previdência S/A Morgan Stanley Mountain Cleantech AG MTAA Superannuation Fund Mutual Insurance Company Pension-Fennia Nanuk Asset Management Natcan Investment Management Nathan Cummings Foundation, The National Australia Bank National Bank of Canada NATIONAL BANK OF GREECE S.A. National Grid Electricity Group of the Electricity Supply Pension Scheme National Grid UK Pension Scheme National Pensions Reserve Fund of Ireland National Union of Public and General Employees (NUPGE) NATIXIS Nedbank Limited Needmor Fund NEI Investments Nelson Capital Management, LLC Neuberger Berman New Alternatives Fund Inc. New Amsterdam Partners LLC New Mexico State Treasurer New York City Employees Retirement System New York City Teachers Retirement System New York State Common Retirement Fund (NYSCRF) Newton Investment Management Limited NGS Super NH-CA Asset Management Nikko Asset Management Co., Ltd. Nipponkoa Insurance Company, Ltd Nissay Asset Management Corporation NORD/LB Kapitalanlagegesellschaft AG Nordea Investment Management Norfolk Pension Fund Norges Bank Investment Management North Carolina Retirement System Northern Ireland Local Government Officers’ Superannuation Committee (NILGOSC) NORTHERN STAR GROUP Northern Trust Northward Capital Pty Ltd Nykredit Oddo Cie OECO Capital Lebensversicherung AG ÖKOWORLD Old Mutual plc OMERS Administration Corporation Ontario Teachers’ Pension Plan OP Fund Management Company Ltd Oppenheim Co. Limited Oppenheim Fonds Trust GmbH Opplysningsvesenets fond (The Norwegian Church Endowment) OPTrust Oregon State Treasurer Orion Energy Systems Osmosis Investment Management Parnassus Investments Pax World Funds Pensioenfonds Vervoer Pension Denmark Pension Fund for Danish Lawyers and Economists Pension Protection Fund Pensionsmyndigheten Perpetual Investments PETROS - The Fundação Petrobras de Seguridade Social PFA Pension PGGM Vermogensbeheer Phillips, Hager North Investment Management Ltd. PhiTrust Active Investors Pictet Asset Management SA Pioneer Investments PIRAEUS BANK PKA Pluris Sustainable Investments SA PNC Financial Services Group, Inc. Pohjola Asset Management Ltd Polden-Puckham Charitable Foundation Portfolio 21 Investments Porto Seguro S.A. Power Finance Corporation Limited PREVHAB PREVIDÊNCIA COMPLEMENTAR PREVI Caixa de Previdência dos Funcionários do Banco do Brasil PREVIG Sociedade de Previdência Complementar ProLogis Provinzial Rheinland Holding Prudential Investment Management Prudential Plc Psagot Investment House Ltd PSP Investments Q Capital Partners QBE Insurance Group Rabobank Raiffeisen Fund Management Hungary Ltd. Raiffeisen Kapitalanlage-Gesellschaft m.b.H. Raiffeisen Schweiz Genossenschaft Rathbones / Rathbone Greenbank Investments RCM (Allianz Global Investors) Real Grandeza Fundação de Previdência e Assistência Social Rei Super Reliance Capital Ltd
  9. 9. 9 Resolution Resona Bank, Limited Reynders McVeigh Capital Management RLAM Robeco Robert Patricia Switzer Foundation Rockefeller Financial (trade name used by Rockefeller Co., Inc.) Rose Foundation for Communities and the Environment Rothschild Royal Bank of Canada Royal Bank of Scotland Group RPMI Railpen Investments RREEF Investment GmbH Russell Investments SAM Group SAMPENSION KP LIVSFORSIKRING A/S SAMSUNG FIRE MARINE INSURANCE Samsung Securities Sanlam Life Insurance Ltd Santa Fé Portfolios Ltda Santam Sarasin Cie AG SAS Trustee Corporation Sauren Finanzdienstleistungen GmbH Co. KG Schroders Scotiabank Scottish Widows Investment Partnership SEB SEB Asset Management AG Second Swedish National Pension Fund (AP2) Seligson Co Fund Management Plc Sentinel Investments SERPROS - Fundo Multipatrocinado Service Employees International Union Pension Fund Seventh Swedish National Pension Fund (AP7) Shinhan Bank Shinhan BNP Paribas Investment Trust Management Co., Ltd Shinkin Asset Management Co., Ltd Siemens Kapitalanlagegesellschaft mbH Signet Capital Management Ltd Smith Pierce, LLC SNS Asset Management Social(k) Sociedade de Previdencia Complementar da Dataprev - Prevdata Socrates Fund Management Solaris Investment Management Limited Sompo Japan Insurance Inc. Sopher Investment Management SouthPeak Investment Management SPF Beheer bv Sprucegrove Investment Management Ltd Standard Bank Group Standard Chartered Standard Chartered Korea Limited Standard Life Investments State Bank of India State Street Corporation StatewideSuper StoreBrand ASA Strathclyde Pension Fund Stratus Group Sumitomo Mitsui Financial Group Sumitomo Mitsui Trust Holdings, Inc. Sun Life Financial Inc. Superfund Asset Management GmbH SUSI Partners AG Sustainable Capital Sustainable Development Capital Svenska Kyrkan, Church of Sweden Swedbank AB Swift Foundation Swiss Re Swisscanto Asset Management AG Syntrus Achmea Asset Management T. Rowe Price T. SINAI KALKINMA BANKASI A.Ş. Tata Capital Limited TD Asset Management Inc. and TDAM USA Inc. Teachers Insurance and Annuity Association – College Retirement Equities Fund Telluride Association Tempis Asset Management Co. Ltd Terra Forvaltning AS TerraVerde Capital Management LLC TfL Pension Fund The ASB Community Trust The Brainerd Foundation The Bullitt Foundation The Central Church Fund of Finland The Children’s Investment Fund Management (UK) LLP The Collins Foundation The Co-operative Asset Management The Co-operators Group Ltd The Daly Foundation The Environmental Investment Partnership LLP The Hartford Financial Services Group, Inc. The Joseph Rowntree Charitable Trust The Korea Teachers Pension (KTP) The Pension Plan For Employees of the Public Service Alliance of Canada The Pinch Group The Presbyterian Church in Canada The Russell Family Foundation The Sandy River Charitable Foundation The Shiga Bank, Ltd. The Sisters of St. Ann The United Church of Canada - General Council The University of Edinburgh Endowment Fund The Wellcome Trust Third Swedish National Pension Fund (AP3) Threadneedle Asset Management TOBAM Tokio Marine Holdings, Inc Toronto Atmospheric Fund Trillium Asset Management Corporation Triodos Investment Management Tri-State Coalition for Responsible Investment Tryg UBS Unibail-Rodamco UniCredit SpA Union Asset Management Holding AG Union Investment Privatfonds GmbH Unione di Banche Italiane S.c.p.a. Unionen Unipension UNISON staff pension scheme UniSuper Unitarian Universalist Association United Methodist Church General Board of Pension and Health Benefits United Nations Foundation Unity Trust Bank Universities Superannuation Scheme (USS) Vancity Group of Companies VCH Vermögensverwaltung AG Ventas, Inc. Veris Wealth Partners Veritas Investment Trust GmbH Vermont State Treasurer Vexiom Capital, L.P. VicSuper Victorian Funds Management Corporation VietNam Holding Ltd. Voigt Coll. GmbH VOLKSBANK INVESTMENTS Waikato Community Trust Inc Walden Asset Management, a division of Boston Trust Investment Management Company WARBURG - HENDERSON Kapitalanlagegesellschaft für Immobilien mbH WARBURG INVEST KAPITALANLAGEGESELLSCHAFT MBH Water Asset Management, LLC Wells Fargo Company West Yorkshire Pension Fund WestLB Mellon Asset Management (WMAM) Westpac Banking Corporation WHEB Asset Management White Owl Capital AG Winslow Management, A Brown Advisory Investment Group Woori Bank Woori Investment Securities Co., Ltd. YES BANK Limited York University Pension Fund Youville Provident Fund Inc. Zegora Investment Management Zevin Asset Management Zurich Cantonal Bank CalSTRS (California State Teachers Retirement System) “CalSTRS’ board has made climate risk management the signature issue in our corporate governance engagement program. CDP data is an essential input and is reviewed prior to meeting with companies on any issue to ensure that the discussion covers climate risk if warranted. CDP data is also very important to CalSTRS as we develop and execute our shareholder resolutions.” Jack Ehnes, CEO
