The Carbon Disclosure Project

Contacts

Carbon Disclosure Project BVI Bundesverband Investment Paul Dickinson und Asset Management e. V. Chief Executive Officer Rudolf Siebel +44 (0) 20 74 15 7112 Managing Director [email protected] +49 69 154090-0 40 Bowling Green Lane [email protected] London Eschenheimer Anlage 28 EC1R 0NE 60318 Frankfurt am Main United Kingdom Germany www.cdproject.net www.bvi.de

Professor Dr. Alexander Bassen WWF Universität Hamburg Matthias Kopp +49 40 42 838 4046 Projektleiter Finanz- und Energiesektor [email protected] +49 30 3087 4217 Von-Melle-Park 9 [email protected] 20146 Hamburg Große Präsidentenstraße 10 Germany 10178 Berlin Germany www.wwf.de

Bundesverband Investment und Asset Management e.V. Eschenheimer Anlage 28 · 60318 Frankfurt am Main Telefon 0 69/15 40 90-0 · Telefax 0 69/5 9714 06 [email protected] · www.bvi.de CARBON DISCLOSURE PROJECT

Carbon Disclosure Project Report 2008 Germany On behalf of 385 institutional investors with assets of 57 trillion US Dollars Report written by Prof. Dr. Alexander Bassen, University of Hamburg October 2008

The information included herein this report is based on that provided in respondent submissions, which the authors and publishers believe to be reliable, but the authors and publishers do not guarantee its accuracy or completeness. The authors and publishers make no assurance, representation or warranty express or implied, concerning the fairness, accuracy, or completeness of the information and opinions contained herein. All opinions expressed herein are based on the authors and publishers judgment at the time of publishing this report and are subject to change without notice due to economic, political, industry and firm-specific factors. The report makes all attempts to adhere to the disclosure permission requests of the individual company respondents. Comprehensive and unedited information from the original submissions is available at www.cdproject.net. The authors and publishers and their affiliated companies, or their respective shareholders, directors, officers and/or employees, may have a position in the securities discussed herein. The securities 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. The contents of this report may be used by anyone providing acknowledgment is given. Imprint

Eschenheimer Anlage 28 60318 Frankfurt am Main Telefon 0 69/15 40 90-0 Telefax 0 69/5 9714 06 [email protected] www.bvi.de

Author: Prof. Dr. Alexander Bassen, University of Hamburg Print and Design: Druck- und Verlagshaus Zarbock GmbH & Co. KG, Frankfurt am Main

This brochure has been printed in a FSC certified company, using a recycling paper consisting of 100 percent recovered paper.

ISBN 978-3-937790-25-1 CDP Members 2008

Carbon Disclosure CARBON DISCLOSURE PROJECT London Pensions Fund Authority United Kingdom Project 2008 MEMBERS 2008 This report and all of the public responses Merrill Lynch & Co.,Inc. U.S. from corporations are available to down- ABRAPP – Associação Mitsubishi UFJ Financial load free of charge from Brasileira das Entidades Group (MUFG) Japan www.cdproject.net. Fechadas de Previdência The contents of this report may be used Morgan Stanley Investment Complementar Brazil by anyone providing acknowledgement is Management U.S. given. Aegon N.V. Netherlands Morley Fund Management APG Investments United Kingdom Netherlands National Australia Bank ASN Bank Netherlands Limited Australia ATP Group Denmark Neuberger Berman U.S. AXA Group France Newton Investment Banco Real Brazil Management Limited United Kingdom BlackRock U.S. BP Investment Pictet Asset Management SA Switzerland Management Limited United Kingdom Rabobank Netherlands Caisse de dépôt et placement Robeco Netherlands du Québec Canada SAM Group Switzerland Caisse des Dépôts France Schroders United Kingdom California Public Employees’ Signet Capital Management Retirement System U.S. Switzerland California State Teachers Sompo Japan Insurance Inc. Retirement System U.S. Japan Calvert Group U.S. Standard Chartered PLC Canada Pension Plan United Kingdom Investment Board Canada Sun Life Financial Inc. Catholic Super Australia Canada CIBC Canada Swiss Reinsurance Company Switzerland Ethos Foundation Switzerland The Ethical Funds Company Canada Folksam Sweden Fortis Investments Belgium The RBS Group United Kingdom Generation Investment The Wellcome Trust Management United Kingdom United Kingdom Zurich Cantonal Bank ING Netherlands Switzerland KLP Insurance Norway Legg Mason, Inc. U.S.

3 Carbon Disclorsure Project 2008

CDP Signatories 2008 BankInvest Denmark Christian Super Australia Barclays Group United Kingdom CI Mutual Funds’ Signature Advisors 385 investors (including the 41 german Canada BayernInvest Kapitalanlagegesellschaft based corporations as shown below in mbH Germany CIBC Canada red) with assets of over 57 trillion US BBC Pension Trust Ltd United Kingdom Citizens Advisers, Inc. U.S. dollars were signatories to the CDP6 infor- Beutel Goodman and Co. Ltd Canada Clean Yield Group, Inc. U.S. mation request dated 1st February 2008 including: BlackRock U.S. ClearBridge Advisors, Socially Aware Investment U.S. BMO Financial Group Canada Close Brothers Group plc United Kingdom BNP Paribas Investment Partners France Colonial First State Global Asset AACHENER GRUNDVERMÖGEN Boston Common Asset Management, LLC Management Australia Kapitalanlagegesellschaft mbH Germany U.S. Columbia Management U.S. Abax Global Capital United Kingdom BP Investment Management Limited United Kingdom Comité syndical national de retraite Aberdeen Asset Managers Bâtirente Canada United Kingdom Brasilprev Seguros e Previdência S/A. Brazil Commerzbank AG Germany ABRAPP – Associação Brasileira das Entidades Fechadas de Previdência British Coal Staff Superannuation Scheme Companhia de Seguros Aliança do Brasil Complementar Brazil United Kingdom Brazil Acuity Funds Canada British Columbia Investment Management Connecticut Retirement Plans and Trust Corporation (bcIMC) Canada Funds U.S. Aegon N.V. Netherlands BT Financial Group Australia Co-operative Financial Services (CFS) Aeneas Capital Advisors U.S. United Kingdom BVI Bundesverband Investment und Asset AGF Management Limited Canada Management e.V. Germany Credit Agricole Asset Management France AIG Investments U.S. CAAT Pension Plan Canada Credit Suisse Switzerland Alberta Teachers Retirement Fund Canada Caisse de dépôt et placement du Québec Daegu Bank South Korea Canada Alcyone Finance France Daiwa Securities Group Inc. Japan Caisse des Dépôts France Allianz Group Germany DEGI Deutsche Gesellschaft für Altshuler Shacham LTD Israel Caixa Beneficente dos Empregados da Immobilienfonds mbH Germany Companhia Siderurgica Nacional – CBS AMP Capital Investors Australia Brazil Deka FundMaster Investmentgesellschaft mbH Germany AmpegaGerling Investment GmbH Caixa de Previdência dos Funcionários do Germany Banco do Nordeste do Brasil (CAPEF) Deka Investment GmbH Germany Brazil ANBID – National Association of Brazilian DekaBank Deutsche Girozentrale Germany Investment Banks Brazil Caixa Econômica Federal Brazil Deutsche Bank Germany APG Investments Netherlands Caixa Geral de Depósitos Portugal Deutsche Postbank Privat Investment ASB Community Trust New Zealand California Public Employees’ Retirement Kapitalanlagegesellschaft mbH Germany System U.S. ASN Bank Netherlands Development Bank of Japan Japan California State Teachers Retirement ATP Group Denmark Development Bank of the Philippines (DBP) System U.S. Philippines Australia and New Zealand Banking Group California State Treasurer U.S. Limited Australia Dexia Asset Management France Calvert Group U.S. Australian Ethical Investment Limited DnB NOR Asset Management Norway Australia Canada Pension Plan Investment Board Domini Social Investments LLC U.S. Canada Australian Reward Investment Alliance DPG Deutsche Performancemessungs- (ARIA) Australia Canadian Friends Service Committee Gesellschaft für Wertpapierportfolio mbh Canada Aviva plc United Kingdom Germany CARE Super Pty Ltd Australia AXA Group France DWS Investment GmbH Germany Carlson Investment Management Sweden Baillie Gifford & Co. United Kingdom Economus Instituto de Seguridade Social Carmignac Gestion France Brazil Banco Sweden Catherine Donnelly Foundation Canada ELETRA – Fundação Celg de Seguros e Banco Bradesco S.A. Brazil Previdência Brazil Catholic Super Australia Banco do Brazil Brazil Environment Agency Active Pension fund CCLA Investment Management Ltd United Kingdom Banco Itaú Holding Financeira Brazil United Kingdom Epworth Investment Management Banco Pine S.A. Brazil Central Finance Board of the Methodist United Kingdom Church United Kingdom Banco Real Brazil Erste Bank der Oesterreichischen Banco Santander, S.A. Spain Ceres U.S. Sparkassen AG Austria Banesprev – Fundo Banespa de Seguridade CERES-Fundação de Seguridade Social Ethos Foundation Switzerland Brazil Social Brazil Eureko B.V. Netherlands Bank Sarasin & Co, Ltd Switzerland Cheyne Capital Management (UK) LLP United Kingdom Eurizon Capital SGR Italy Bank Vontobel Switzerland China Investment Corporation China Evli Bank Plc Finland

