New York – Two new studies released at the New York Stock Exchange on September 23 by CDP – formerly known as the Carbon Disclosure Project – in conjunction with PwC and Sustainable Insight Capital Management, Inc. (SICM), respectively demonstrate that CDP leaders who incorporate environmental factors into their business strategies are mitigating climate related risks, finding opportunities to strengthen their businesses and delivering higher profitability than their industry peers.
The findings of these two complementary reports add significantly to the body of knowledge on the role of environmental factors in corporate performance.
CDP’s President North America, Tom Carnac, says, “The release of today’s report findings show the link between climate change management and superior financial performance is building. These two studies validate that relationship by exhibiting how companies incorporating environmental stewardship into their business model and investment decision making process can gain strength and protect their competitive advantage.”
The “CDP S&P 500 Climate Change Report 2013”, by CDP and PwC, provides an annual update on greenhouse gas emissions data and climate change strategies at America’s largest public corporations in response to CDP’s disclosure request from 722 investors representing $ 87 trillion. This year, seventy-seven percent of respondents (258 companies) reported an increase in climate change exposure, up from 61 percent in 2012, with extreme weather topping the list of highest-impact.
In response, the report showed:
- S&P 500 companies investing on average over four percent of annual capital expenditure in emissions reductions, representing $ 50 billion worth of investments on a range of emissions reduction activities and energy-saving processes. The energy sector leads with a reported $ 27.3 billion invested, followed by utilities with $ 13.7 billion invested. Greenhouse gas emissions were reported to have been reduced on aggregate by 6.1%.
- S&P 500 companies reported $ 4 billion in monetary savings from their investments in emissions reductions, including product design innovations ($ 1.2 billion), energy efficiency processes ($ 991 million), and changes to their transportation fleet and use ($ 709 million).
- Twenty companies generated 85 percent ($ 3.5 billion) of the monetary savings reported by all the respondents and twenty companies accounted for nearly 90 percent of the carbon emissions reductions. The seven companies who overlap both of these lists are Ameren Corporation, AT&T, Dell, Exelon Corporation, Northeast Utilities, Wal-Mart Stores, Inc. and Waste Management.
- Companies from the S&P 500 on the 2013 Climate Performance Leadership Index (CPLI) more than doubled in number from 2012, demonstrating the significance of incorporating climate change risks and opportunities into their overall business strategy.
PwC SBS partner Doug Kangos added that the results of the 2013 report indicate a turning point in the corporate response to climate change. “The overarching story is business transformation. Leading companies are innovating to create value on many levels while demonstrating increasing sophistication and confidence in addressing the risks and opportunities associated with climate destabilization,” Kangos said.
The complementary report covering the Global 500, “Linking Climate Engagement to Financial Performance: An Investor’s Perspective”, released at the same event and co-written by CDP and Sustainable Insight Capital Management, shows that superior transparency on climate engagement is associated with higher financial performance.
The analysis is based on the CDP disclosure scores of 702 companies covered in CDP’s Global 500 climate change reports from 2008 to 2012. Using peer to peer comparisons, companies were ranked by industry and split into quintiles by their CDP disclosure score, then examined against various metrics of financial profitability. The analysis shows that industry leaders in the first quintile based on their relative CDP scores, provide a higher return on equity (+5.2%), more stable cash flow generation (+18.1%) and higher dividend growth (+1.6%).
The analysis leverages CDP’s unique data set on corporate engagement on climate change to demonstrate that strategic management of climate change risks and opportunities is reflected in the underlying financial performance of companies.
US S&P 500 companies’ CDP disclosure and performance scores are listed in full in the CDP S&P 500 Climate Change report.