  10. 10. 10 I am pleased to introduce the CDP FTSE 350 Report 2012. As a responsible long term investor, the London Pensions Fund Authority (LPFA) recognises environmental, social and governance (ESG) issues, such as natural capital, are often not captured by the traditional investment appraisal process but can have a material impact on long term investment returns. Driving this issue is insufficient disclosure by investee companies on how ESG issues impact their business model. As a result, we welcome the CDP’s recent merger with the Forest Footprint Disclosure Project, which together now represent the world’s largest natural capital disclosure system covering carbon, water and forests. This is an exciting development as it demonstrates the integrated approach that is needed to address these complex sustainability challenges. Having this information in one place will better facilitate investors’ assessment of the environmental footprints of companies. At the LPFA, this will aid in our efforts to hold our external fund managers and ultimately our investee companies to account for integrating ESG risks and opportunities into their strategic decision making. The theme of this year’s report is the Future of Reporting, an issue which is currently under a significant amount of stakeholder scrutiny and in my view lies at the heart of the “externality” problem. When a company does not sufficiently demonstrate how ESG issues tie into their business model, it makes it more challenging for an investor to make the same assessment and as a result, ESG issues stand a greater chance of getting excluded from the investment process. In addition, the reliability of the underlying ESG data in reporting has also been called into question, with a recent report3 noting few companies in the FTSE 350 assuring their sustainability reports. However given recent events, I believe that the tide may be turning. The UK Government has made a major advancement by its introduction of mandatory reporting of greenhouse gas emissions for all companies listed on the main market of the London Stock Exchange by April 2013. As a board member of the European Institutional Investors Group on Climate Change, I am hopeful that this development will spark a more coordinated regulatory effort on tackling climate change at an international level. We have also seen a growing number of market-driven, innovative initiatives seeking to improve the reporting mechanism, such as the International Integrated Reporting Council and the CDP-endorsed Climate Disclosure Standards Board (CDSB). The CDSB’s Climate Change Reporting Framework empowers companies to provide information that connects the financial, governance and environmental impacts of climate change in their reporting to investors. As clarity and transparency in reporting is a key focus area for the LPFA, we will continue to support CDP’s visionary efforts in this crucial area, and remain hopeful for significant positive developments in the future. Mike Taylor Chief Executive, LPFA 3: Stuck on the starting blocks: The state of sustainability assurance in 2010, Carbon Smart. Guest Foreword “As clarity and transparency in reporting is a key focus area for the LPFA, we will continue to support CDP’s visionary efforts in this crucial area.” Mike Taylor, Chief Executive, LPFA
  11. 11. 11 Building greater accountability to shareholders It is increasingly important to shareholders that companies be accountable and transparent on environmental issues which pose financial risks. As such, the quality and quantity of climate change reporting has radically changed. CDP has been at the forefront of carbon reporting for over ten years. It has become the mechanism for organisations worldwide to measure and disclose greenhouse gas emissions and climate change risk information which is of value to investors. When CDP launched its first FTSE 350 report in 2006, only 49% of companies responded to the questionnaire. This year, 69% of companies (96% of the FTSE100, 2006: 83%) responded, disclosing more information than ever before (average disclosure score in 2012: 66, 2011: 63). Companies are increasingly responsive to CDP’s request, which shows that business sees the threats and opportunities presented by climate change as real and material. The UK Government recently announced regulation, which will be applicable to companies from next financial year, that all UK-registered quoted companies will have to report their greenhouse gases emissions in their Directors’ Report. By being the first country in the world to mandate disclosure of gross global emissions for the entire organisation in annual reports, the Government is recognising the importance of corporate reporting in driving company and shareholder actions. This is supported by Defra’s 2011 consultation on measuring and reporting on greenhouse gas emissions, which showed that two thirds of companies were in favour of mandatory reporting. Reporting greenhouse gas emissions through CDP has become a standard part of the reporting process for UK companies (93% report Scope 1 and Scope 2 emission), but fewer (64%) disclose greenhouse gas emissions as part of their corporate financial reports. Annual reports are often long, complex and focus on short term performance, based on historic financial data. Longer term business sustainability and broader issues such as environmental and social performance are rarely adequately covered. The global financial crisis has heightened the value of information disclosure, risk management and good corporate governance. There is also an increasing appetite to change the annual reporting model to include metrics that reflect a company’s exposure to all risks – including climate change. An emerging approach to this is ‘Integrated Reporting’, showing the relationship between an organisation’s strategy, governance and financial performance and the social, environmental and economic context within which it operates. CDSB, a special project of CDP, has developed a Climate Change Reporting Framework which is designed to link financial and climate change-related reporting in a company’s annual report. While the proposed scope of reporting mandated by the UK Government remains limited to Scope 1 and Scope 2 greenhouse gas emissions reporting for now (and only covers a small set of the information reported to investors through CDP), it will likely increase over time. Some of the catalysts of better reporting include: continued economic uncertainty; growing interdependencies in business models; higher frequency of business disruption events (both climatic and man-made); and changing expectations from stakeholders. Despite these drivers, not many companies are integrating climate change in their strategy (2012: 56%, 2011: 46%) and only 31% verify or assure any of their emissions (2011: 26%). Key Themes and Highlights of 2012 Responses Physical opportunities Regulatory opportunities Reputational change in consumer behaviour opportunities F2 Opportunities Identified by Responding Companies • 2011 • 2012 59% 57% 60% 53% 72% 76% 0 10 504020 30 60 80 10070 90 Percentage of responding companies F3 Risks Identified by Responding Companies • 2011 • 2012 Physical risks Regulatory risks Reputational change in consumer behaviour risks 74% 68% 61% 50% 84% 77% 0 10 504020 30 60 80 10070 90 Percentage of responding companies 11
  12. 12. 12 Types of Reporting Investor requested reporting: Investor requested reporting is the provision of information by a company that goes beyond regulatory requirements and is of value to investors. Investor requested disclosures can include detailed information on a company’s greenhouse gas emissions and climate change-related information including governance, strategy and risk. CDP is an example of investor requested reporting. Mandatory carbon reporting: Compulsory reporting by companies of their carbon emissions to regulators enabling investors and others to see which companies are effectively managing the hidden long-term costs of carbon (greenhouse) gas emissions. The proposed UK government mandatory reporting regulations due to be introduced from April 2013 require companies to include emissions data for their entire organisation (gross emissions) in their annual reports. Companies already reporting to CDP should be prepared to meet the requirements of this regulation. CDSB’s climate change reporting framework will be listed in the regulation guidance as a method for companies to comply with the proposed regulation. Mainstream (annual) reports: These are the annual reporting packages in which certain organisations are required to deliver their audited financial results under the corporate compliance to securities laws of the territory or territories in which they operate. Mainstream reports are normally publicly available and provide information to existing and prospective investors about the financial position and financial performance of the organisation and are distinct from material published separately. The exact provisions under which companies are required to deliver mainstream reports differ internationally and examples include UK Companies Act 2006, Regulation (EC) No 1606/2002 of the European Parliament and the Council on the application of international accounting standards and the US Securities and Exchange Commission Regulations S-K. Mainstream reports include financial statements and other financial reporting. Integrated reporting: Integrated reporting connects information about an organisation’s current decisions with its future prospects; connecting information about strategy, risk, remuneration and performance; and recognising that the economy, environment and society are inseparable and therefore information provided to understand an organisation’s performance in each of these areas needs to be viewed as part of a whole. Integrated reporting helps boards of directors to see the issues they face more clearly, and enables them to explain their business rationale to stakeholders with greater clarity and authority. Non-financial reporting: Non-financial reporting is shorthand for the critical contextual information about social and environmental performance that is reported alongside financial information to provide a broader, more meaningful understanding of a company’s business, its market position, strategy, performance and future prospects.