4 CDP Signatories 2008

F&C Management Ltd United Kingdom Generation Investment Management KCPS and Company Israel United Kingdom FAELCE – Fundação Coelce KfW Bankengruppe Germany de Seguridade Social Brazil Genus Capital Management Canada KLP Insurance Norway FAPERS – Fundação Assistencial e Gjensidige Forsikring Norway Previdenciária da Extensão Rural do Rio Kyobo Investment Trust Management Co., Grande do Sul Brazil GLG Partners LP United Kingdom Ltd. South Korea FAPES – Fundação de Assistencia e Goldman Sachs & Co. U.S. La Banque Postale Asset Management France Previdencia Social do BNDES Brazil Governance for Owners United Kingdom Fédéris Gestion d’Actifs France LBBW – Landesbank Baden-Württemberg Groupe Investissement Responsable Inc. Germany First Affirmative Financial Network U.S. Canada Legal & General Group plc First Swedish National Pension Fund (AP1) Guardian Ethical Management Inc Canada United Kingdom Sweden Guardians of New Zealand Superannuation Legg Mason, Inc. U.S. FirstRand Ltd. South Africa New Zealand Libra Fund U.S. Fishman & Co. Israel Hang Seng Bank Hong Kong Light Green Advisors, LLC U.S. Five Oceans Asset Management Pty Harrington Investments U.S. Limited Australia Living Planet Fund Management Company Harvard Management Company U.S. S.A. Switzerland Florida State Board of Administration (SBA) HANSAINVEST Hanseatische Investment U.S. Local Authority Pension Fund Forum GmbH Germany United Kingdom Folksam Sweden Hazel Capital LLP United Kingdom Local Government Superannuation Scheme Fondaction Canada Health Super Fund Australia Australia Fonds de Réserve pour les Retraites – FRR Helaba Invest Kapitalanlagegesellschaft Lombard Odier Darier Hentsch & Cie France mbH Germany Switzerland Fortis Investments Belgium Henderson Global Investors London Pensions Fund Authority United Kingdom Forward Funds/Sierra Club Funds U.S. United Kingdom Macif Gestion France Fourth Swedish National Pension Fund Hermes Investment Management (AP4) Sweden United Kingdom Macquarie Group Limited Australia Frankfurter Service Kapitalanlage- HESTA Super Australia Maine State Treasurer U.S. Gesellschaft mbH Germany Hospitals of Ontario Pension Plan (HOOPP) Man Group plc United Kingdom FRANKFURT-TRUST Investment Canada Maple-Brown Abbott Limited Australia Gesellschaft mbH Germany Housing Development Finance Corporation Franklin Templeton Investment Services Limited (HDFC Ltd.) India Maryland State Treasurer U.S. GmbH Germany HSBC Holdings plc United Kingdom MEAG MUNICH ERGO Asset Management GmbH Germany Frater Asset Management South Africa I.B.I. Investments House Ltd. Israel Front Street Capital Canada MEAG MUNICH ERGO IDEAM – Integral Development Asset Kapitalanlagegesellschaft mbH Germany Fukoku Capital Management Inc Japan Management France Meeschaert Gestion Privée France FUNCEF – Fundação dos Economiários Ilmarinen Mutual Pension Insurance Federais Brazil Company Finland Meiji Yasuda Life Insurance Company Japan Fundação AMPLA de Seguridade Social – Industrial Bank China Merck Family Fund U.S. Brasiletros Brazil Industry Funds Management Australia Meritas Mutual Funds Canada Fundação Atlântico de Seguridade Social ING Netherlands Brazil Merrill Lynch & Co.,Inc. U.S. Inhance Investment Management Inc Fundação Banrisul de Seguridade Social Canada METZLER INVESTMENT GMBH Germany Brazil Insight Investment Management (Global) Midas International Asset Management Fundação Codesc de Seguridade Social – Ltd United Kingdom South Korea FUSESC Brazil Instituto Infraero de Seguridade Social – Mirae Investment Asset Management Fundação Corsan – dos Funcionários da INFRAPREV Brazil South Korea Companhia Riograndense de Saneamento Brazil Insurance Australia Group Australia Mistra, Foundation for Strategic Environmental Research Sweden Fundação São Francisco de Seguridade Interfaith Center on Corporate Social Brazil Responsibility U.S. Mitsubishi UFJ Financial Group (MUFG) Japan Fundação Vale do Rio Doce de Seguridade Internationale Kapitalanlagegesellschaft Social – VALIA Brazil mbH Germany Mitsui Sumitomo Insurance Co.,Ltd. Japan FUNDIÁGUA – Fundação de Previdência da Investec Asset Management Mizuho Financial Group, Inc. Japan United Kingdom Companhia de Saneamento e Ambiental do Monega Kapitalanlagegesellschaft mbH Distrito Federal Brazil Jarislowsky Fraser Limited Canada Germany Gartmore Investment Management Ltd JPMorgan Asset Management U.S. Monte Paschi Asset Management SGR United Kingdom S.p.A Italy Jupiter Asset Management GEAP Fundação de Seguridade Social United Kingdom Morgan Stanley Investment Management Brazil U.S. KAS Investment Servicing GmbH Germany Generali Investments Deutschland Morley Fund Management United Kingdom Kapitalanlagegesellschaft mbH Germany KBC Asset Management NV Belgium

5 Carbon Disclorsure Project 2008

Motor Trades Association of Australia Pension Fund for Danish Lawyers SH Asset Management Inc. South Korea Superannuation Fund Pty Ltd Australia and Economists Denmark Shinhan Bank South Korea Münchner Kapitalanlage AG Germany Pension Plan of the Evangelical Lutheran Church in Canada Canada Shinkin Asset Management Co., Ltd Japan Munich Re Group Germany PETROS – The Fundação Petrobras de Shinsei Bank Japan Natcan Investment Management Canada Seguridade Social Brazil Siemens Kapitalanlagegesellschaft mbH Nathan Cummings Foundation U.S. PGGM Netherlands Germany National Australia Bank Limited Australia Phillips, Hager & North Investment Signet Capital Management Ltd Switzerland National Bank of Kuwait Kuwait Management Ltd. Canada Skandia Nordic Division Sweden National Grid Electricity Group of the PhiTrust Active Investors France Electricity Supply Pension Scheme Pictet Asset Management SA Switzerland SNS Asset Management Netherlands United Kingdom Pioneer Investments Société Générale France National Grid UK Pension Scheme Trustee Kapitalanlagegesellschaft mbH Germany Ltd United Kingdom Sompo Japan Insurance Inc. Japan Portfolio 21 Investments U.S. National Pensions Reserve Fund of Ireland SPF Beheer bv Netherlands Ireland Portfolio Partners Australia Standard Chartered PLC United Kingdom Natixis France Porto Seguro S.A. Brazil Standard Life Investments United Kingdom Nedbank Group South Africa PREVI Caixa de Previdência dos State Street Corporation U.S. Funcionários do Banco do Brasil Brazil Needmor Fund U.S. Storebrand ASA Norway Prudential Plc United Kingdom Nest Sammelstiftung Switzerland Sumitomo Mitsui Financial Group Japan PSP Investments Canada Neuberger Berman U.S. Sumitomo Trust & Banking Japan QBE Insurance Group Limited Australia New Alternatives Fund Inc. U.S. Sun Life Financial Inc. Canada Rabobank Netherlands New Jersey Division of Investment U.S. Superfund Asset Management GmbH Railpen Investments United Kingdom New Jersey State Investment Council U.S. Germany Rathbones/Rathbone Greenbank Sustainable World Capital U.S. New Mexico State Treasurer U.S. Investments United Kingdom New York City Employees Retirement Svenska Kyrkan, Church of Sweden Real Grandeza Fundação de Previdência e Sweden System U.S. Assistência Social Brazil Swedbank Sweden New York City Teachers Retirement System REDEPREV – Fundação Rede de U.S. Previdência Brazil Swiss Reinsurance Company Switzerland New York State Common Retirement Fund RREEF Investment GmbH Germany Swisscanto Holding AG Switzerland (NYSCRF) U.S. Rei Super Australia TD Asset Management Inc. and TD Asset Newton Investment Management Limited Management USA Inc. Canada United Kingdom Rhode Island General Treasurer U.S. Teachers Insurance and Annuity NFU Mutual Insurance Society RLAM United Kingdom Association – College Retirement Equities United Kingdom Robeco Netherlands Fund (TIAA-CREF) U.S. NH-CA Asset Management South Korea Rock Crest Capital LLC U.S. Telstra Super Australia Nikko Asset Management Co., Ltd. Japan Royal Bank of Canada Canada Tempis Capital Management South Korea Nissay Asset Management Corporation Terra fondsforvaltning ASA Norway Japan SAM Group Switzerland TfL Pension Fund United Kingdom Norfolk Pension Fund United Kingdom Sanlam Investment Management South Africa The Bullitt Foundation U.S. Norinchukin Zenkyouren Asset Management Co., Ltd Japan Santa Fé Portfolios Ltda Brazil The Central Church Fund of Finland Finland North Carolina State Treasurer U.S. Sauren Finanzdienstleistungen Germany The Collins Foundation U.S. Northern Ireland Local Government Savings & Loans Credit Union (S.A.) Limited The Co-operators Group Ltd Canada Australia Officers’ Superannuation Committee The Daly Foundation Canada (NILGOSC) United Kingdom Schroders United Kingdom The Dreyfus Corporation U.S. Northern Trust U.S. Scotiabank Canada The Ethical Funds Company Canada Oddo & Cie France Scottish Widows Investment Partnership United Kingdom The Local Government Pensions Old Mutual plc United Kingdom Insitution (LGPI) (keva) Finland SEB Asset Management AG Germany Ontario Municipal Employees Retirement The RBS Group United Kingdom System (OMERS) Canada Second Swedish National Pension Fund The Russell Family Foundation U.S. Ontario Teachers Pension Plan Canada (AP2) Sweden The Shiga Bank, Ltd. Japan Opplysningsvesenets fond Seligson & Co Fund Management Plc (The Norwegian Church Endowment) Finland The Standard Bank of South Africa Limited Norway SERPROS Fundo Multipatrocinado Brazil South Africa Oregon State Treasurer U.S. Service Employees International The Travelers Companies, Inc. U.S. Orion Energy Systems, Inc. U.S. Union Benefit Funds U.S. The United Church of Canada – General Council Canada Pax World Funds U.S. Seventh Swedish National Pension Fund (AP7) Sweden

6 CDP Signatories 2008

The Wellcome Trust United Kingdom Third Swedish National Pension Fund (AP3) Sweden Threadneedle Asset Management United Kingdom Tokio Marine & Nichido Fire Insurance Co., Ltd. Japan Trillium Asset Management Corporation U.S. Triodos Bank Netherlands Tri-State Coalition for Responsible Investing U.S. TrygVesta Denmark UBS AG Switzerland Unibanco Asset Management Brazil UniCredit Group Italy Union Asset Management Holding AG Germany Unitarian Universalist Association U.S. United Methodist Church General Board of Pension and Health Benefits U.S. Universal-Investment-Gesellschaft mbH Germany Universities Superannuation Scheme (USS) United Kingdom Vancity Group of Companies Canada Vårdal Foundation Sweden VERITAS INVESTMENT TRUST GmbH Germany Vermont State Treasurer U.S. VicSuper Pty Ltd Australia Victorian Funds Management Corporation Australia Visão Prev Sociedade de Previdencia Complementar Brazil Wachovia Corporation U.S. Walden Asset Management, a division of Boston Trust and Investment Management Company U.S. WARBURG-HENDERSON Kapitalanlagegesellschaft für Immobilien mbH Germany West Yorkshire Pension Fund United Kingdom WestLB Mellon Asset Management (WMAM) Germany Winslow Management Company U.S. XShares Advisors U.S. YES BANK Limited India York University Pension Fund Canada Youville Provident Fund Inc. Canada Zurich Cantonal Bank Switzerland

Foreword of the Federal Minister for the Environment, Nature Conservation and Nuclear Safety, Sigmar Gabriel (MdB), for the Third German Report of the “Carbon Disclosure Project (CDP)”

Mankind is currently facing huge challenges: climate change, drastically increasing resource consumption worldwide and rapidly rising resource and energy prices are threatening the ecological and economic foundations of our lives. In the case of major global problems, economic, ecological and social aspects have become intrinsically linked. How we produce and how we manage our natural resources has become a crucial issue that affects the whole of mankind. It is not only the state of the climate and environment, but also the state of the financial markets that make clear: business as usual is not an option for the future. At the same time, the need for change also brings with it major opportunities for growth. We at the Federal Environment Ministry have responded with the concept of ecological industrial policy. Companies that take account of these megatrends in their strategies avoid possible risks, make active use of new opportunities and recognise their social responsibility. Corporate social responsibility (CSR) is a key strategic instrument for companies to secure their competitiveness for the long term. The active participation of a number of large companies in the carbon disclosure project is proof that energy efficiency and climate protection are no longer side issues on the financial markets! Globalisation increases expectations regarding corporate responsibility. The public, consumers and financial markets no longer only ask how high company profits are and how companies use their profits, they also ask how these profits are made. I therefore wish you every success and broad participation in your project.

