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Carbon Disclosure, Latest CDP Findings and How Investors Are Using the Data.

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Paul Simpson, COO - Carbon Disclose Project - UK

Paul Simpson, COO - Carbon Disclose Project - UK

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  • 1. CDP 2007 Findings How investors are using the data Paul Simpson – Chief Operating Officer TBLI, Paris 15th November 2007
  • 2.
    • Significant risks and opportunities from:
    • Taxation and regulation
    • Changes in weather patterns
    • Technological innovations
    • Shifts in consumer attitude and demand
    • There will be winners and losers in the transition to a low carbon economy
    • Investors need information to determine how companies will be affected.
    Climate Change – An Investment Issue
  • 3.
    • Climate change is expected to reduce GDP by at least 5% each year; if more dramatic predictions come to pass, the cost could be more than 20% of GDP
    • To stabilise at manageable levels, emissions would need to stabilise in the next 20 years and fall between 1% and 3% after that. This would cost 1% of GDP
    • The benefits of strong, early action considerably outweigh the costs
    • Each tonne of CO2 we emit causes damages worth at least $85, but emissions can be cut at a cost of less than $25 a tonne
    • Shifting the world onto a low-carbon path could eventually benefit the economy by $2.5 trillion a year
    • By 2050, markets for low-carbon technologies could be worth at least $500bn
    Context: UK Government Stern Report
  • 4. Costs of Climate Change
  • 5. Investment Opportunities
  • 6.
    • CDP Mission: To facilitate a dialogue between investors and corporations supported by quality information from which a rational response to climate change will emerge
    • CDP provides a coordinating secretariat for institutional investor collaboration
    • Create a lasting relationship between shareholders and corporations regarding the implications for shareholder value and commercial operations presented by climate change
    • CDP is a not for profit organisation, independent with US charitable status 501(c)3, application to be UK charity
    • CDP supported financially by donations, sponsorship and the governments of USA, France, UK, Australia and Sweden
    Carbon Disclosure Project (CDP) Background
  • 7.
    • 315 investors with assets of $41 trillion (30% of global total invested assets)
    • Information requested from 2,400 companies
    • 1,300 companies answered the questions in 2006
    • www.cdproject.net - largest registry of corporate GHGs in the world
    • 2007 expansions in US, Japan, UK, France, Germany, Canada, Brazil, India, Australia, Asia, South Africa, Scandinavia
    • Global launches with high profile speakers
    • CDP is now an established annual process
    • CDP is where the corporate world reports GHG emissions
    The Carbon Disclosure Project (CDP)
  • 8.
    • CDP1 2003 35 signatory investors $4.5 trillion
    • CDP2 2004 95 signatory investors $10.3 trillion
    • CDP3 2005 155 signatory investors $21 trillion
    • CDP4 2006 255 signatory investors $31 trillion
    • CDP5 2007 315 signatory investors $41 trillion
    Rising Awareness in the Financial Services Sector
  • 9. Regional Variations in Responses
  • 10.
    • FT500 Report by Innovest Strategic Value Advisors
    • Highest response rate ever – 77% answered questionnaire
      • North America leads growth in emissions disclosure
    • Improved carbon accounting; more robust responses - 79% disclosed GHG data
    • 80% see risks from climate change
    • 82% see opportunities
    • 76% implemented emissions reductions programs
    • 46% strategies for emissions trading
    • Wide variations in risk exposure – between and within sectors
    CDP Key Findings 2007 (FT500 Companies)
  • 11. Variations Between Sectors
  • 12. Variations Within Sectors
  • 13. Innovest “Carbon Beta™” Varies Widely – Both Between and Within Sectors
  • 14. Climate Disclosure Leadership Index
  • 15.
    • Qualitative check – Are companies addressing the issue?
    • Engagement
    • Shareholder resolutions
    • Sell side research
    • New Investment products
      • Weighted indexes
      • Focus on certain technologies or asset classes
    How Investors are Using CDP Data
  • 16.
    • Increasing number of sell side broker reports:
    • UBS – Beyond Weather
    • Citigroup – Climatic Consequences
    • Lehman Brothers – The Business of Climate Change
    • Merrill Lynch – Combating Climate Change
    • New investment products:
    • Schroders - Global Climate Change Fund
    • KLD / Fixed Income Securities LP
    • CalPERS / CalSTRS – Green Wave Initiative
    Investors addressing Climate Change
  • 17.
    • Climate change is likely to prove one of those tectonic forces that gradually but powerfully changes the economic landscape in which our clients operate and one that causes periodic sharp movements in asset prices.
    • Sectors particularly affected include: Utilities, Oil and Gas, Metals and Mining, Insurance, Pharmaceuticals, Building and construction and real estate.
    • Given the size of the investment management industry, investment companies are in a strong position to influence business managers to focus on these issues .
    Lehman Brothers – The Business of Climate Change
  • 18.
    • New fund offering investors exposure to companies involved in mitigation of, or adaptation to the effects of climate change on a globally diversified basis.
    • Portfolio of 50 to 80 stocks aiming to provide long term out performance of the MSCI world index.
    Schroders – Global Climate Change Fund
  • 19.
    • Carbon still largely an externality
    • Future regulation uncertain
    • Data quality remains varied
    • Short term focus of investors, particularly in equity markets
    • Pension funds failing to incorporate into RFP’s
    Barriers to Integration of Carbon Data in Investment Analysis
  • 20.
    • There will be winners and losers from the transition to a low carbon economy.
    • Investors have a key role to play and need better information to incorporate climate change into investment decisions.
    • Increased integration of carbon data but barriers still remain
    • CDP is the Global standardised mechanism by which companies report their greenhouse gas emissions to their investors
    • CDP hosts the largest registry of corporate GHGs in the world at www.cdproject.net
    Conclusion
  • 21.
    • There will be a large creation and re-distribution of shareholder value in the transition to a low carbon economy – there will be winners and losers at sector level and within sectors at company level.
    • The winners are more likely to be those businesses that take the time to understand and address this complex area.”
    • Tom Delay, Chief Executive, The Carbon Trust
    • Climate Change and Shareholder Value
    • March, 2006
    Conclusion
  • 22.
    • T hank you
      • Carbon Disclosure Project
      • www.cdproject.net
      • Paul Simpson
      • Chief Operating Officer
      • [email_address]
      • +44 7799 345 269