  13. 13. 13 Climate change reporting: drivers and content Companies are increasingly aware that they need to tell a comprehensive story to all stakeholders and report on all elements which could affect their business continuity. Good reporting can demonstrate preparedness for regulations and motivate companies to critically evaluate their internal processes. Shareholders and customers are making choices based on both economic and environmental issues and transparent reporting can help companies to increase market share. Most significantly, some companies have stated that the process of reporting on climate issues has brought about strategic change. To provide material, shareholder relevant, information to financial markets, companies need to report on the risks, opportunities and strategies associated with climate change across a company’s entire operation. This would include their suppliers, customers and other critical elements beyond the legal entity itself. CDP has been asking FTSE companies to disclose this information voluntarily, through its global reporting platform, since 2006, promoting an overall increase in awareness of the business-critical issues (see Figures 2 and 3). Regulation The introduction of new climate change regulations will motivate companies to report on the impact of those regulations. The future of carbon reporting will increasingly be driven by the introduction of new climate change regulation. Currently, regulatory risks and opportunities are the most reported type of risks and opportunities, with risks far outweighing opportunities (see Figure 4). 84% believe upcoming regulations pose a risk (2011: 77%) and 32% believe these are linked to emissions reporting obligations (2011: 33%). For example, Morrison notes how reporting could be detrimental to its business if the regulation does not conform to the current voluntary method it uses: it could increase administrative costs or highlight relatively poor performance with respect to Morrison’s peers. Tate Lyle notes the absence of a binding international agreement to tackle climate change means levels of ambition, regulation and costs are developing differently around the world. Royal Dutch Shell believes that a real carbon price in the global energy system will be the most effective approach to managing greenhouse gas emissions internationally. It does not believe voluntary industry GHG targets will significantly help progress regulatory discussions across the globe. Other UK regulations are also seen as risks. For instance, 41% of responding companies state that they see the CRC Energy Efficiency Scheme as a risk, in large part because of the uncertainties surrounding it. HSBC notes that the CRC Energy Efficiency Scheme put it at a disadvantage by not taking account of its carbon neutrality. Shanks and Derwent London are amongst those companies who report that administrative costs linked to the CRC Energy Efficiency Scheme will place a significant burden on their operations (Shanks: £205,000, Derwent London: £319,000). The Confederation of British Industry supports mandatory carbon reporting as an important way to help businesses save money and emissions, provided it is done in a sensible way. F4 Regulatory Risks and Opportunities Identified by Responding Companies • Risks • Opportunities Airpollution limits Capand trade schemes Lackof regulation Carbontaxes Other regulatory drivers Emission reporting obligations Productefficiency regulationsand standards Fuel/energy taxesand regulation Productlabeling regulationsand standards General environmental regulations includingplanning Uncertainty surroundingnew regulation International agreements Voluntary agreements 7% 14% 18% 33% 22% 52% 19% 32% 26% 43% 21% 31% 17% 19% 4% 18% 12% 19% 19% 9% 13% 32% 7% 6% 60% 50% 40% 30% 20% 10% 0% 13
  14. 14. 14 However, regulations can also lead to opportunities, as outlined by 72% of respondents (2011: 76%). For example, Kier notes how the need to comply with the CRC Energy Efficiency Scheme has been a major driver internally with regards to opportunities to improve energy efficiency and reduce energy consumption. Emissions reporting obligations are one of the main regulatory opportunities (2012: 20% of respondents). The most highly reported impact from this is an increase in demand for an existing product or service (28% of reporting opportunities) with all opportunities being achievable in the near future (current opportunities: 56% of companies, opportunities in 1-5 years: 60% of companies). Aegis notes how being able to proactively meet increasing emission reporting obligations will enhance its credibility amongst stakeholders. Cairn Energy and Diageo echo this by stating that they will gain a competitive advantage over other companies if they perform well in this area. Diageo has shown a long-term commitment to reporting its emissions, which has helped identify carbon hotspots and drive efficiencies. It believes this gives an advantage relative to competitors who lack such understanding or are not as well prepared for compliance with upcoming reporting regulations: there is a clear advantage to being an early-mover. Existing and future regulations may lead to new costs due, for instance, to feed-in tariffs or carbon taxes. The fluctuating (and low) price of carbon is hindering investments. Aviva notes how the current low carbon prices do not create the right incentives for private investment in low carbon infrastructure, while fluctuating fuel costs, often affected by regulation, are creating financial risks for companies. On the other hand, Rolls Royce notes how it has invested in facilities, operational improvements and energy efficiency programmes in order to lower its exposure to fuel-related costs and carbon-related costs. This decoupling is clearly shown by increasing revenue by 151% while decreasing greenhouse gas emissions by 33% between 1998 and 2011. This clearly shows how regulation will drive the requirement to report and that the impacts of climate change related regulation will have an immediate relevance to the financial decisions for shareholders. Reputation and stakeholder expectations Reporting climate change activities is not only important to comply with regulations, but also to manage reputation. Telling a positive story, through voluntary and mandatory communications is important to satisfy stakeholders’ needs, manage their expectations and win new business opportunities. This is even more important for those companies looking to take strategic advantage over their competitors and lead in the low carbon market. As the number of companies reporting increases, and report wider and deeper information, the expectation will grow for their peers to match their demonstration of managing the business impacts of climate change. In 2012, 61% of responding companies highlighted risks (2011: 50%) and 60% highlighted opportunities (2011: 53%) associated with their reputation, changes F5 Percentage OF RESPONDING Companies Verifying/Assuring Scope 1, 2 or 3 Emissions • Scope 1 • Scope 2 • Scope 3 Scope 1 Scope 2 Scope 3 33% 17% 31% 0 5 252010 15 30 35 Percentage of responding companies 14
  15. 15. 15 in consumer behaviour, or both. There are good reasons for why companies will consider reputational impacts an increasingly important reporting issue. Diageo, for instance, highlights that 2011 was a record year for shareholder resolutions related to environmental issues including greenhouse gas reporting. Spectrics notes that a number of the products it developed in 2011 have been influenced by climate change and reflect the drive from its customers to reduce energy consumption and emissions. Reporting can translate into a boost to brand value and reputation. British Sky Broadcasting notes that emission reporting guidelines (it uses Defra’s Voluntary Reporting Guidelines and the Greenhouse Gas Protocol) have enabled companies that are investing and reducing their carbon emissions to benefit by being seen to be a leader on climate change. This, in turn, can bring with it reputational benefits, the ability to attract and retain talent and the opportunity to build new partnerships with like- minded organisations and suppliers. Electrocomponents supports this assertion by noting that reporting obligations can make its customers more aware of energy conservation opportunities which may increase the demand for its products and services. A leading reputation can stem from reporting commitments but also from bold internal policies. For example, Lloyds Banking introduced in 2011 a ‘No Travel Week’ once a month to reduce its business travel emissions by 20% by 2020. Imperial Tobacco grants environmental projects exemptions from their normal requirements that pay backs should occur within three years. Communicating and reporting this will improve a company’s reputation. Consistency and reliability of emissions data The UK’s