Sigmar Gabriel Federal Minister for the Environment, Nature Conservation and Nuclear Safety

9 Table of Contents

Table of Contents

CDP Signatories 2008 ...... 4 Foreword of the Federal Minister for the Environment, Nature Conservation and Nuclear Safety, Sigmar Gabriel (MdB) ...... 9

1 Executive Summary

Executive Summary ...... 13

2 The Carbon Disclosure Project (CDP)

Overview ...... 19 CDP in the future ...... 21 Improved access to CDP data via CORE ...... 21 Partners to the CDP6 Report for Germany ...... 22

3 Climate change from the perspective of auditors and investment professionals

Climate change from the perspective of auditors – Interview with the largest auditing companies ...... 25

CO2 risks and valuation ...... 28 Introduction 28 Valuation 28

CO2 emissions as a value driver in practical analysis 29

Indicator approach: from CO2 intensity to CO2 risk 30 Objectifiable, quantifiable indicators for review 31 Market-based reviewing using multipliers 31 Summary and outlook 31

4 Analysis of the answers of german companies in the CDP6 Responses 33 Transparency 33 Methodology 34 Company-specific risks and opportunities of climate change ...... 35 Risks of climate change 35 Regulatory risk 35 Physical risk 35 General risk 36 Risk management 36 Company-specific opportunities arising from climate change 37 General opportunities 37 Regulatory opportunities 38 Physical opportunities 38 Investments due to the consequences of climate change ...... 39 GHG emissions reporting ...... 40 Emissions reporting in the CDP 40 Scope and distribution of emissions 41 Meeting targets 42 Emissions intensity 43 Governance ...... 44 Responsibility and individual performance 44 Communication 45 Emissions – a value driver ...... 45

5 Appendix

CDP6 Questionnaire ...... 51 Response of the 200 largest companies in Germany ...... 54 The most important trends from the other regional and sector-based CDP reports ...... 58 Key to abbreviations ...... 62

11 1 Executive Summary

This year, the globally active Carbon Disclosure Project (CDP) was carried out in Germany for the third time. In total 109, 55 percent of Germany’s 200 largest companies participated in the project. These represent over 90 percent of market capitalisation.

Overall, the companies’ reporting on the significance of climate change for their respective business models appears to be much improved in comparison with previous years.

Executive Summary

Although the risk was generally judged to transport and logistics companies see the A highly sophisticated model has devel- be similar to the previous year’s results, physical risks as being the most signifi- oped in relation to the positive economic risk is assessed very differently according cant. effect of emissions. This effect varies to a to industry sector and also variously pre- A level of standardisation can be recog- large degree depending on the industry; sented from company to company. Fur- nised in the reporting on greenhouse gas naturally, energy providers, transport, raw thermore, the regulatory risk is seen as the (GHG) emissions. 32 percent of the com- materials, consumables and supplies are most meaningful risk, while the physical panies already use the Greenhouse Gas particularly affected. However, this is also risk is of equal importance to insurance (GHG) Protocol. The level of transparency due to the fact that these companies have companies and transport and logistics regarding the companies’ own emissions supplied insufficient information about businesses. However, 75 percent of com- has also seen a significant increase; just emissions resulting from the added value panies indicate that they have implement- under 60 percent of the companies can chain and product use, meaning that it ed a form of risk management. This year, quantify their emissions. There is, howev- has, so far, not been possible to take the companies once again viewed the er, considerable scope for development in these risks into account. opportunities presented by climate differentiating according to type and change as being greater than the risks. The following table gives an overview of region. There are particular deficiencies Opportunities are generated by new prod- important new developments that have regarding emissions produced by the ucts, in particular those which aim to save influenced the discussion on climate added value chain and product use. 49 energy. Particularly financial services change and examples of resulting conse- percent of the companies use emissions providers and capital goods producers quences. targets as a means of ensuring a reduc- see a heavy bias towards opportunities as tion in their emissions. This reduction opposed to risks. Energy providers, on the should primarily be achieved through an other hand, see a bias towards regulatory increase in energy efficiency. risks rather than opportunities, while

Table 1: Climate trends of the year 2007/2008

Developments over the Results Consequences (examples) last 12 months

Scientific

New research on the current status • Nasa Chief Climate Scientist James Hansen et al. use new The limits for stabilisation (2015–2020) and global CO2 of climate change evaluation methods to reach the conclusion that climate emissions reduction (50–85 percent by 2050 worldwide) for- change can only be held within tolerable boundaries if mulated by the Intergovernmental Panel on Climate Change

global emissions reduction targets of around 350ppm CO2 are too broad, orientation towards maximum limits is neces-

in the atmosphere are adhered to. Previously, research sary. The goal must be a CO2-free society by the middle of (IPCC 2007) had acted on the assumption of stabilisation the century and significant efforts to lower emissions in the

at around 450ppm CO2.Today, the concentration is already short to medium-term by 2020

over 385ppm CO2

Global politics

The UN Climate Change Confer- • By 2009 a treaty to succeed the Kyoto protocol is to be • “Uncertainty over the future framework conditions” is ence of December 2007 culminat- ratified on the basis of the fourth IPCC report, i. e. 450ppm reduced, a global successor treaty to Kyoto is probable ed in the “Bali Roadmap” • Developing countries and the USA have joined this • Global CO2 regulation is becoming likely process • New business opportunities will arise, financing models • Transfer of technology and finance will play a far more are becoming relevant for private-sector stakeholders in explicit and key role in this addition to development banks

Australia ratifies Kyoto protocol • Australia becomes one of the last industrialised countries • CO2 regulation foreseeable to accept the obligations outlined in the Kyoto protocol • Emission trading system discussed in Australia

• Product limitations announced, for example prohibition of conventional light bulbs from 2010

G8 summit in Japan agrees to • The G8 heads of government approve the Bali process • CO2 regulations are foreseeable halve global greenhouse gas emissions by 2050 • G5 states agree on the most stringent reduction scenarios • Statements from the emerging countries (G5) indicate that of the IPCC report as a global guideline they will also introduce regulation

13 Carbon Disclorsure Project 2008

Developments over the Results Consequences (examples) last 12 months

Global politics

Key emerging countries announce • South Africa, India, China and other countries announce Although they have rather more the basic character of a climate programmes or action details of concrete national climate programmes and insti- declaration of intent, these announcements point to signifi- plans tutionalise them cant changes in dynamics – for the first time, emerging countries are displaying their own initiative regarding regula- • South Africa aims to achieve stabilisation by 2020, India tion and drawing up clear institutional methods for imple- organises sector-specific measures and China establishes mentation an explicit climate programme

European and German politics

EU energy and climate change • Concrete reduction targets approved using 1990 as a • Clear reduction targets, energy efficiency targets, renew- package (EU package) approved basis: 20 percent unilateral reduction by 2020 and 30 per- able energy targets, supporting or demanding a clear inte-

cent by 2020 through multilateral activities gration of CO2 costs or opportunities in reviews of activi-

ties and giving incentives for minimising CO2 • This package introduces concrete building blocks for

these targets to be reached in all economic areas • Political framework conditions for CO2-minimising economies begin to take shape • European emission trading rules introduced for the period 2013–2020 within the scope of the EU package: • Germany’s EU reduction target is 14 percent, German target for renewable energy is 18 percent by 2020 - Full auctioning of emissions certificates for the electricity sector, in other sectors an increasing proportion of auc- • Electricity producers will have to carry the actual costs of

tioning CO2 emissions and plan power plant investments with this in mind - Quota of permitted reduction certificates from CDM/JI projects significantly limited • Emissions will become a real cost factor for airlines for the first time, which will have an indirect impact on aircraft - Air traffic integrated into emission trading from 2012 manufacturers and also, for example, on transport costs

Integrated climate and energy • Germany implements a climate target of 40 percent by • CO2 is established as a driving force for political measures, package of the German Federal 2020 with a concrete package of measures that addresses renewable energy and cogeneration (KWK Gesetz (Cogen- Government (IKEP) a comprehensive range of economic areas eration Law), EEG Gesetz (Renewable Energies Law), EE- Wärmegesetz (Renewable Energies Heating Law)), buildings, traffic etc. are addressed

• Many sectors are still exempt, however further steps in this direction can be expected as the measures are probably

insufficient for reaching the target of 40 percent (CO2 automobile tax, energy efficiency specifications for products etc. have been announced)

Inclusion of air traffic in emission • Limitation at 97 percent of average emissions of • Airlines have to broaden their efforts to increase efficiency trading as of 2012 2004–2006 (e.g. by also using biofuel), however it is difficult to present reductions with the current business model; particularly • 15 percent of emissions certificates auctioned cost-sensitive business models could be appropriate

• Increasing emissions growth tends to require follow-up steps (possibly kerosene tax etc.) – the new influencing factors on the business model should be taken into account

Pan-European CO2 regulation for • Voluntary commitment not fulfilled in 2008, binding regula- • CO2 is now a factor when drawing up business strategies automobiles with consumption lev- tion with set limits is to be introduced, 120 g CO2/km is (in many cases as a reactive step) els above the manufacturers’ fleet expected from 2012 with special regulations average is imminent (there are • As a result, automobile manufacturers are striving to introduce innovations, in particular electricity-powered vehicles already fees for CO2 emissions, for example France already has a • The sector’s inaction has led to political regulation encom- punitive tax on cars >160g/km, passing labelling, advertising etc. 200 Euro – 2600 Euro surcharge) • Companies with unsuitable product strategies will suffer financial difficulties (from sales slumps to large-scale writ- ing off of unsuccessful innovations)

14 Executive Summary

Developments over the Results Consequences (examples) last 12 months

Politics in the USA

Both presidential candidates are • McCain has set a targeted reduction of > 60 percent by • CO2 regulation foreseeable within the scope of a cap and going into the election campaign 2050, Obama has a long-term reduction target of 80 per- trade system with climate programmes – USA’s cent by 2050 national/international position will • Morgan Stanley/Citi/JP Morgan’s Carbon Principles com- change • Both candidates put forward a cap and trade emission mit them to increased “due diligence” regarding invest- trading system ment plans for energy providers due to future CO2 restric- tions

Carbon markets

USA – regional emission trading • North-eastern states (Regional Greenhouse Gas Initiative) • Forthcoming regulation via cap and trade system has system in development regardless to start in 2009 resulted, for example, in banks adopting an alternative due of election result diligence approach and utility companies placing greater • California (to start in 2012) emphasis on CO2 issues

Australia plans cap and trade sys- • Australia: the major features of an Australian emission • A global pattern of regulation designed to limit quantities is tem (to start in 2011): trading system were announced in June 2007 emerging

New Zealand introduced trading • New Zealand: began in 2008 (in the forestry sector) and is • Implications for the value of sectors and companies must system in 2008 being gradually expanded to cover fossil fuels (2009), sta- be reported using a wider range of methods tionary energy and industrial emissions (2010) and agricul- ture (2013)

ICAP (International Climate Action • ICAP has been set up as a platform for establishing global • A globally acknowledged CO2 price would ensure the inter-

Partnership) between states and CO2 markets by states and federal states of the EU, the nalisation of CO2 costs and fair competition federal states agreed to establish a USA, Canada, New Zealand and Norway global carbon market • An effective global price for CO2 would compel companies • Development of models for “linking regional markets” and stakeholders to place the CO2 intensity of the business model at the centre of their considerations

Company level

CO2 product labelling entered the • Great Britain: second wave of new CO2 labelling on con- • CO2 emissions as a product performance indicator is market across Europe alongside sumer products as an information source, e.g. Tesco’s becoming relevant across the entire added value chain, practical developments to deter- label, split into 5 categories, is displayed on 20 different CO2 can become a differentiating factor and allows mine product-related greenhouse products improved availability of CO2 data effects (Product Carbon Footprints (PCF)) • Germany: amongst other measures, a pilot project has • Standardised methods are being discussed, companies been carried out by nine companies to find an agreed have a basis on which to quantify PCFs methodology, BMU (German Federal Ministry for the Envi- ronment) project for finding a universal methodology • Customers can recognise the environmental friendliness of products and use this in their buying behaviour

• France: various CO2 labelling schemes on products in chain stores including Casino

• Switzerland: Migros provide labelling on own brands etc.

