Banks and investors back calls to biggest companies to cut emissions

by Search Gate staff. Published Mon 20 Feb 2015 09:51, Last updated: 2015-02-20
Investors recognise need for companies to cut emissions

On behalf of 92 pension funds, asset managers, insurers and banks, the Carbon Disclosure Project (CDP), which holds the world’s largest collection of self-reported corporate environmental data, has sent letters to the CEOs of 415 of the world’s largest public companies calling for cost-effective management and reductions of their carbon emissions.

The letters were sent as part of CDP’s Carbon Action initiative in parallel to CDP’s annual request for disclosure of greenhouse gas emissions, climate change strategies and water use.

Support for Carbon Action, which aims to improve company profitability and reduce the long-term business risks of carbon emissions, has more than doubled since it was launched in April 2017, driven by a small group of institutional investors including Dutch and British pension funds and asset managers.

The largest new signatories include Spain’s Banco Santander, Banesto and BBVA from the banking sector, fund manager Henderson and APG the asset manager. There is also a significant number of new signatories in Australia, which passed its Clean Energy Act in November last year, taking the group’s combined assets to over US$10 trillion.

Emilio Botín, chairman of Banco Santander, said: “Banco Santander has a strong commitment with the environment and climate change. The Bank is making significant progress by measuring and reducing its main consumption inputs and CO2 emissions as well as by integrating social and environmental criteria into the credit analysis processes.”

Banking and financial services group Rabobank, investment management companies AXA IM and Aviva Investors, are among 31 organisations that joined last year and have continued their commitment to the initiative.

Paul Simpson, CDP’s CEO added: “Institutional investors increasingly recognise that companies in their portfolios can reduce emissions while generating efficiencies. Minimising exposure to emissions regulation in Australia, the EU and other markets will also protect their investments for the long-term. Companies that capitalise on financial savings as a result of carbon reductions are well placed to improve their competitive position in the marketplace.”

CDP first launched its emissions disclosure programme in 2002 with the backing of 35 institutional investors, requesting transparency from public companies of their carbon emissions. In 2015 there are now over 655 signatories representing $78 trillion in assets, and disclosure rates among the world’s largest companies run at 80%. CDP data is downloaded on average more than 730,000 times a month via Bloomberg terminals.

Paul Abberley, CEO at Aviva Investors London, a founding signatory to the Carbon Action initiative, said: “We are delighted to help catalyse this initiative. We were a founding signatory because we believe that the external costs of greenhouse gas emissions will become internalised into company cash flows and profitability. Managing greenhouse gas emissions is therefore essential to delivering sustainable shareholder returns. There still remains huge potential in companies for achieving cost effective emissions reductions but we are so pleased that there has been such increased support this year.”

Claudia Kruse, head of sustainability and corporate governance at APG said: “Companies stand to benefit from improving operational energy efficiency as well as from capturing the market opportunity for energy efficiency-related products and services. The potential upside to their short-term performance and long-term competitiveness can be material. Hence, investors need greater visibility of how management drives improvements and seizes strategic opportunities.”

The calls for companies to take action are issued through Carbon Action letters tailored to company-specific circumstances, these may include requests to:

* Make year-on-year emissions reductions;

* Invest in emission reduction activities with a positive return on investment;

* Set and publicly disclose an emissions reduction target that covers the principal sources of emissions in their business if they have not already done so;

* Demonstrate management and steps toward reduction of emissions across their supply chains.
Institutional investor support for Carbon Action is driven by a range of factors, depending on the organisation, these include:

* Concern about climate change and extreme weather events;

* For companies in the European Union, reducing exposure to potential increases in the price of carbon traded on the EU emissions trading scheme (ETS);

* Growing understanding that emissions reduction activities can be cost-effective;

* Protecting the financial sustainability of loans on the part of banks, and investments on the part of asset managers and pension funds;

* Increasing use of ESG (environmental, social and corporate governance) data in decision-making, as per the United Nations (UN) Principles for Responsible Investing (PRI) initiative;

* Regulatory risk and long-term corporate strategic preparedness.

As with the annual CDP disclosure request, which has been sent to 4,910 corporations, companies have until 31 May 2015 to report their emissions and emissions-reducing activities to CDP. Data from responses to the Carbon Action letters will be collected through the same questionnaire and then synthesized in a public summary report, and a detailed investor analysis for the signatories, which will be delivered this autumn.

Carbon Action signatories can then use the information in individual interactions with company management, or collaboratively through the UN PRI.

Reflecting the growth in support for Carbon Action, there was a surge in the number of signatories to CDP's disclosure programmes for 2015, with increases of 19% (to 655 signatories representing $78 trillion in assets) for the Investor CDP programme and 33% (to 470 representing $50 trillion in assets) for CDP Water Disclosure. Disclosure data from this year’s requests will be made available to investors via the CDP website, CDP reports, Bloomberg terminals and other financial information services from autumn 2015.

Matt Christensen, global head of responsible investment at AXA Investment Managers said: “The Carbon Action initiative is an excellent means for AXA IM to evolve its existing support of CDP and highlight the importance of a low-carbon future by moving from disclosure into a more interactive engagement between investors and companies”.




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Comments about Banks and investors back calls to biggest companies to cut emissions

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Robert Vincin, Australia around 1 year, 10 months ago


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