mandatory reporting regulation will require companies to report their Scope 1 and 2 emissions in their annual reports. While responding companies are increasingly confident in measuring and reporting their Scope 1 and Scope 2 emissions, there is still some way to go with the reporting of Scope 3 emissions. The quality of Scope 3 data disclosed to CDP was mixed due to the complexity involved in assessing some types of Scope 3 emissions. For example, a majority of responding companies (69%) measured business travel emissions as part of their Scope 3 emissions but few reported their upstream (19%) and downstream goods (25%) emissions. The updated Scope 3 protocol released in November 2011 will help consistency of reporting, but until there is a real driver to report on this area, the harder to measure Scope 3 items are unlikely to be reported in full. Financial auditors hold a responsibility to read all financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. This includes the data that will be reported by companies next year as part of the UK’s mandatory reporting regulations. Any apparent material misstatements or inconsistencies may impact the financial audit opinion. Over time, this may be seen as a risk that leads companies to request that their emissions data is assured. Reporting comparable and reliable data is important to ensure the data can be relied upon to drive key decisions. Stakeholders are looking for independent third party verification or assurance to help them to assess the materiality and accuracy of the companies’ reported data. There was an increase in companies reporting some form of verification or assurance of their emissions in 2012 from 25% in 2011 to 35% in 2012. CDP has provided considerable input to drive this rise in verification, including the Carbon Performance Leadership Index (CPLI) (see page 26) entry requirement for verification or assurance over Scope 1 2. Verification and assurance adds credibility to companies’ efforts in tackling and reporting their actions on climate change: it adds an independent, external opinion on the data and is strong proof for investors of companies’ willingness to clearly disclose their performance and their progress. This increase in verification of emissions will prepare these companies for future, more stringent, reporting regulation, and reduce the risk of incorrect emissions reporting. Gaining a business and strategic advantage from reporting Companies are increasingly aware of the benefit of reporting on carbon issues. As Tesco notes, growing consumer awareness of climate change means that there are strong reputational benefits to taking a lead in the transition to a low carbon economy: companies’ actions can have a significant bearing on the ability to win business and/or investors. 89% of CDLI companies already recognise these reputational opportunities (non- CDLI: 55%). BT Group highlights that, in 2012, its sustainability credentials were requested in £2.7billion of customer bids. The potential revenue streams are huge: RBS views the climate change-related market to be £200-400bn in size while HSBC’s Climate Change Centre of Excellence “Longer term, we have integrated our Carbon Critical Design philosophy into all of our business decisions. The campaign aimed to raise our employees’ awareness of the criticality of carbon in every project that we deliver so that they in turn could engage our clients on carbon.” Atkins
  16. 16. 16 estimates that the global market for low-carbon energy solutions in 2020 could be over US$2.2 trillion. In addition, investors are increasingly using climate performance metrics to positively and negatively screen potential investments. United Utilities believes that an experience in delivering a business strategy which integrates climate change and a transparent strategic narrative around climate change puts it at a strategic advantage. Indeed, while only 33% of responding companies consider themselves to have a strategic advantage relating to climate change, the proportion jumps to 74% when looking at the companies listed on the CDLI. While the percentage of all reporting companies who integrate climate change into their strategy remains low (2012: 56%), 95% of CDLI companies already have an integrated strategy. 80% of the CDLI also includes climate change-related information in their annual reports. Being able to report a long-term understanding of physical risks provides greater confidence to shareholders and customers. While customers may focus on the environmental impact of companies’ products or services, investors may focus on the long-term resilience of their business. Extreme weather patterns are increasingly frequent in the UK and worldwide (physical risks were highlighted by 74% of respondents) and can have a significant impact on a company’s business continuity. For example, Debenhams notes how a number of its supply chain operations are located in areas at risk from flooding or droughts and the supply of materials for products may be negatively affected by extreme weather events. The gulf in the quality of reporting between CDLI companies and non-CDLI companies highlights how regulation will help other companies catch up with the leaders. Mandatory reporting, such as the UK’s proposed regulations on GHG reporting, will provide further impetus towards an integrated reporting model. “We recognise that climate change is not just an environmental challenge; but also one that affects the health and livelihood of millions of people because of the links to complex issues such as poverty; economic development and population growth. We believe that the most effective response to the challenges associated with climate change can only be achieved through a concerted global effort.” Astra Zeneca “In 2012, our sustainability credentials were requested in £2.7bn of customer bids.” BT Group “We believe that incorporating climate change in our strategy has helped us to gain strategic advantage; both operationally... and in the market places we serve.” Electrocomponent
  17. 17. 17 The Future of Reporting The culmination of several factors coming together has helped drive greater levels of carbon disclosure in the past decade. Government regulations, from building standards and the EU-ETS to the recently proposed mandatory reporting legislation, now require companies to measure and report their emissions as part of compliance. Stakeholder pressure from investors and customers, as seen by the work of CDP, helps prepare companies for regulation. As the tools and frameworks (such as CDSB’s Climate Change Reporting Framework) for reporting become available and improve, the private sector will continue to find that disclosure becomes easier and more useful. Looking to the future, the evolution of reporting on climate change will be focused on the following key issues: retaining global consistency in reporting, improving the quality of data and demonstrating an integration of this understanding into strategy. Mandatory reporting in the UK will continue to drive more companies to report emissions and include this information in their annual reports. Voluntary reporting through CDP will provide more detailed information for companies to determine what is material and for investors to use in their research and analysis of future risk. There will also be an expectation that the information reported is verified and assured. The detail of the UK Government’s new regulations, in particular regarding the boundary requirements, will be crucial in deciding whether companies are truly prepared for mandatory reporting or not. However, there is no doubt that CDP has been crucial in preparing companies for mandatory reporting. The investor-relevant information requested by CDP is currently more comprehensive than the proposed UK reporting requirements, and provides a global platform that continues to drive forward strategic change and business benefit and will prepare companies with the data they need to be ready for whatever the future of reporting is.