CDP Supply Chain Leadership • Multinational enterprises attempt to increase the CO2 • Increases the relevance of CO2 intensity as a success Collaboration (SCLC) established transparency of their added value and supply chain factor

• The pressure to recognise CO2 intensities and sources increases, even for smaller companies, in the absence of a

binding CO2 standard

Financial and capital market-driven activities

CalPERS (important US pension In October 2007, US investor groups, NY Attorney General • Market participants demand the creation of an information fund) and others demand binding Cuomo and California Public Employees’ Retirement System basis for a comprehensive company assessment: physical climate risk reporting (CalPERS) called on the US Securities and Exchange Com- emissions, emissions management, climate risks (physical, mission to obligate listed stock corporations to submit a regulatory, reputation, operational and resulting risks) report on climate-related risks • Companies have to prepare for the demands of internal and external reporting

Financial analyses of the influence • For example: industry studies on the effects of climate • Business models of entire industries face upheaval of climate change on business change on individual sectors by CA Cheuvreux and others models • Capital allocation will also depend on CO2 in future

15 Carbon Disclorsure Project 2008

Developments over the Results Consequences (examples) last 12 months

Financial and capital market-driven activities

BVI integrates CDP response • BVI offers service for its member companies in the case of • Investors have to use the best available instruments to behaviour of companies in sug- non-participation in the German CDP survey with regard to understand a company’s CO2 intensity gested voting behaviour at general the voting behaviour or critical questioning at general meetings meetings

Increasingly climate-related prod- • Merrill Lynch, Société Générale, UBS and Barclays Capital, • Visibility of climate as an factor influencing investment ucts/indices on the market for example, have floated commodity-linked indices as products (based on Kyoto or EU ETS certificates) • The lack of a methodical and reporting basis for the comprehensive review of CO2 risks prevents effective integra-

• Fund products increasingly incorporate CO2 as a key tion into mainstream analysis and investment factor

Banks quantify the “footprints” of • Individual financial institutions have examined their stock • In future, companies will firstly be assessed in this catego- their portfolios and loan books portfolios for CO2 intensity, ASN Bank from the Nether- ry and secondly subject to greater transparency demands lands is the first bank to publish these results – Individual – Internally, these steps lead to an improved understanding

banks also develop methods for assessing the CO2 inten- of the financial services providers regarding their own cli- sity of credit portfolios mate risk; integration in mainstream methods is a logical next step

Reporting

In Great Britain, compulsory com- • British companies are facing compulsory CO2 reporting • Availability of CO2 data, continuity and quality should pany reporting is part of the pro- requirements improve, possibility of link with financial reporting posed Climate Change Bill

16 Executive Summary

17 2

Introduction: The Carbon Disclosure Project

CDP’s mission is to facilitate a dialogue between investors and corporations, supported by high quality information from which a rational response to climate change will emerge.

The Carbon Disclosure Project (CDP)

Overview 4) Corporate governance with regard to Figure 1: CDP6 signatory climate change. The Carbon Disclosure Project is the location by region The CDP6 information request can be largest investor coalition in the world: viewed in the Appendix. more than 385 signatory investors, with 47% a combined asset base of 57 trillion US The responses from companies to CDP’s dollars, signed CDP’s sixth annual annual requests for corporate data pro- request for information in 2008 (CDP6) vide investors with vital information which was sent to over 3000 companies regarding the current and prospective worldwide. impact of climate change on their portfo- 7% lios, and therefore represents an important The CDP annual information request is resource for investment decisions. The sent to the Chair of the Board of the fact that CDP’s requests are made on 8% 1% world’s largest companies by market 27% behalf of investors serves to raise the capitalization. It covers four principal 10% awareness of senior management that cli- areas: mate change is a business issue that 1) Management’s views on the risks and requires serious strategic focus. Europe opportunities that climate change After eight years of consecutive growth, North America presents to the business; CDP currently runs projects in more than South America 2) Greenhouse gas emissions accounting; 20 countries, with new projects launched Asia in China, Korea, Latin America, the Australia 3) Management’s strategy to reduce Netherlands and Spain in 2008. CDP has Africa emissions/minimize risk and capital- also entered into a key strategic relation- ize on opportunity; and

Figure 2: The countries in which CDP currently runs projects

Iceland

Norway Sweden Denmark Canada Finland

Germany

Netherlands China

Switzerland Japan

Spain Taiwan Italy USA France Korea Thailand

Hong Kong Malaysia Mexico India

Singapore Indonesia

South Africa Brazil Australia

Chile New Zealand

Argentina

19 Carbon Disclorsure Project 2008

ship with Merrill Lynch and has appointed ments in the UK including the Foreign and PricewaterhouseCoopers as its global Commonwealth Office and the Office of advisor. These associations will support Government Commerce in HM Treasury to growth over the next three years. understand supply chain emissions, risks and opportunities. We are pleased to report that CDP received a record number of company CDP acts as secretariat for the Climate responses to its 2008 annual request – Disclosure Standards Board (CDSB), more than 1550 in total. This demon- which aims to promote and advance cli- strates an increasing understanding by the mate-change-related disclosure in main- world’s largest corporations of the impor- stream reports through the development tance of climate change and its relation to of a global framework for corporate business strategy and shareholder value. reporting on climate change. This frame- Analysis of this year’s responses shows work will elicit comprehensive, consistent an advance in greenhouse gas emissions and comparable information for investors, accounting with scope 3, or indirect emis- as well as offering greater certainty on dis- sions reporting, registering an increase closure requirements for corporations, and since 2007. thereby provide an influential model for use by national regulators. CDP is currently conducting further research into how investors use By working with information users, their CDP data in order to improve its under- advisors, regulators and public interest standing of the investment community’s groups, as well as the four leading requirements. The results to date show accountancy majors and the associated signatory investors using company accountancy bodies CDSB aims to sup- responses to CDP in: port, harmonize and strengthen existing climate-change-related reporting initia- • Company engagement; tives and standards. Rather than creating • Qualitative checking; a new standard, the aim is to bring together and enhance current best practice in • Sell-side research; the form of a single consistent framework • The filing of shareholder resolutions; and that can be used for disclosure in mainstream reports. • The creation of new products and indices. This year more than 2,000 additional companies were brought into CDP’s system through the new CDP Supply Chain Proj- ect. More than 30 companies, including Tesco, HP, Kellogg and Vodafone now use the CDP system to collect climate change relevant data from their suppliers. This represents a significant achievement by the corporate community, demonstrating how collaboration is key to better understand climate change and its impacts on procurement. Carbon disclosure has assumed heightened importance on the political agenda and the CDP process has received support from political leaders globally. Gov- ernment and public sector organizations also understand the importance of measuring their own carbon risks and emissions. More than 30 cities in the U.S. are currently working together to report through the CDP system, a development that will yield a much better understanding as to how cities are preparing for the low carbon economy. CDP is also working with central and local government depart-

20 The Carbon Disclosure Project (CDP)

CDP in the future: Improved access to “The Carbon Disclosure Project is vital, and we’ve got to get • CDP is continuously working to CDP Data via CORE improve the quality and quantity of everybody to participate in it.” reporting on climate change. CDP is In September 2008 CDP launched the also improving its online reporting sys- CORE 2.0 database. CORE stands for Bill Clinton tem and providing extensive guidance COrporate REsponses and it is the former U.S. President on what should be measured and enhanced access function for presenta- reported; tion and analysis of the CDP data, allow- ing all the CDP responses to be searched • CDP will refine its offering to investors and sorted by index, geography, sector or “Before CDP we had no com- through the provision of more bespoke CDP question. The results are displayed prehensive data on corporate data to service the requirements of on screen via a web interface and can be greenhouse gases. But with individual investment institutions. CDP downloaded to Microsoft Excel. is also working to expand the availabili- CDP, policy makers, investors ty of its information through profession- CORE 2.0 is designed to enable the user and companies themselves can al data distribution channels; to efficiently manipulate the CDP data to their requirements. The CORE 2.0 system take better informed decisions.” • CDP plans to continue its expansion has been built utilizing feedback from our around the globe and aims to launch signatory members in 2007. Fredrik Reinfeldt projects in Russia and other locations Swedish Prime Minister in 2009; For more information about CORE 2.0 please see www.cdproject.net or contact • CDP has recently launched a new proj- Daniel Turner at the CDP London office: ect, ‘CDP Finance’, working with banks [email protected] “The Carbon Disclosure Project to better understand the opportunities, is independent and impartial, it risks and liabilities with relation to climate change across their client base, is a clear and transparent mech- including the lending and private equity anism for anyone to see our portfolios; carbon footprint and to judge • CDP is also developing strategic rela- our performance at reducing it.” tionships with a range of organizations to further expand CDP’s work and Sir Terry Leahy reach in the future; Chief Executive, Tesco plc • CDP is working towards a unified global business response to climate change and through its associations with “The CDP supports AIG Invest- investors, corporations, governments and the other key stakeholders, will ments’ efforts to assess and continue to help catalyze a sustainable, analyze trends in risks and low carbon economy. opportunities associated with climate change and its mitiga- tion. Climate change continues to be a major financial and investment concern for us and our clients.”

Win J Neuger Chief Executive, AIG Investments

21 Carbon Disclorsure Project 2008

“CDP is one of the most Partners to the CDP 6 valuable tools we have to help Report for Germany us evaluate climate risk across our whole portfolio.” The partners to the CDP6 report for Ger- many are BVI Bundesverband Investment und Asset Management e.V. and the World Brian Rice Wide Fund For Nature (WWF). The author Investment Officer, CalSTRS of the report is Professor Alexander Bassen. The BVI represents the interests of 89 “The Carbon Disclosure Project companies, which are active in asset is an excellent tool for increasing management. Our members manage over the exchange of climate infor- 1.6 trillion Euro in investment funds and mation between companies and discretionary portfolios on behalf of more than 15 million private and institutional their institutional investors.” investors. 45 BVI members support the CDP directly as “Signatory Investors”. Bendt Bendtsen Danish Minister for Economic The WWF is one of the world’s largest and Business Affairs conservation organisations. It has supported the work of the CDP in compelling capital markets and companies to improve transparency on man-made cli- “The specialist focus of the mate change globally since 2001 and in Carbon Disclosure Project Germany since 2006. provides a suitably rigorous The BVI and the WWF support the CDP in structure for an overview of a order to increasingly ensure the consideration of the effects of climate change on company’s response to climate the economic situation of listed compa- change, and the survey template nies and the German economy as a whole is a very helpful management in investment research. Holistic analysis of tool for us to assess climate- the opportunities and risks presented by climate change must be engaged in by related risks and opportunities in companies of all sectors and should not our own business. It also allows be limited to obvious emitters of green- us to benchmark our practices house gases. Improved transparency accelerates the necessary systematic against peers.” integration of climate risks in investment decisions on the part of investors. Sir Tom McKillop Chairman, Royal Bank of Scotland Group Prof. Alexander Bassen, University of Hamburg, Chair for Management and Capital Markets, is the author of the CDP6 Report for Germany. Prof. Bassen researches, teaches and consults on the effect of corporate governance, corporate responsibility, climate change and investor relations on the capital market.