  18. 18. 18 The years since CDP started asking organisations for climate change-related information have seen significant developments in awareness of resource constraints, market inefficiencies and global risks and the private sector has been identified as needing to play a crucial role in addressing these issues. This has had consequential effects on reporting requirements. New legislation, standards and codes encourage or require companies to report on an increasingly wide range of factors designed to inform governments, investors, consumers and society about all aspects of their performance so that more effective decisions can be made by stakeholders about how to allocate and protect resources. The future of reporting is likely to focus on refining the substance and format of these new requirements both to recognise the changing nature of business, (in particular its reliance on intangible rather than physical assets to create value) and to meet the needs of stakeholders seeking to secure sustainable economic growth. The widespread adoption of International Financial Reporting Standards gives a universal language for the disclosure of financial results, now we need equivalent internationally recognised standards on the measurement and assessment of the non-financial resources and relationships on which companies depend for their success together with mechanisms for disclosure of that information through mainstream reporting channels. Much progress towards this has already been made by CDP through the significant non-financial reporting capacity it has built and its ever-pioneering advances such as the development of an XBRL taxonomy for climate disclosure. Complementing the work of the International Integrated Reporting Council (IIRC), CDP’s special project, the Climate Disclosure Standards Board (CDSB) focuses on mainstream reporting of climate change-related information in annual filings to investors. The requirements and principles of CDSB’s Climate Change Reporting Framework are designed to support assurance activities and are extensible to reporting on other forms of natural capital. Work on reporting by governments and other organisations has been likened to notes on a musical score that are currently being played in isolation. The future will hopefully see more orchestration of efforts on reporting as envisaged by the inter-agency work on consistency by CDSB, GRI, the OECD and UNCTAD. Corporate reporting should reflect our need to work in harmony with each other and with our planet. Standards and Consistency Lois Guthrie, Executive Director, CDSB
  19. 19. 19 Taking the next step in reporting Over the last few years, we have seen sustainability and climate change move more towards the mainstream of business thinking and reporting. This has been driven by a number of factors: companies seeing the potential business benefits (for example GE generated US$21bn in revenues in 2011 from a US$2.3 billion RD investment in their eco-imagination division); the realisation that growth cannot be sustained with declining natural capital; and a need for companies to meet changing customer needs. What is clear is that businesses are seeing sustainability and climate change as a new way in which to change their business model, strategy and generate and sustain multiple competitive advantages into the future. However, capitalising on this opportunity is not straightforward. This is where reporting has a part to play. Reporting is all about telling it how it is: in a way that is balanced, unbiased, clear about the relevance to the business and some external context. However, it also needs to be concise, to the point, and memorable. And when it comes to corporate reporting, comparability should be added to this list of attributes. With all of these attributes it is challenging but necessary to demonstrate how a business is seizing the opportunities and addressing the risks from climate change. The UK’s recent announcement of mandatory greenhouse gas emissions reporting for companies listed on the London Stock Exchange provides the necessity for many companies to report. The challenge will be telling a compelling picture to go along side the basic information that needs to be disclosed. The underlying principles of integrated reporting are a good place to start when looking at the next steps in reporting: • Discuss the external market drivers: capture economic, competitive, regulatory, geopolitical, environmental, social and technological drivers and be future orientated about how these are shaping the market in which you operate. • Be transparent around your strategy: show how this responds to the market drivers, is aligned to remuneration policies and the identified risks, and inform the reader about the extent of this across the value chain in which you operate. • Explain how the business model enables you to differentiate: include the relative importance of resources (financial, human and natural capital) and relationships (customers, suppliers, employees, etc.). • Disclose your performance: give a balanced assessment of performance on progress against strategy, including Key Performance Indicators and targets, to provide insight into how the business is dealing with the market drivers. • Think of the future: the future orientation of the business and how it is going to continue into the future will be important to the reader. Giving a balanced picture is not as easy as it sounds. Climate change is a complex issue fraught with uncertainty. Admitting that you do not have all the answers and don’t have certainty about how it will impact the business is never easy. But biased reporting has less credibility and risks being branded as ‘greenwash’. Those who have the courage to deal with uncertainty are those who will capitalise on the opportunities. Alan McGill, Partner, PwC
  20. 20. 20 By leading on emissions reductions activities and CO2 accounting, as well as driving this through our value chain, we believe we can make our biggest difference to improving and preserving natural capital. Reporting plays a key role here. For a number of years we have been connecting our fiscal metrics to our nonfinancial KPIs to demonstrate the real value add of our policies, practice and performance to our stakeholders. Transparency in reporting is critical, as it increases trust and helps to highlight the cost gaps of externalities. Our stakeholders are calling for the benefits of transparency and increased visibility in enabling the old adage: what you value, you protect. We have long believed that including environmental costs in reporting, reduces risk and will strengthen society’s ability to deliver a global economic model which balances efficiency and resiliency. Environmental impacts from climate change are a thorny and pressing example. A recent study concluded that CO2 e emissions and resulting climate change impacts account for a large and growing share of environmental costs. Trucost estimate these external costs as US$ 4.5 trillion in 2008 and rising to US$ 21 trillion in 2050. These environmental costs are unavoidable and translate into business costs in the guise of: insurance premiums, environmental taxes, rising supply costs and the cost associated with infrastructure repairs after severe weather events. For example, the widespread flooding experienced across many parts of the UK in 2007 caused an additional 31,000 customer complaints and cost BT approximately £9m in operational insurance claims. More recently the severe flooding affecting Thailand last year caused severe human suffering and ecological damage. It also impacted on our industry by increasing costs and supply lead times for hard drives. Suppliers of such equipment are often clustered geographically; Thailand manufactures over 70% of the world market in hard drives. We know that there’s more to do to factor this into our climate change adaptation strategy. This summer in the UK our fault rate in the network increased by some 30% - this is despite our long term efforts to protect the network from flooding, wind damage and lightning strikes. We all need to do more to ensure that businesses’ products and services can deliver more good to society than the natural capital consumed in their making, delivery and end of life. Transparently accounting and reporting for environmental costs, connecting non-financial and financial metrics, will play a central part in enabling this imperative. Tony Chanmugam Group Finance Director, BT Reducing our business costs often go hand in hand with reducing our impacts on the environment. We know this with certainty since we’ve been measuring and reporting our environmental performance since 1992. But the goalposts are shifting, and rightly so. Reporting needs to frame and illuminate the global challenge of increasing population and consumption that is bringing break-point pressure on finite environmental resources. As a business we are increasingly being asked to demonstrate how the decisions that we make impact on the environment and society, in particular through our supply chain and the products and services we provide our customers. Some of our customers are making commitments to accounting for natural capital and exploring aligned frameworks so that we can all speak the same language and count the same numbers. Investors too are increasingly looking to factor environmental considerations into investment decisions. For BT, we believe that one of the biggest differences that we can make is by applying our people, skills and technology to help reduce the demands on the planet’s natural resources. For example, it’s been calculated that our sector generates some 2% of Carbon Dioxide equivalent (CO2 e) worldwide and that our products and services could help avoid 15% of worldwide emissions by 2020. Neither BT nor its supply chain is a large user of natural capital, but many of our business customers are, and we offer a host of services designed to help them be more efficient. Our primary raw material is energy. Energy powers the communications solutions that keep people and businesses connected. In the UK alone BT consumes around 0.7% of the country’s electricity, spending around £250m per annum and generating over 600,000 tonnes of CO2 e emissions. The Future of Reporting – A Company Perspective A number of multinationals such as leading telecommunications group BT have demonstrated a forward-thinking approach to preparing their carbon statements by using the CDSB’s Climate Change Reporting Framework for climate change reporting since 2010.