22 Das Carbon Disclosure Projekt (CDP)

23 3

Climate Change from the Perspec- tive of Auditors and Investment Professionals

Climate Change from the Perspective of Auditors and Investment Professionals

Climate Change from Michael Werner: From our experience with auditing green the Perspective of house gas (GHG) data, we see at times Auditors – Interview considerable potential for improvement in the collection and reporting of GHG data. with the largest Audit- For this reason, GHG data often may in ing Companies our opinion lack credibility if there is no external audit. Given the scope for interpretation within 1. Authorities have particularly been the framework of currently applied meth- interested in a standardization and reg- ods, a comparison of GHG data from dif- ulation of the GHG emissions reporting. ferent companies is very difficult. Compa- René Bräunig (KPMG) Based on your experience, what do you nies can currently choose between a think about the latest development of range of boundaries: e. g. a control vs. an GHG emission reporting and the rele- equity approach, measuring CO2 emis- vance for the financial reporting of a sions vs. GHG emissions as a whole, company? including or excluding upstream activities. Moreover, they are given a lot of freedom in choosing the accuracy of measure- Joachim Ganse: ments and calculation principles for GHG emissions, as well as underlying emis- The European-wide, operative minimum sions factors As a result, direct compari- standard “EU Monitoring guidelines” exist son between two companies is not always for the European Emission Trading System meaningful. (EU-ETS) and is realised in 27 EU-countries in line with the specific national con- The communication of data on green- ditions. The general approach in Europe is house gas emissions by companies has similar; however, there are certain national increasing implications on their evaluation variations and deviations in realisation. So by the financial market. This is com- Joachim Ganse (Deloitte) far, the Kyoto Protocol mechanisms Clean pounded by the introduction of the Emis- Development Mechanism (CDM) and Joint sions Trading Scheme (ETS) within the EU Implementation (JI) were considerably less and its planned extension to cover other regulated than the European emission sectors, as well as the increased attention trading within the EU-ETS. More and more that the general public pays to in climate problems regarding the quality of the change. Moreover, GHG emissions are processes but also the stringency of the increasingly being published in company audits by the auditors and authorities management reports, resulting in a trend were identified. This led, as from May towards a heightened significance of such 2008 to a massive rise in regulation, which data. partially exceeds the level of EU-ETS. Greenhouse gas emissions e. g. the finan- René Bräunig: cial value of acquired or saleable emission certificates is directly disclosed in form of Up to now there has been no standard for a balance sheet item. So, the certificates the reporting of GHG-related data which Gerd Lützeler (Ernst & Young) are part of the current assets or liabilities. leads to variances in the completeness Further, they must be taken into account and accuracy of GHG data reported when reporting the balance sheet risk, depending on the approach adopted. which bases on the uncertainty of the cer- This can result in, for example, inconsis- tificate origin and is reflected as operative tent valuations as a result of different risk. treatment with respect to the scope of the entities under review (e. g. subsidiaries, sites without production). There could also Gerd Lützeler: be varying approaches regarding the sources and types of emissions to be con- In our field of expertise we see a range of sidered during the determination of the assurance statements, which not always relevant GHG emissions as well as with cover the proper subjects or information. respect to the degree of consideration of Best practices or minimum requirements indirect emissions. In addition, in terms of could help to address short comes. the accuracy of GHG emissions, there also exists the risk of differing methods of Michael Werner (PwC)

25 Carbon Disclorsure Project 2008

data evaluation. As a result the emissions Michael Werner: as knowledge on financial risk manage- themselves could be determined different- ment processes are indispensable for the We see two types of GHG-related risks: ly (measurement, calculation, estimate) or auditors (also the accountants). on the one hand, risks resulting from the the calculation of the CO equivalents 2 impending climate change ( e. g. high- Concerned companies shall include the could be based on different conversion water, droughts) (risk type 1) and on the greenhouse gas risk in their financial man- factors. other hand risks resulting from (future) agement. The experience shows that this The above described problems, which can regulations or changes in demand (risk has so far hardly done. In addition, the arise from the lack of a uniformly applied type 2). auditors should be personally qualified standard, can also have consequences for and responsible, so that no qualitative In our experience, type 1 risks (direct the financial reporting of a company. Hav- protection is given over a parent company, effects of climate change) are only seldom ing said that, with regard to the emission in order to reduce the latent risk of quality raised as central topics by companies – trading, which in Germany accounts for procrastination. but reporting of GHG emissions is only of approximately 50 percent of GHG emis- limited use for assessing these risks. The minimum requirement put on the sions, there are partially already European qualification of the responsible auditor standards regarding CO emissions. An analysis of type 2 risks requires not 2 should be the experience of at least 20 only GHG emissions but also other infor- greenhouse gas audit projects. Otherwise mation on a company’s business activi- experience shows that a good work can- ties. With the exception of ETS compa- not be guaranteed. The very high com- nies, such indirect risks are difficult to 2. Do you think that the current practice plexity of emission audits shows that a quantify in our opinion. A potential for of the GHG reporting covers the specif- huge operative range of experience is improvement with regard to type 2 risks ic risk? Please, specify a potential necessary. Finally, the standardisation of exists in particular in an improvement in improvement within the reporting the audit procedures should be made in the comparability of GHG data (cf. answer scheme. each case through all involved parties, i. e. question 1) and the development of gen- through the inclusion of customers, audi- erally accepted models for risk analysis. tors and authorities. Otherwise we would Joachim Ganse: have objections regarding too excessive influences of the authorities, which would Improvement opportunities arise in partic- René Bräunig: put into question the legal independency ular with respect to the compliance with As mentioned above, the application of of the audit procedures. accuracy requirements when determining inconsistent standards and the use of dif- greenhouse gas emissions. Also the miss- fering criteria during the evaluation of ing operative practice of new rules and GHG emissions can potentially result in Gerd Lützeler: sometimes also history-based opposition unclear and inconsistent reporting. The in the companies are obvious, which must To our opinion materiality, comparability setting of binding standards would there- be appropriately addressed. and standardisation would surely help to fore be a positive step in the right direc- integrate GHG emissions in a financial Still a lot of the greenhouse gas emission tion. In any case, the standards and crite- report. In fact we see integration of sus- auditors have a too low level of formation ria used should be disclosed as part of the tainability reports (approved according to and experience. While almost all auditors reporting to ensure comparability with ISAE 3000 and GRI) integrated in financial had a technical formation, the fiscal other companies. reports. Since GHG information is part of knowledge is often missing. On the other a normal sustainability report integration hand, a similar situation is given at the of activities is taking place already. responsible persons on the customer side, as these often also origin from the opera- 3. Which requirements (e. g. compara- tive technical management. Regarding the bility, standardization, integration to the Michael Werner: Kyoto mechanisms CDM/JI, this signifi- financial reporting, materiality) do you cant weakness is currently approached by In view of the increasing relevance of the think provide a proper reporting of GHG massive standardisation efforts of the emission data for the financial market, emissions? United Nations. GHG reporting is increasingly required to meet the financial market’s requirements: Joachim Ganse: • Reliable systems (integrated, automated, Gerd Lützeler: reliable IT solutions instead of spread- The future requirements shall clearly focus Please, specify a potential improvement sheet analyses with numerous manual on a stronger linking of the technical and within the reporting scheme. According to inputs) that can supply valid data financial spheres. The auditors shall not the accreditation rules for EA 6-03, ILAC 4 only handle the technical level but also • Clearly defined processes (controls, and ISO 17020 a risk assessment has to assess the fiscal effects. Therefore, expe- approval procedures, documentation) be made by the verification body. This rience and expertise on the field of green- assessment however can be set up by the • A defined organisational structure with house gas relevant investment analyses, verification body itself. Guidelines or a clear role descriptions and responsibili- the respective accounting of greenhouse template could help to assure that all risks ties. gas emissions and their derivatives as well have been addressed.

26 Climate Change from the Perspective of Auditors and Investment Professionals

René Bräunig (KPMG): transparent what has been reviewed and industries. However, it can be stated that what improvements could be made. the energy industry has the biggest finan- Essential with regard to the reporting of cial impact, as it sets the CO price and GHG emissions are the principles of com- 2 also directly the energy price. pleteness and accuracy. To illustrate this, Michael Werner: if for example in the case of two alumini- Regarding CDM/JI, a considerable diversi- um producers one included the emissions The greatest problem and source of errors fication of the specific risks can be generated by the external electricity sup- in reporting GHG emissions are mostly the observed, depending on the project type plier in its calculation of GHG emissions lack of processes and inadequate organi- and the experience of the auditors. This is and the other did not, then the two would zation in the systematic collection of data: reflected in the wide range of results as not be comparable. Also the use of differ- The emission data must be collected, well as in the relatively high refusal rate of ent emission factors would reduce the checked and approved by a standardized project activities through the UN. comparability. process throughout the complete compa- This is a general duty without any excep- ny. A comprehensible documentation of In order to avoid such inconsistencies in tion. The topic is the linking of the finan- data and processes is a mandatory task reporting, whilst at the same time, cial markets with the carbon market – from an auditor’s point of view. enhancing the comparability of available therefore the same quality requirements data, we recommend a standardisation of To date, GHG data is often still gathered shall apply for both market sectors. relevant criteria. using a collection of spreadsheet analy- We anticipate a full integration of the ses. Special software packages that also The same applies to the so called corner- greenhouse gas risk management in the cover the usual adequacy requirements stones of reporting, namely “Integration in usual risk management. are slowly starting to be used. Financial Reporting” and “Materiality”. One basic idea is the following: the CO Incomplete/Missing data and inadequate 2 certificates overtake the function of data precision influence the quality of money as universal exchange mean for emission reporting and may impair the the markets carbon and energy efficiency. credibility of the company in the eyes of 4. What are the main issues of GHG For the financial management they can be stakeholders. reporting? controlled as a foreign currency might be, Differing methods of collection of emis- under maximum application of the existing sion data as well as a heterogeneous data financial reporting and risk management. Joachim Ganse: basis make comparability of company information more difficult (see answer to The extreme complexity requires profes- question 1). Gerd Lützeler: sional knowledge. Currently, the existing know-how in economy is still too low or of Monetary quantification will help to an unfavourable structure. The assess- address business risks. Our expectation is René Bräunig: ment of measurement uncertainties of that this part will need and get more atten- measurement devices and calculation We refer to the points made above. tion and therefore knowledge is needed results, required in emission trading, was on this level to support companies with so far unusual in practice. So, not only the the financial consequences. sole balancing leads to a result, but also the consideration of the error propagation. 5. Do industrial differences exist in the Michael Werner: The executing authorities try a one-sided reporting of emissions? Have you law-making although they are constitu- already anticipated these differences Sector-related differentiation is of major tionally not responsible for this. Reasons within sectors? How do you take importance due to the different GHG- for this are the sometimes rather impre- regional and industrial differences into related risks for individual sectors. Of par- cise or also missing rules, providing a account? From your point of view is the ticular importance is a differentiation of huge area of discretion. announcement of operational risks emissions that are covered by ETS and related to climate change a general those that are not Regarding the CDM/JI projects, the public obligation of companies or just an obli- liability of the UNO authority is missing. General climate change risks (type 1 – see gation of specific industries? In what Substantial remedies against authoritative answer to question 2) can be isolated way do you expect a monetary quantifi- decisions and a too slow working manner from the GHG emissions of the company cation of the risks due to climate are not possible or international legislation because of their global nature. For this change and the consequences within is applied, respectively. reason, we regard the naming of risks in the external and internal financial this area as separate from the reporting of reporting? GHG emissions. Gerd Lützeler: A monetary quantification of GHG emis- Information on the amount of CO2 emis- Joachim Ganse: sions in the case of ETS companies can sions is missing, accuracy and findings be made using the EUA market price. As In European emission trading (EU-ETS) are not always reported. It is not always far as other companies (not subject to exist only slight differences between the ETS) are concerned, we expect a quantifi-