  21. 21. 21
  22. 22. 22 2012 Leaders Introduction to the Carbon Disclosure Leadership Index (CDLI) and the Carbon Performance Leadership Index (CPLI) Each year, company responses are reviewed, analysed and scored for the quality of disclosure and performance on actions taken to mitigate climate change. The highest scoring companies for disclosure enter the CDLI and the highest for performance enter the CPLI. What are the CDLI and CPLI criteria? To enter the CDLI, a company must: • Make their response public and submit it via CDP’s Online Response System; • Achieve a score within the top 10% of the reporting population (35 companies in 2012). To enter the CPLI (Performance Band A), a company must: • Make their response public and submit it via CDP’s Online Response System; • Attain a performance score greater than 85; • Score maximum performance points on question 13.1a (absolute emissions performance for GHG reductions due to emissions reduction actions over the past year); • Disclose gross global Scope 1 and Scope 2 figures; and • Score maximum performance points for verification of Scope 1 and Scope 2 emissions. Why are the CDLI and CPLI important to investors? Analyses of the CDLI and CPLI provide insights into the characteristics and common trends among the leading companies on carbon disclosure and performance. They highlight good practices in reporting, governance, risk management, verification and emissions reduction activities that drive climate change adaptation and mitigation. Additionally, good carbon management and disclosure may be used as a proxy to assess where management are applying superior understanding of their risk profile and opportunities to help increase financial returns and the sustainability of their business. Companies in the CDLI and CPLI typically show a deeper understanding of, and address more pro-actively, the risks and opportunities presented by climate change. They build this into their strategy, risks and opportunities management and reporting processes. This transparency, and willingness to disclose information, is attractive to investors as they can make a more informed decision based on this information. For further information on the CDLI and the CPLI and how scores are determined, please visit https://www.cdproject.net/guidance
  23. 23. 23 Sector Company Name Disclosure Score2012 Consecutive yearsinthe CDLI Performance  Band Consumer Discretionary Reed Elsevier 88 4 B British Sky Broadcasting 86 3 B TUI Travel 85 5 B Carnival 84 4 B Kingfisher 84 3 B Consumer Staples Diageo 98 2 A Reckitt Benckiser 93 4 A Tesco 91 4 B Tate Lyle 89 1 B British American Tobacco 86 2 B Unilever 84 1 A Energy BG Group 89 2 B Royal Dutch Shell 89 4 B Financials British Land 96 2 A Barclays 92 4 B Land Securities 92 1 B Standard Chartered 92 1 B Royal Bank of Scotland 89 4 B HSBC 86 4 B Lloyds Banking Group 85 4 B Old Mutual 85 4 B Great Portland Estates 84 2 B Health Care GlaxoSmithKline 90 4 B Smith Nephew 84 1 C Industrials Serco 92 3 B Cobham 86 1 C Morgan Crucible 86 1 A Information Technology Logica 93 4 B Materials Anglo American 94 3 A Mondi 88 2 A Telecommunication Services BT Group 88 3 B Cable and Wireless Worldwide 85 2 B Utilities Centrica 96 4 B United Utilities 92 1 B SSE 90 4 B This FTSE Small Cap Company is not in FTSE 350 but achieved the required score to join CDLI Industrials Morgan Sindall Group 86 1 B CDLI T2 The CDP FTSE 350 CDLI 2012 In 2012, all ten sectors were once again represented and Financials was, as in 2011, the most represented sector (nine companies) although the most over-represented was Utilities, of whom 43% are in the CDLI (See Figure 6). There is a clear relationship between companies attaining a position in the CDLI and in the CPLI: six out of the seven (87%) CPLI companies are also in the CDLI (in 2011, all seven (100%) of the CPLI companies were in the CDLI). Some of this year’s leaders have shown consistency over a number of years: 16 companies have now been in the CDLI for four years. However, nine companies are included in the CDLI for the first time this year. While the disclosure score required to enter the CDLI in 2012 is similar to last year, the average CDLI score increased once again to 88 (2011: 87, 2010: 85). Emissions Reporting CDLI companies are far better prepared for the introduction of mandatory reporting regulations than non- CDLI companies: • 100% of CDLI companies report Scope 1 and Scope 2 emissions (non-CDLI: 91%); • 97% of CDLI companies report Scope 3 emissions (non-CDLI: 69%); • 94% of CDLI companies verify their Scope 1 emissions (non-CDLI: 22%); • 89% of CDLI companies verify their Scope 2 emissions (non-CDLI: 20%); • 34% of CDLI companies verify their Scope 3 emissions (non-CDLI: 13%); • CDLI companies report, a mean average, three different Scope 3 types of emissions (non-CDLI: two categories); and
  24. 24. 24 • 80% of the CDLI companies already include information on climate change in their annual reports (non-CDLI: 49%). Overall, CDLI companies already show a far higher willingness and transparency around their processes, achievements and targets. This preparedness will allow them to respond better to any future regulatory requirements for emissions reporting. Risks and Opportunities CDLI companies are able to better understand the risks and opportunities presented by climate change and link these to their strategies and risk management procedures. On average, CDLI companies scored 77% of disclosure points for questions related to opportunities (non-CDLI: 42%) and CDLI companies scored 84% of disclosure points for risks (non-CDLI: 52). Figures 8 and 9 show how CDLI companies consistently outperform other companies in identifying regulatory and physical risks and opportunities. Integrating Strategy Leaders are not only reporting the short term impact of climate change but are equally integrating climate change into their long-term strategy. 57% of the CDLI recognise risks with timeframes of more than ten years (non-CDLI: 24%) and 23% of the CDLI recognise opportunities with timeframes of more than ten years (non-CDLI: 12%). CDLI companies have already adapted their strategies and reflect best practice reporting across the board: • 94% (non-CDLI: 49%) of the CDLI have integrated climate change into their strategies; • 97% have monetary incentives (non-CDLI: 35%); and • 100% have climate change risk management procedures (non-CDLI: 72%). 74% of CDLI companies believe they currently have a strategic advantage relating to climate change. Indeed, the leaders demonstrate their preparedness for climate change and forward thinking by outperforming average FTSE 350 respondents in all areas of disclosure: emissions management, reporting, governance and strategy, opportunities, risks and stakeholder engagement (see Figure 10). “Longer term (15-20 years) strategic opportunities are focused on providing products and services that enable adaptation and resilience to the impacts of climate change.” Barclays F6 Sector representation in the CDLI • % of CDLI consisting of sector • % of disclosers in sector • % of disclosers in sector in CDLI Consumer Discretionary Utilities Telecommunication Services Materials Information Technology Industrials HealthCare Financials Energy Consumer Staples 14 18 17 7 6 6 26 22 6 3 9 21 3 6 6 11 6 4 9 3 45 40 35 30 25 20 15 10 5 0% F7 Percentage of responding companies disclosing or verifying emissions • CDLI • Non-CDLI Disclose Scopes 1 + 2 Verify Scope 1 Verify Scope 2 Disclose Scope 3 Verify Scope 3 91% 100% 20% 89% 70% 97% 13% 37% 22% 94% 0 10 504020 30 60 80 10070 90 Percentage of responding companies 24
  25. 25. 25 F8 Average disclosure score for regulatory and physical risks • CDLI • Non-CDLI F9 Average disclosure score for regulatory and physical opportunities • CDLI • Non-CDLI Physical risks Regulatory risks Physical opportunities Regulatory opportunities 53% 37% 59% 46% 82% 73% 90% 83% 0 10 504020 30 60 80 10070 90 0 10 504020 30 60 80 10070 90 F10 Comparison of disclosure scores • CDLI • Non-CDLI • All Governance and Strategy Emissions Management Emissions Reporting Risks Disclosure Opportunities Disclosure Verification/ Stakeholder Engagement 77% 80% 94% 72% 75% 93% 85% 87% 99% 50% 58% 84% 42% 48% 77% 40% 48% 89% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 25