27 Carbon Disclorsure Project 2008

cation of GHG reduction targets, e. g. In these cases the balance sheet value of CO Risks and using own reduction measures (that come the assets collapses and write-downs on 2 1 at a price), purchase of “green” electricity account of insufficient project quality lead Valuation or purchase of voluntary emission reduc- to a failure of the investment projects. tion certificates. Introduction A major goal of the Carbon Disclosure Gerd Lützeler: Project is to ensure transparency regard- René Bräunig: Apparently self-regulation gives too much ing the opportunities and risks presented In general, with regard to the reporting of room for interpretation. Since the EU ETS by companies’ own GHG emissions. This GHG emissions, we would recommend is one European legislation equally imple- should allow investors to take this infor- distinguishing between industry sectors, mented (or should be implemented equal- mation into account when making invest- as emissions can vary significantly across ly) the approach on verification should be ment decisions. However, the interface such groups. For example, the energy equal as well to achieve equal competi- between information preparation and consumption and the CO2 emissions of tion. information use has still to be clearly the previously mentioned aluminium pro- defined. This section therefore introduces ducers constitute significant economic as the various approaches and methods for well as ecologic issues. In contrast, these Michael Werner: incorporating CO2 risks into the company issues would normally be rather negligible review for the purposes of the capital mar- There are adequate provisions for ETS for retail companies, with the exception of ket. Alongside theoretical considerations, emissions in the monitoring guidelines of food retailers (i. e. cold chain). the spotlight falls on how the various the EU Commission and the further guide- models are presented by investment In our view, a quantification of risks asso- lines on national level. Nevertheless, we house analysts. In particular, the analyses ciated with the internal and external see the definite need for clear guidelines of Bernstein, CA Cheuvreux, Citigroup, reporting of GHG emissions is in general a for non-ETS companies and emission Goldman Sachs, JP Morgan, Merrill Lynch sensible idea. This would require, howev- sources, to allow a valid external analysis and Société Générale are referred to here. er, a clear definition of the valuation stan- of THG data as well as benchmarking of The evaluation results of the analyses are dards to be applied. different companies. Such guidelines need summarised later. not be set forth by the legislator. Guiding principles and standards from association Valuation initiatives (corresponding to numerous guidelines regarding accounting) should Capital market-orientated valuation helps 6. Do you think a standard set by an be adequate in our opinion. to determine the fair value of a company. authority is necessary or do you rather The idea of this valuation procedure is to believe in self-regulative capabilities of discount future cash flows of a company the market? René Bräunig: using a risk-adjusted adequate discount rate. Theoretical capital market models Legislative standards for sections of the are typically used to determine this risk- Joachim Ganse: GHG emissions can be expected in the adjusted discount rate. The Capital Asset future and already partially exist ( e. g. EU Operative standards do already exist and Pricing Model (CAPM) is used for this pur- Emission Trading Directive). Whether the are currently tightened. Meanwhile a gap pose. This equilibrium model determines a market will introduce self-regulation in still exists in the ruled linking between the fair remuneration for taking on risks on the conjunction with the standardisation of operative and the financial risk manage- capital market and derives the equity cap- GHG emissions will primarily depend on ment world. This will be a field of more ital costs of a company. whether investors in the future base their mature discussions in the next years and investment decisions on GHG emissions Investment banks review companies using might result in respective regulations. reporting and hence demand such regula- so-called Discounted Cash Flow models A regulation over the market takes already tion. Another factor is the extent to which (DCF). The Weighted Average Cost of place in markets, whose main business is companies themselves consider they can Capital (WACC) method, which is com- the carbon market: e. g. financial institu- benefit from their environmental stance monly used internationally for valuation, tions, which require solvency and risk and provide evidence of this through the capitalises the cash flows of a company additions for certain projects/emission application and disclosure of such gener- using a weighted interest rate that takes certificates and project developers. So, a ally accepted standards. Such a develop- into account the capital structure, tax number of insolvencies can be currently ment is likely to vary from sector to sector. effects, capital costs for debt and the observed amongst CDM/JI project devel- opportunity costs affecting shareholders’ opment companies and portfolio houses. equity.2 In addition to the reason and pur-

1 By Prof. Alexander Bassen (University of Hamburg)/Dr. Hendrik Gartz (head of the DVFA Committee Non-Financials)/Sebastian Rothe (University of Hamburg)/ Felix Schnella (head of the DVFA Committee Non-Financials). 2 See Koller, T./Goedhart, M./Wessels, D.: Valuation – Measuring and Managing the Value of Companies, 4th edition, New Jersey 2005, p. 106.

28 Climate Change from the Perspective of Auditors and Investment Professionals

pose for the calculation, the industry-spe- heightened risk arising from GHG emis- cific features must be taken into account sions increases the beta coefficient7 and in order to determine a fair company the company value falls. value.3 However, the influence is not merely limit- CO2 emission trading represents a theo- ed to producers which release emissions retical and practical challenge for deter- during the course of the production mining the risks to the company value process: growing costs for energy, raw arising from CO2 emissions within the materials and for implementing new tech- framework of capital market theory and nologies result in a so-called “downside integrating this into the review process. risk”. Looking at the “revenue” value driv- This affects the entire added value chain er from the above diagram, we can draw of a company as well as its direct CO2 the conclusion that – depending on the emissions. price elasticity of a commodity – an increase in CO2 costs can only be partially CO2 Emissions as a Value Driver in passed on to customers, if at all. The price Practical Analysis The shareholder value approach highlight- Figure 3: Value Drivers affecting Profit and Loss Accounts6 ed by RAPPAPORT (1999) identifies the company-specific value drivers4 for determining the economic value of a company, which play a key role in determining the Revenue company value. The strengths of individual value drivers exert a direct influence on the cash flow of a company and there- ROIC* Cost fore require in-depth analysis.5 The diagram (Figure 3) shows a simple value driver structure with a direct effect on the Value profit and loss accounts of a company. Capital Empirical studies come to the conclusion that taxes, interest costs, overheads and Growth revenue are the parameters that influence * ROIC – Return on Invested Capital company value to the greatest degree.

The potential for increasing a company’s and quantity structure of the company to value is determined by growth and the be reviewed should be analysed individu- Return on Invested Capital (ROIC). The ally. In addition, the “operating profit mar- latter is derived from quotients of Net gin” of a company falls if, all other things Operating Profit Less Adjusted Taxes being equal, cost increases relating to (NOPLAT) and invested capital. As long as CO2 regulation cannot be fully passed on the total of the growth rate and the ROIC to the customers. exceeds the company’s cost of capital, added value is created. The extent of the If a company does not have enough emis- ROIC is mainly dependent on the size of sions certificates, this can be compensat- the “revenue”, “costs” and invested “capi- ed for by purchasing emissions rights on tal”. From the perspective of valuation, the market. This brings about a price and volume risk, as emissions certificates are CO2 emissions influence the value drivers “revenue” and “costs” and thus have a traded on the stock exchange and prices lasting impact on the financial perform- therefore vary over time. Alongside the ance and the company value. Alongside guideline for emissions reduction targets, this influence on the success of a compa- the price of emissions rights certificates is ny, the DCF model allows the influence on influenced by other factors. In detail, the discounting factor to be identified. A these are the allocative mechanism, the

3 See Drukarczyk, J.: Unternehmensbewertung, Munich 2003, p. 129. 4 RAPPAPORT lists the following value drivers: revenue growth rate, operating profit margins, profits tax rate, capital expenditure on current assets, capital expenditure on fixed assets, cost of capital and length of forecast period. 5 See Akalu, M: Measuring and Ranking Value Drivers: A Shareholder Value Perspective, Working Paper, Rotterdam 2005, p. 1. 6 See Koller, T./Goedhart, M./Wessels, D.: Valuation – Measuring and Managing the Value of Companies, 4th edition, New Jersey 2005, p. 424. 7 The beta coefficient of a company reflects the business risk in relation to the market risk.

29 Carbon Disclorsure Project 2008

market rules of the CO2 market, the trad- the review process is to form indicators as ed CO2 intensity is then converted into a able quantity of emissions certificates, the a basis for this process. maximum revenue-related CO2 risk. In the number of Clean Development or Joint process, the product is formed from the Until now, there has been no ubiquitous Implementation projects, fuel prices and CO intensity and the certificate price. standard for the CO intensity indicator. 2 general economic growth and technologi- 2 As a result, various definitions of this indi- Corresponding assumptions are made for cal progress.8 The following table 2 con- cator can be found in literature, such as the price trend of the emissions certifi- trasts examples of positive and negative the ratio between kg CO and kWh. Alter- cates. For phase III, i. e. for the EU certifi- drivers of the price of CO :9 2 2 cate trading period from 2013 to 2020, the European Commission favours the full Table 2: Examples of positive and negative drivers of the price of CO2 auctioning of emissions rights for electricity producers. Experts forecast that CO2 Bullish Signals “+” Bearish Signals “-” certificates will be traded in the price range from 20 Euro to 65 Euro in the Colder winter and warmer summer than expected Warmer winter and colder summer than expected phase after 2012. Increasing “spark spreads” and “dark spreads”10 Decreasing “spark spreads” and “dark spreads” Furthermore, freely allocated certificates Low supply of emissions rights from the NAP Poor checks on emissions by governments or reduction obligations must be taken Political action to reduce GHGs in phase III after Lack of political will to extend the Kyoto specifica- into account. These results are then 2012 tions and reduce greenhouse gas emissions applied to the company’s EBITDA mar- 15 Implementation of GHG regulation in the USA and USA renunciates from multilateral climate protec- gin. This results in an EBITDA-related introduction of a cap and trade emission trading tion agreements, emissions checks and a legal CO2 risk. Finally, the ability to pass on system framework for a market-based emission trading costs resulting from the CO2 obligations to system customers or suppliers is examined. This “cost-shifting” depends on the market Emissions regulation does not necessarily natively, direct greenhouse gas emissions position of the respective company, the have negative effects on profits and com- can be compared with the fixed assets of legal framework conditions and price sen- pany values. Positive effects result from a company.11 In the following demonstra- sitivities. If all CO2 emissions costs that 12 arise within the added value chain can be innovations, participation in the develop- tions, the “CO2 intensity” indicator is the passed on to customers, the prices rise ment of new markets and the ability to ratio of the total volume of CO2 emissions pass on costs arising from emissions reg- over the lifetime13 of a project or product by the same percentage value. ulation to customers, for example. to the corresponding revenue. The following calculation clarifies the pro- The formation of indicators for reviewing cedure described using energy suppliers Indicator approach: From CO Intensity 16 2 purposes can be divided into five steps. as an example. In the following, the cal- to CO2 Risk culated CO2 intensity of European energy As a first step, the CO intensity of a com- One approach for integrating the risk from 2 suppliers is 5,431g CO2 per Euro revenue pany is calculated. Secondly, the calculat- 17 damaging greenhouse gas emissions into (or in tonnes per Euro, 0.005431). The

14 Figure 4: CO2 Risk Determination Process

Revenue Freely EBITDA Ability of cost CO2 Intensity related allocated CO2 risk shifting CO2 risk certificates

8 See Gatzen, C: The Economics of Power Storage – Theory and Empirical Analysis for Central Europe, Dissertation, Schriften des Energiewirtschaftlichen Instituts an der Universität zu Köln, Munich 2008, p. 156 9 See Labatt S./White, R.: Carbon Finance – The Financial Implications of Climate Change, New Jersey 2007, p. 208. 10 The “spark spread” is the difference between the prices of electricity and gas; the “dark spread” describes the difference between the price of electricity and coal. 11 For more information, see also the following descriptions in the section “Objectifiable, quantifiable indicators for review”.