  26. 26. 26 The criteria to enter the CPLI was more stringent in 2012: companies had to obtain a performance score above 85, achieve at least a 3% reduction in carbon emissions as a result of emissions reduction activities over the last year and disclose and verify Scope 1 and 2 emissions. All companies in the 2012 CPLI are new to the index, however six of the seven are also in the CDLI. In addition to showing high levels of disclosure, companies are showing leadership by implementing actions. Figure 11 shows how CPLI companies are strongly outperforming non-CPLI companies in a number of areas. CPLI companies are already, without exception, disclosing details of their greenhouse gas emissions in public reports, with the vast majority (86%) choosing to put this information in their annual reports. The leaders are therefore well placed to adapt to the Government’s new reporting requirements without significantly needing to modify their business processes. In addition, in accordance with the CPLI entry requirements, 100% of the CPLI verify both their Scope 1 2 emissions (non-CPLI: 32%). All CPLI companies are setting absolute and intensity targets to monitor progress: 57% of CPLI companies have absolute targets (non-CPLI: 32%) and 71% have intensity targets (non-CPLI: 36%). CPLI companies are not only setting and disclosing targets but, importantly, are working towards meeting them. CPLI companies are meeting their targets faster than the non-CPLI respondents: 86% of CPLI companies have met or are ahead of their targets (non-CPLI: 43%). By already integrating climate change into their mainstream business processes, the vast majority of leading companies are ideally placed to meet future reporting requirements and are at the forefront of driving the change in the business as usual approach to adapting to a sustainable future. Sector Company  Disclosure Score2012 Performance Band Alsointhe CDLI? Consumer Discretionary Marks Spencer 81 A No Consumer Staples Diageo 98 A Yes Reckitt Benckiser 93 A Yes Unilever 84 A Yes Financials British Land* 96 A Yes Industrials Morgan Crucible 86 A Yes Materials Anglo American 94 A Yes Mondi 88 A Yes CPLI T3 The CDP FTSE 350 CPLI 2012 F11 Performance comparison between CPLI and non-CPLI companies • CPLI • All • Non-CPLI Higher Level governance Integrated strategy Verification or assurance Monetary incentives Implementation of emissions reduction targets Progress meeting targets Emissions reductions from initiatives Report Climate Change in annual reports 97% 97% 100% 55% 56% 100% 57% 45% 100% 67% 66% 100% 43% 61% 88% 53% 54% 100% 53% 54% 86% 32% 31% 100% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% * British Land was added to FTSE CPLI on 8th November 2012 following a review which identified specific items with regards to British Land’s response. Revisions of the items resulted in scoring adjustments and British Land’s inclusion in the CPLI.
  27. 27. 27 Appendix I Table of emissions, scores and sector information by company Please refer to the Key on page 45 for further explanation of the abbreviations used 3i Group United Kingdom FIN 53 E AQ 2,457 580 1,877 3 3i Infrastructure United Kingdom FIN DP SA DP DP DP DP DP DP A.G. Barr United Kingdom CS NR NR NR NR NR NR NR NR Aberdeen Asset Management United Kingdom FIN 64 D AQ NP NP NP NP NP NP Aberforth Smaller Companies Trust United Kingdom FIN DP DP DP DP DP DP DP DP Admiral Group United Kingdom FIN 42 AQ 6,981 0 6,981 Aegis Group United Kingdom CD 79 C AQ 15,257 999 14,258 5* Int Afren United Kingdom EGY AQ(L) NR AQ(L) AQ(L) AQ(L) AQ(L) AQ(L) AQ(L) African Barrick Gold (see Barrick Gold Corporation - Global 500) United Kingdom MAT AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) Aggreko United Kingdom IND IN DP IN IN IN IN IN IN Alliance Trust United Kingdom FIN 54 D IN NP NP NP NP NP NP AMEC United Kingdom EGY 76 C AQ 41,151 22,724 18,427 1 VAA S1, S2, VAR S3 Int Amlin United Kingdom FIN 70 D AQ 3,595 806 2,789 3* VAA S1, S2, S3 Anglo American United Kingdom MAT 94 A AQ 18,844,462 9,361,858 9,482,604 5 VAA S1, S2 Abs Antofagasta United Kingdom MAT 64 E AQ 1,883,876 565,718 1,318,158 6* Aquarius Platinum Bermuda MAT 75 E AQ 635,445 38,094 597,351 1 ARM Holdings United Kingdom IT 53 E AQ 11,203 560 10,643 2 Int Ashmore Group United Kingdom FIN 7 NR Ashtead Group United Kingdom IND 36 AQ NP NP NP NP NP NP Company name Country Sectora 2012Scoreb 2011responsestatusc TotalScope1+Scope2 Emissionsd Scope1 Scope2 NumberofScope3 categoriesreportede Verification/Assurance statusf Target(s)reportedg
  28. 28. 28 Associated British Foods United Kingdom CS 57 D AQ 3,606,296 2,504,154 1,102,142 VAR S1, S2 Int AstraZeneca United Kingdom HC 73 B AQ 637,555 375,002 262,553 5 VAA S1, S2, S3 Abs, Int Atkins United Kingdom IND 81 C AQ 59,619 33,578 26,041 1 VAA S1, S2, S3 Abs Aveva Group United Kingdom IT DP DP DP DP DP DP DP DP Aviva United Kingdom FIN 78 B AQ 142,459 44,471 97,988 2* VAA S1, S2, S3 Abs Az Electronic Materials United Kingdom MAT NR X NR NR NR NR NR NR Babcock International Group United Kingdom IND 28 AQ 0 0 Abs BAE Systems United Kingdom IND 69 C AQ 1,017,000 353,000 664,000 1 VAA S1 Abs Balfour Beatty United Kingdom IND 78 C AQ 482,851 348,522 134,329 5* VAA S1, S2, S3 Int Bankers Investment Trust (see Henderson) United Kingdom FIN AQ(SA) SA AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) Barclays United Kingdom FIN 92 B AQ 874,031 51,138 822,893 1 VAA S1, S2, VAR S3 Abs Barratt Developments United Kingdom CD NR IN NR NR NR NR NR NR BBA Aviation United Kingdom IND 43 AQ 131,299 80,594 50,705 VAR S1, S2 Beazley United Kingdom FIN NR AQ NR NR NR NR NR NR Bellway United Kingdom CD 47 AQ 2,944 370 2,574 Berendsen United Kingdom IND 12 AQ Berkeley Group United Kingdom CD 76 C AQ 10,961 3,545 7,416 2* Abs Betfair United Kingdom CD DP X DP DP DP DP DP DP BG Group United Kingdom EGY 89 B AQ 7,525,410 7,507,395 18,015 1 VAA S1, S2, S3 Abs BH Global United Kingdom FIN NR DP NR NR NR NR NR NR BH Macro United Kingdom FIN NR SA NR NR NR NR NR NR BHP Billiton Australia MAT 71 B AQ 40,826,000 19,863,000 20,963,000 2 VAA S1, S2, S3 Int Big Yellow Group United Kingdom FIN 67 C NR 7,300 126 7,174 1 VAA S1, S2, VAR S3 Abs, Int Company name Country Sectora 2012Scoreb 2011responsestatusc TotalScope1+Scope2 Emissionsd Scope1 Scope2 NumberofScope3 categoriesreportede Verification/Assurance statusf Target(s)reportedg
  29. 29. 29 Blackrock World (see Blackrock - Global 500) United Kingdom FIN AQ(SA) SA AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) Bluecrest Allblue United Kingdom FIN DP NR DP DP DP DP DP DP Bodycote International United Kingdom IND DP NR DP DP DP DP DP DP Booker Group United Kingdom CS DP NR DP DP DP DP DP DP Bovis Homes Group United Kingdom CD 56 E AQ 1,323 853 470 1 Int BP United Kingdom EGY 75 C AQ 70,790,000 61,820,000 8,970,000 1 VAA S1, S2, S3 Brewin Dolphin Holdings United Kingdom FIN NR IN NR NR NR NR NR NR British American Tobacco United Kingdom CS 86 B AQ 729,090 355,410 373,680 3* VAA S1, S2, S3 Int British Assets Trust (see FC Asset Management) United Kingdom FIN AQ(SA) SA AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) British Empire Securities United Kingdom FIN NR NR NR NR NR NR NR NR British Land Company United Kingdom FIN 96 A AQ 31,346 1,821 29,525 7 VAA S1, S2, S3 Abs British Sky Broadcasting United Kingdom CD 86 B AQ 113,089 22,744 90,345 1* VAA S1, S2, S3 Abs, Int Britvic United Kingdom CS 64 D AQ NP NP NP NP NP NP BT Group United Kingdom TCOM 88 B AQ 1,498,024 196,290 1,301,734 3 VAA S1, S2, S3 Abs, Int BTG United Kingdom HC 46 AQ 4,573 1,299 3,274 Bumi United Kingdom EGY NR X NR NR NR NR NR NR Bunzl United Kingdom IND 71 C AQ 129,622 99,610 30,012 3 VAR S1, S2 Int Burberry Group United Kingdom CD 74 D AQ 33,494 1,790 31,704 1 VAF S1, S2 BWIN Party Digital Entertainment United Kingdom CD NR NR NR NR NR NR NR NR Cable Wireless Communications United Kingdom TCOM 44 AQ 145,986 19,297 126,689 2* Cable and Wireless Worldwide United Kingdom TCOM 85 B AQ 195,380 5,722 189,658 5* VAA S1, S2, VAR S3 Abs Cairn Energy United Kingdom EGY 74 D AQ 166,535 166,266 269 1 VAA S1, S2, S3 Caledonia Investments United Kingdom FIN NR DP NR NR NR NR NR NR Company name Country Sectora 2012Scoreb 2011responsestatusc TotalScope1+Scope2 Emissionsd Scope1 Scope2 NumberofScope3 categoriesreportede Verification/Assurance statusf Target(s)reportedg
  30. 30. 30 CAPE United Kingdom IND AQ(L) X AQ(L) AQ(L) AQ(L) AQ(L) AQ(L) AQ(L) Capita Group United Kingdom IND DP AQ DP DP DP DP DP DP Capital Counties Properties United Kingdom FIN 66 D NR 13,840 2,075 11,765 VAR S1, S2 Abs Capital Shopping Centres Group United Kingdom FIN 71 C AQ 51,930 5,220 46,710 VAR S1, S2 Abs Carillion United Kingdom IND 77 C AQ 255,794 217,420 38,374 2* VAR S1, S2, S3 Abs, Int Carnival USA CD 84 B AQ 11,003,072 10,949,844 53,228 3 VAA S1, S2 Int Carpetright United Kingdom CD DP NR DP DP DP DP DP DP Catlin Group United Kingdom FIN 68 D AQ 8,632 681 7,951 3 Centamin Egypt Canada MAT NR NR NR NR NR NR NR NR Centrica United Kingdom UTIL 96 B AQ 7,696,573 7,564,949 131,624 2* VAA S1, S2, S3 Abs, Int Charter International United Kingdom IND NR DP NR NR NR NR NR NR Chemring Group United Kingdom IND 30 AQ 68,357 68,357 Int City of London Investment Trust (see Henderson Group) United Kingdom FIN AQ(SA) SA AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) Close Brothers Group United Kingdom FIN DP NR DP DP DP DP DP DP Cobham United Kingdom IND 86 C AQ 185,527 123,647 61,879 3 VAA S1, S2 Int Colt Technology Services United Kingdom TCOM 62 D AQ 127,695 2,067 125,628 2 Compass United Kingdom CD 51 D AQ NP NP NP NP NP NP Computacenter United Kingdom IT 53 E AQ NP NP NP NP NP NP Cookson Group United Kingdom IND DP DP DP DP DP DP DP DP Cranswick United Kingdom CS 57 D AQ 76,407 31,774 44,633 2 Int CRH Ireland MAT 75 C AQ 11,580,000 10,329,000 1,251,000 2 VAA S1, S2, S3 Int Croda International United Kingdom MAT 72 D AQ 201,454 149,580 51,874 1* VAA S1 Abs CSR United Kingdom IT DP DP DP DP DP DP DP DP Daejan Holdings United Kingdom FIN DP DP DP DP DP DP DP DP Company name Country Sectora 2012Scoreb 2011responsestatusc TotalScope1+Scope2 Emissionsd Scope1 Scope2 NumberofScope3 categoriesreportede Verification/Assurance statusf Target(s)reportedg
  31. 31. 31 Daily Mail General Trust United Kingdom CD 47 AQ 69,400 13,900 55,500 2 Abs Dairy Crest Group United Kingdom CS 62 D AQ 223,462 141,805 81,657 3 VAA S1, VAR S2, S3 Int De La Rue United Kingdom IND 61 D AQ NP NP NP NP NP NP Debenhams United Kingdom CD 71 D AQ NP NP NP NP NP NP Dechra Pharmaceuticals United Kingdom HC DP NR DP DP DP DP DP DP Derwent London United Kingdom FIN 78 C AQ 9,246 3,244 6,002 2* Int Devro United Kingdom CS DP DP DP DP DP DP DP DP Dexion Absolute United Kingdom FIN NR DP NR NR NR NR NR NR Diageo United Kingdom CS 98 A AQ 690,263 596,506 93,757 5* VAA S1, S2 Abs Dignity United Kingdom CD 49 AQ 22,590 15,202 7,388 Diploma United Kingdom IT DP DP DP DP DP DP DP DP Dixons Retail United Kingdom CD NR SA NR NR NR NR NR NR Domino Printing Sciences United Kingdom IT 63 E AQ 9,211 4,635 4,576 1 VAR S1, S2, S3 Abs Dominos Pizza United Kingdom CD 63 E AQ 86,770 40,431 46,339 3* Drax Group United Kingdom UTIL 62 C AQ 21,465,607 21,465,607 0 VAR S1 Int DS Smith United Kingdom MAT 58 D AQ 883,387 687,097 196,290 VAA S1, S2 Int Dunedin Income Growth Investment Trust (see Aberdeen Asset Management) United Kingdom FIN AQ(SA) SA AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) Dunelm Group United Kingdom CD DP DP DP DP DP DP DP DP Easyjet United Kingdom IND NR NR NR NR NR NR NR NR Edinburgh Dragon Trust (see Aberdeen Asset Management) United Kingdom FIN AQ(SA) SA AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) Edinburgh Investment Trust United Kingdom FIN NR SA NR NR NR NR NR NR Electra Private Equity United Kingdom FIN 0 AQ Company name Country Sectora 2012Scoreb 2011responsestatusc TotalScope1+Scope2 Emissionsd Scope1 Scope2 NumberofScope3 categoriesreportede Verification/Assurance statusf Target(s)reportedg
  32. 32. 32 Electrocomponents United Kingdom IT 77 B AQ 20,315 3,729 16,586 1 Elementis United Kingdom MAT DP IN DP DP DP DP DP DP EnQuest United Kingdom EGY NR DP NR NR NR NR NR NR Essar Energy United Kingdom UTIL NR SA NR NR NR NR NR NR Eurasian Natural Resources Corporation (ENRC) United Kingdom MAT 81 C DP NP NP NP NP NP NP Euromoney Institutional Investors United Kingdom CD 40 AQ 2,860 200 2,660 1 Abs Evraz United Kingdom MAT 20 NR NP NP NP NP NP NP Exillon Energy United Arab Emirates EGY NR NR NR NR NR NR NR NR Experian Group Ireland IND 65 D AQ 60,980 6,730 54,250 1 VAR S1, S2, S3 Int FC Asset Management United Kingdom FIN 66 D AQ 752 0 752 1 FC Commercial Property Trust (see FC Asset Management) United Kingdom FIN AQ(SA) SA AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) Fenner United Kingdom IND NR NR NR NR NR NR NR NR Ferrexpo Switzerland MAT NR NR NR NR NR NR NR NR Fidelity China Special Situations (see Fidelity European Values) United Kingdom FIN AQ(SA) SA AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) Fidelity European Values United Kingdom FIN 16 NR NP NP NP NP NP NP Fidessa Group United Kingdom IT NR NR NR NR NR NR NR NR Filtrona United Kingdom MAT 54 E AQ 61,030 6,266 54,764 Int FirstGroup United Kingdom IND 60 D AQ 3,074,615 2,713,282 361,333 2 VAF S1, S2 Int Foreign Colonial Investment Trust (see FC Asset Management) United Kingdom FIN AQ(SA) SA AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) Fresnillo Mexico MAT 61 E AQ 700,340 285,788 414,552 G4S United Kingdom IND 77 C AQ 518,062 394,480 123,582 1 Int Galliford Try United Kingdom IND 68 D AQ 49,092 41,864 7,228 VAF S1, S2 Int Company name Country Sectora 2012Scoreb 2011responsestatusc TotalScope1+Scope2 Emissionsd Scope1 Scope2 NumberofScope3 categoriesreportede Verification/Assurance statusf Target(s)reportedg
  33. 33. 33 Genesis Emerging Markets Fund United Kingdom FIN NR NR NR NR NR NR NR NR Genus United Kingdom HC NR NR NR NR NR NR NR NR GKN United Kingdom CD 60 C AQ NP NP NP NP NP NP GlaxoSmithKline United Kingdom HC 90 B AQ 1,874,230 1,016,974 857,256 3* VAR S1, S2, S3 Abs Glencore International Switzerland MAT 64 E X NP NP NP NP NP NP Go-Ahead Group United Kingdom IND 65 C DP 896,217 367,362 528,856 VAR S1, S2 Int Grainger United Kingdom FIN 71 D AQ 601 249 352 2 Int Great Portland Estates United Kingdom FIN 84 B AQ 5,444 1,181 4,263 1 VAA S1, S2 Int Greene King United Kingdom CD 62 D AQ 146,036 53,128 92,908 1 VAF S3 Abs Greggs United Kingdom CS 75 C AQ NP NP NP NP NP NP Halfords Group United Kingdom CD NR IN NR NR NR NR NR NR Halma United Kingdom IT 63 E NR 18,219 18,219 0 1 Int Hammerson United Kingdom FIN 71 C AQ 67,684 4,886 62,798 * Int Hansteen Holdings United Kingdom FIN DP DP DP DP DP DP DP DP Hargreaves Lansdown United Kingdom FIN DP NR DP DP DP DP DP DP Hays United Kingdom IND 58 E AQ 11,520 3,524 7,996 1 VAR S1, S2, S3 Henderson Group United Kingdom FIN 72 B AQ 2,360 119 2,241 3 VAR S1, S2, S3 Int Herald Investment Trust United Kingdom FIN NR NR NR NR NR NR NR NR Heritage Oil Channel Islands EGY 11 AQ NP NP NP NP NP NP HICL Infrastructure (see HSBC Holdings) United Kingdom FIN AQ(SA) SA AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) Hikma Pharmaceuticals United Kingdom HC DP AQ DP DP DP DP DP DP Hiscox United Kingdom FIN 58 C NR 1,348 165 1,183 2 Int Hochschild Mining United Kingdom MAT NR DP NR NR NR NR NR NR Home Retail Group United Kingdom CD 73 C AQ 285,552 113,117 172,435 1 VAR S1, S2 Int Company name Country Sectora 2012Scoreb 2011responsestatusc TotalScope1+Scope2 Emissionsd Scope1 Scope2 NumberofScope3 categoriesreportede Verification/Assurance statusf Target(s)reportedg
  34. 34. 34 Homeserve United Kingdom CD NR NR NR NR NR NR NR NR Howden Joinery Group United Kingdom CD NR NR NR NR NR NR NR NR HSBC Holdings United Kingdom FIN 86 B AQ 799,065 73,721 725,344 1 VAR S1, S2, S3 Int Hunting United Kingdom EGY 48 AQ 25,230 3,055 22,175 Icap United Kingdom FIN DP NR DP DP DP DP DP DP IG Group Holdings United Kingdom FIN DP DP DP DP DP DP DP DP Imagination Technologies United Kingdom IT NR NR NR NR NR NR NR NR IMI United Kingdom IND 70 B AQ 92,000 25,000 67,000 1 VAA S1, S2 Int Imperial Tobacco Group United Kingdom CS 75 D AQ 310,687 149,714 160,973 15 VAA S1, S2 Abs, Int Inchcape United Kingdom CD NR AQ NR NR NR NR NR NR Informa United Kingdom CD 63 E AQ NP NP NP NP NP NP Inmarsat United Kingdom TCOM 20 AQ 4,328 4,328 Intercontinental Hotels Group United Kingdom CD 75 C AQ 2,233,000 656,000 1,577,000 2 Int Intermediate Capital Group United Kingdom FIN DP AQ DP DP DP DP DP DP International Consolidated Airlines Group Spain IND 75 C X 22,699,731 22,578,170 121,561 2 VAA S1, S2, S3 Abs, Int International Personal Finance United Kingdom FIN 72 C AQ 25,299 19,932 5,367 2 VAR S1, S2, S3 Int International Power (see GDF Suez) United Kingdom UTIL AQ(SA) AQ AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) International Public Partnerships United Kingdom FIN NR NR NR NR NR NR NR NR Interserve United Kingdom IND 79 B AQ 36,434 29,794 6,641 4 VAF S1, S2, S3 Int Intertek Group United Kingdom IND 59 E NR NP NP NP NP NP NP Invensys United Kingdom IND 62 C AQ 99,479 21,573 77,906 1 VAR S1, S2, S3 Abs Investec (see Investec Ltd - South Africa) United Kingdom FIN AQ(SA) SA AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) AQ(SA) ITE Group United Kingdom IND 57 D NR NP NP NP NP NP NP Company name Country Sectora 2012Scoreb 2011responsestatusc TotalScope1+Scope2 Emissionsd Scope1 Scope2 NumberofScope3 categoriesreportede Verification/Assurance statusf Target(s)reportedg

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