12 Many different definitions are used for the CO2 intensity indicator in previous literature. A kg CO2-kWh ratio is also possible. 13 Due to the problems in calculating emissions during a product or project lifetime, periodical emissions are sometimes also used.

14 Diagram of the CO2 risk determination process on the basis of Société Généralé (June 2007). 15 The EBITDA margin is the ratio of EBITDA to revenue. 16 Example according to Lucas-Leclin, V./Nahal, S./Lannegrace, M.-G./Ouaknine, Y.: CREAM-ing Carbon Risk exposure, Equity research report, Société Générale, 2007.

17 The CREAM-ing Carbon Risk exposure report assesses different industries according to their CO2 risks. Energy suppliers, however, differ with regard to their power plant portfolios and therefore also their CO2 risk. This should be taken into account accordingly during corporate review.

30 CO2 Risks and Valuation

market price of CO2 certificates is expect- fore the following rules have to be priate forecasts regarding business devel- ed to amount to 23 Euro per tonne. Using observed when carrying out a market- opment can also be drawn up using indi- 20 the result of the CO2 intensity and the cer- based review: cators and weighted indicators. However, tificate price, a revenue-related, industry- the individual indicators are only weighted (1) Select comparable companies with re- specific CO risk of 12.5 % can be calcu- on a subjective basis, which means that 2 gard to anticipated ROIC and growth rate lated. If we assume that 90 % of emissions such a review process is not necessarily certificates are allocated free of charge, (2) Only use multipliers for future estima- intersubjectively verifiable. the adjusted CO certificate price amounts tions 2 All the described processes are aimed at to 2.30 Euro per tonne. The revenue-relat- (3) Use enterprise value multipliers based comparing companies with one another ed CO2 risk is therefore reduced to 1.25 %. on EBITA in order to avoid problems using CO performance indicators and The EBITDA margin is used to relate the 2 with regard to capital structure and thereby being able to adapt the calculations CO2 risk to financial performance indica- one-off effects based on financial size. These processes, tors. An average EBITDA margin for energy like market appraisal using multipliers which suppliers of 32.8 % and a revenue-related (4) Adjust the enterprise value by taking was introduced as an alternative approach, CO2 risk of 1.25 % ultimately results in an into account assets that are not opera- 18 do not derive CO2 risks and integrate them EBITDA CO2 risk of 3.8 %. Finally, it is tionally necessary, e. g. excess liquidity into the company assessment within the examined to what extent the costs can be Evaluation methods using the framework of capital market theory. passed on to customers. If it is assumed price/earnings multiplier (P/E) and the that 50 % of the costs can be transferred, Therefore, although GHG emissions are enterprise value/EBITDA multiplier the EBITDA CO2 risk falls to 1.9 %. taken into account in numerous analyses, (EV/EBITDA) are predominantly used for until now no investigated analysis has company review. The advantage of this Objectifiable, Quantifiable Indicators employed an equilibrium model in line procedure is the direct comparability with for Review with capital market theory in order to other companies from the same industry. determine the fair remuneration for taking Alongside the described indicator approach Multiplier evaluation can also be on risks from greenhouse gas emissions. for identifying the strength of the influence employed for quantifying the CO2 risk of a exerted by CO2 emissions on individual company. The starting point is an estima- A review procedure consistent with capital value drivers, an alternative approach is to tion of the number of free certificates to market theory does not investigate cash assemble quantifiable indicators in order to be allocated to a company in phase II. The flows with regard to the influence exerted compare the performance of a company in EV/EBITDA and P/E multipliers are then on them by CO2 emissions and prices. relation to its competitors.19 calculated under the assumption that the Instead, the change to the systematic number of freely allocated certificates risks is taken into account using the com- The energy consumption from production have to be procured on the market. pany’s beta coefficient. Beta coefficients or distribution processes allows the over- are typically derived from historical rate of heads to be assigned easily and thus The adjusted multipliers allow the change return time series. As the market price for quantified. In a world of climbing energy in comparison with the calculated multipli- CO2 certificates is not necessarily found in prices, a high rate of energy efficiency will ers to be worked out based on the free historical company rates of return, a continue to gain in significance in the allocation of emissions certificates. The future-orientated method of beta calcula- future and thereby represent a compara- determined percentage change in the used tion is necessary. Indicator procedures, tive competitive advantage. The “green- multipliers therefore reflects a quantifiable such as those used for relative CO2 inten- house gas emissions” (GHG) indicator estimation of the capital market with sities, can play an important role here. reflects how well company-specific emis- regard to the CO2 risk of the evaluation sions are managed. In this approach, CO2 object in comparison with the competition. Such an analytical deduction determines intensity is quantified by relating the direct the equity capital costs of the evaluation greenhouse gas emissions to fixed assets. Summary and Outlook object and thus takes into account CO2 risks in the discount rate. Such an ap- The investigated analyses take into Market-based Reviewing Using Multip- proach is objectifiable and therefore inter- account the risk presented by greenhouse iliers subjectively verifiable. The limited use of gas emissions in the form of indicators models relating to capital market theory in A careful evaluation of multipliers reflects during calculation. The results of the the review process clarifies the need for the capital market’s estimation of how an analysis flow into the cash flow of the further research on how climate-related object is reviewed in comparison to the evaluation object for the forecasted peri- political effects in the form of CO2 emis- competition. Despite the wide range of od. The core of the analysis is the idea sions can be integrated into existing capi- application, this review procedure har- that CO emissions are value drivers with 2 tal market models. bours a constant source of errors. There- a direct impact on the cash flow. Appro-

18 Ratio from revenue-related CO2 risk and EBITDA margin. 19 The following indicators particularly lend themselves to the review of energy suppliers. However, transferability to other industries is not ruled out. 20 See Koller, T./Goedhart, M./Wessels, D.: Valuation – Measuring and Managing the Value of Companies, 4th edition, New Jersey 2005, p. 376.

31 4

Analysis of the Answers of German Companies in the CDP6

Responses pate in the CDP, as the market capitalisa- Figure 5: CDP6: Response in tion of the companies that replied The CDP6 questionnaire was delivered to Germany amounts to 90.2 percent (86.7 percent) of the 200 largest listed companies in Ger- the market capitalisation of the 200 many according to market capitalisation. largest companies. Therefore the sample 22 of these companies are also part of the 55% audit is once again biased with regard to CDP6 Report on the global GLOBAL 500. company size. Causes for the low 109 of the 200 companies, or 55 percent response rate of smaller businesses are (compared to 52 percent in the previous chiefly the lack of human resources and year) answered the questionnaire. A fur- the fact that the relevance of climate ther 2 percent made information available. change for their own industry sectors is 9 percent of the companies informed the classified as being low. 9% CDP that they would not be participating 2% and 34 percent did not answer. We were On an international level, the German pleased that the high response rate from response rate is mid-table, which can be 34% the previous year could be reached again. seen in the “International Trends” section Viewing the responses by indices, the in the appendix to this report. The GLOB- response rate is dispersed as follows. AL 500 regularly achieves a response rate Answered questionnaire of over 70 percent. As the Emission Trad- No response ing System of the EU has been in exis- Participation declined) Table 3: Responses by indices tence since January 2005, the companies Provided information included in this already have to compile Index CDP6 CDP5 reports on their CO2 emissions. The time DAX 93 % 93 % and effort of these companies is therefore

MDAX 71 % 58 % low, which has had an impact on their response behaviour. Moreover, with the TecDAX 42 % 50 % National Allocation Plan II (NAP II) further H-DAX 71 % 66 % installations are subject to the EU ETS

SDAX 39 % 32 % (for example from the petroleum industry) so that the impact of the monetarisation Other 38 % 30 % of emissions can be felt by more con- Companies sumers.

The consistently high response rate in the Transparency DAX, once again constituting 93 percent, The respondents were able to decide and the significant increases in the MDAX whether the information they submitted are particularly notable. This development may be published in this report and on the demonstrates that the subject of climate CDP website www.cdproject.net. 60 per- change is gaining relevance for all com- cent (compared with 45 percent in the panies and not just the large Groups. It previous year) gave permission for their was even possible to increase the answers to be accessible to the public21. response rate in the MDAX to 71 percent, This therefore constitutes a significant however only 42 percent (compared to 50 increase in the transparency rate. The percent in the previous year) was reached companies’ publication of this information in the TecDAX. In the H-Dax – which con- improves the transparency of the climate- sists of the DAX, MDAX and TecDAX – the related risks and opportunities that the response rate was increased to 71 per- companies are presented with and cent (compared to 66 percent in the pre- removes the asymmetry of information. vious year). Although responses also The increased willingness to make increased significantly from companies in answers public can be seen as an indica- the SDAX and others which do not belong tor that the data given by the companies to an index, the response rate here falls is regarded as reliable and can therefore considerably short of that of the H-Dax. In be communicated to all investors. Several Germany therefore it is above all the companies have in turn promised to take smaller companies which do not partici-

21 The signatories of CDP6 have access to all the information and answers provided by the companies via the CDP database.

33 Carbon Disclorsure Project 2008

part in the 2009 CDP on the basis of a tives, communication and the relationship Automobile (6) secure data pool. The slight increase in to public opinion-makers which are deter- Energy suppliers (5) the response rate shows that a process of mined. Raw materials, consumables and adaptation is underway, which means that supplies (10) The evaluation is undertaken within the another increased response rate can be Transport/Logistics (5) framework of both a general and an anticipated for the next year. Capital goods (28) industry-specific analysis. Despite the Insurance (7) high response rate from a total of 109 Methodology Financial service providers (17) companies the data is not always suffi- Non-intensive sectors (31) The questionnaire was further modified cient to be able to derive reliable industry- and optimised for the CDP6 in coopera- specific statements. In these cases only The companies answer the questions in tion with investors and companies. The the overall results are discussed. text form. In order to increase the compa- questions are industry-specific, which rability of the answers, these were evalu- How much a company is affected with means that only companies in particularly ated in the same way as the GLOBAL 500 regard to emissions and the impact of the affected industry sectors answer very Report based on the Carbon Disclosure GHG effect, depends on the company detailed questions. Part 1 is relevant for all Leadership Index (CDLI). The verbal characteristics. For this reason there is a companies and covers the risks and answers of companies were classified into series of extra questions in the CDP which opportunities produced by climate four groups for this purpose. are answered by those companies most change. As well as various types of risks affected.22 Using these criteria the qualitative and opportunities, participants are also answers can be quantified and therefore questioned on risk management and For the industry-specific evaluation the form a better basis for comparison. financial and economic effects. Part 1 additional problem of differentiation arose: consists of a total of 10 questions. Part 2 documents information on green- Standard scale for variable responses house gas (GHG) emissions reporting. The Response is thorough, detailed and specific with monetary or quantitative descriptions where relevant. methods used and extent to which emis- CDP’s guidance is adhered to 3 sions are recorded are presented. The Response indicates a broad understanding of the issues, with some specific and company-relevant focus is on the reporting of concrete, comments. The response is clearly unique to the company being considered 2 direct and indirect scope 1 and 2 emis- Part response or response indicates a poor or vague understanding with generalised commentary. sions and also electricity consumption. The same response could be applied to other companies in the sector and still be equally accurate 1 Information is also requested on external No response or response that has no relevance at all to the question answered 0 examination and the emissions history. This part is completed by questions for A very precise differentiation has the companies which are subject to the Ger- advantage of increasing the comparability man Greenhouse Gas Emission Trading of companies within an industry. The sam- Law (TEHG) and which belong to particu- ple size is then however mostly too small, larly affected industry sectors and also by therefore industries have to be combined. questions which can be voluntarily Furthermore companies are on the one answered by other companies. These hand affected through direct (Scope 1) or relate to scope 3 emissions and the signif- indirect emissions (Scope 2 and 3). On the icance and effects of emission trading, other hand there are a number of compa- among other topics. nies that only indicate low emissions in Part 3 is completely devoted to the goals the creation of value, but whose products of reducing greenhouse gas emissions. however can contribute significantly to The goals of reducing greenhouse gases emissions (for example automotive manu- and measures to this effect are dealt with facturers) or can contain climate risks (for in detail. Based on these results, suitable example insurance companies, the asset indicators for emission intensity and management of banks). However, these parameters of emission planning are risks cannot be included in the business- developed. specific GHG emissions. For this reason the analysis has been based on the fol- In part 4 the governance of climate lowing industry classification, the number change in companies is investigated. For of companies in each one is given in this purpose it is primarily the responsibili- brackets. ties in management, but also the incen-

22 These include companies that are subject to the TEHG and/or belong to the automobile, aeronautical, chemical, building materials, energy supplying, oil and gas, metal and mining, paper and forestry and transport industries.

34 Analysis of the Answers of German Companies in the CDP6

Company-specific Regulatory risk SAP is convinced that IT can risks and opportuni- 67 percent of companies believe that they play a strategic role to address are exposed to a regulatory risk, of which companies’ business objectives ties of climate change 15 percent see the risk as low and 52 per- and industry requirements, such cent judge it as being significant. In partic- as emission trading, environ- Risks of Climate Change ularly affected industries this risk is perceived by some 75 percent of companies. mental compliance, energy sav- Regulatory Risks: i How is your compa- Exceptions here are the financial service ings and efficiencies. Under the ny exposed to regulatory risks related providers (44 percent) and capital goods umbrella of sustainability man- to climate change? (39 percent). The highest perception of this ii Physical Risks: How is your company risk is in the automotive, raw materials, agement, SAP believes that IT- exposed to physical risks from climate consumables and supplies and energy led innovation can drive eco- change? supplying industries. In these industries the nomic development and parity production and/or the products are charac- iii General Risks: How is your company terised by particularly high emissions. through resource efficient exposed to general risks as a result of growth. This broader view also climate change? As in the previous year, the regulatory risk is principally perceived as a price risk. encompasses the increased iv Risk Management: Has your company This is due to the fact that 27 percent of need for product safety, product taken or planned action to manage the the companies that identify a regulatory compliance, supply chain visibil- general and regulatory risks and/or risk either expect the EU ETS to spread to ity as well as risk and compli- adapt to the physical risks you have other industry sectors, allowances to be identified? significantly reduced or emissions rights ance management and report- v Financial and Business Implications: auctions to be broadened after 2012. 25 ing. How do you assess the current and/or percent fear that regulation measures will future financial effects of the risks you cause a direct or indirect increase in ener- SAP AG have identified and how those risks gy costs, above all in electricity prices. might affect your business? CO2-associated price increases will, however, not be authorised until 2012. Elec- This year the companies were again asked tricity prices orient themselves on the for their appraisals on the opportunities marginal costs (including emission rights) Figure 6: Climate change as a and risks regarding climate change. In of the last used power plant, so that the risk summary, this demonstrates that the prices fluctuate according to demand and perception of the risk remains unchanged the associated marginal costs. The price 77% in comparison to the previous year. How- of CO2 is thus already comprised in ever, the potential effects of the risk have today’s electricity prices. Any further certainly become more tangible in the increases can only be explained by the analysis. developments expected after 2012. Generally, as in the previous year, 77 per- Further regulatory risks are seen in taxa- cent of companies believe there is a risk tion alteration (10 percent), additional factor in climate change. There is, howev- investment needs (10 percent) and in the er, a very varied perception of the form obligation to comply to energy efficiency that this risk will take. standards (10 percent). 23% Only 23 percent believe that climate In relation to the CDLI the companies change will have no influence on their own show a high level of transparency with Risk business model. Once again, several stat- regard to the assessment of regulatory No Risk ed that they were insured against chang- risks. The best ratings are received by ing weather conditions. Thus there are 23 percent (3) or 22 percent (2) of the companies in this group which indeed companies. 33 percent only provide rudi- hedge a risk, but do not regard it as a risk mentary information and 22 percent do factor of climate change. not deliver satisfactory information. In addition there is a group of companies which state that climate change has a Physical risk small and/or no company-specific influ- 64 percent of companies believe that they ence. In order to analyse the risk more are exposed to a physical risk, of which precisely, the companies have given infor- 18 percent classify the risk as low and a mation on regulatory, physical and other corresponding 46 percent attach a higher risks. significance to the physical risk. Of this, 22 percent see themselves directly

35 Carbon Disclorsure Project 2008

Climate policy and regulation exposed to a risk through extreme weath- answers. 35 percent are only able to pro- affects Allianz through the risks er conditions, for example through loss of vide very general statements and 22 per- use of production plants (22 percent) or cent were not able to provide convincing we accept for our businesses through the breakdown of infrastructure statements. and our customers across the (16 percent). Risks are also perceived in insurance, banking and asset the loss of transport routes or of raw General risk material supply. In comparison to the pre- management business lines, as 64 percent of the companies see them- vious year, the significance of water was selves as being confronted by additional well as the risks Allianz faces as particularly emphasised. Risk awareness risks, which are primarily related to a an investor through the compa- has therefore risen slightly in comparison change in consumer behaviour. Of this, to the previous year. ny’s holdings. 57 percent recognise a significant risk, Physical risks are estimated especially while 7 percent believe that there is only a Allianz SE highly in the industry sectors which are low risk. 23 percent are anticipating a criti- particularly affected. In these industry sec- cal debate by consumers over questions tors 63 percent of companies believe of climate protection. This can have a there is a high risk, which is predominantly direct effect on the range of products Figure 7: CDP6 perception of caused by significantly changing weather (16 percent) or, through the reputation of risk types conditions. These include trans- companies, have a more indirect effect on port/logistics (71 percent), energy suppli- buying patterns (7 percent). This year, as ers due to their cooling needs and over- expected, this perception is once again head power lines (100 percent), the auto- predominantly shared by companies that motive industry and insurance (100 per- deliver directly to the consumer. Regulatory 52% 15% cent each). Risk

Table 4: Appraisal of risks by industry Sector Regulatory Physical General Physical 46% 18% Risk Risk Risk Risk

Automotive 100 % 100 % 100 %

Energy providers 100 % 75 % 80 % General Financial services providers 44 % 44 % 34 % 57% 7% Risk Capital goods 39 % 21 % 48 %

Insurance 67 % 100 % 67 %

Transport/logistics 86 % 71 % 71 % Important Raw materials, consumables Less important and supplies 80 % 55 % 55 %

Non-intensive 33 % 41 % 48 %

We view rising energy prices Furthermore, the companies mainly work Here we can see that the risk is perceived and worsening availability of on the basis that these risks are covered as low in comparison with the particularly energy/fossil fuels as a risk of by insurance and therefore also expect an affected sectors, particularly among man- climate change. To address this increase in insurance premiums as direct ufacturers of capital goods. costs. In terms of increased transparency risk, we are working on further it would be of use to the companies for Risk management reducing the company’s energy them to quantify the uninsured risks of cli- Taking the identified risks into considera- mate change or specify the costs caused consumption and greenhouse tion, the question arises as to how the by increased insurance premiums. Infor- gas emissions, for example, companies allow for current or potential mation on this has not yet been provided risks in the framework of risk manage- through the use of more energy- by the companies, however. efficient processes. ment. Altogether 75 percent of companies Overall, transparency concerning the stated that they include climate risks in physical risks is lower than that for the risk management. In particularly affected Merck KGaA regulatory risks. In this case, only 16 per- industry sectors this figure is 81 percent. cent can make well-grounded statements, This roughly corresponds to the share of although another 27 percent of the com- companies which also identifies a compa- panies give detailed and plausible ny-specific risk. 27 percent of these com-

36 Analysis of the Answers of German Companies in the CDP6

panies have implemented climate-oriented Figure 8: Types of risk management management including measures and checks. A large number of companies has integrated climate risks into the areas environment/safety (26 percent) or corpo- Insurance 5% rate social responsibility (11 percent). 11 percent regard their lobbying activities as risk management and a further 5 percent Lobbying 11% have taken out insurance policies to cover the risks. Corporate 11% According to the CDLI only few compa- Responsibility nies (15 percent) are either able or prepared to also quantify the measures. How- Environment/ 26% ever, 28 percent are able to describe their safety measures in great detail, while 40 percent are only able to give basic information. Independent climate risk 27% The differences can be largely explained management by membership to different industry sectors and the significance of the risk 0% 5% 10% 15% 20% 25% 30% derived from this. Thus the companies which identify a regulatory risk are increasingly carrying out lobbying activities, while companies that identify a physi- Financial and Business Implications: cal risk are increasingly taking action in Bayer requires transparent infor- How do you assess the current and/or the fields of environment/safety. future financial effects of the opportunities mation on two main factors: Accounting for a factor in risk manage- you have identified and how those oppor- the development of Bayer’s ment, however, does not equate to the tunities might affect your business? production-related emissions available or even communicated quantifi- For the first time ever, as with the different and the evolution of the relevant cation of risks. Only 6 percent of compa- types of risks, different types of opportuni- nies disclose current or planned financial regulatory frameworks. ties were also recorded in CDP6. effects. However, 20 percent give a detailed account of how the process of Bayer AG General opportunities quantification is implemented in the companies. 75 percent of respondents provide 74 percent of companies believe that cli- either no information, or only very general mate change in general will present them For each percentage point of information. This is mostly due to that fact with opportunities. Of the industry sectors that the financial effects are estimated as which are particularly affected, 83 percent increased efficiency, electricity being low or can only be quantified when of companies recognise general opportu- consumption of the installed the framework conditions for emissions nities. Even in the less affected industry base can be reduced by 160,000 trading after 2012 have been secured. sectors this figure lies at 52 percent. to 250,000 MWh per year. The opportunities can generally be divided Company-specific Opportunities arising into three groups. Of these, 69 percent from Climate Change Gea Group see opportunities resulting from current or Regulatory Opportunities: How do cur- new products. 23 percent expect rent or anticipated regulatory requirements resources to be used more efficiently in on climate change offer opportunities for the value creation process and that cost Over the next years we will aim your company? benefits can be generated as a result of to increase the share of eco- this, and 14 percent expect that changed Physical Opportunities: How do current projects in our loan portfolio. consumer behaviour will present a com- or anticipated physical changes resulting petitive advantage. These three groups from climate change present opportunities Hypo Real Estate Group can be further differentiated in terms of for your company? regulatory and physical opportunities. General Opportunities: How does cli- According to the CDLI, the quality of mate change present general opportuni- reporting is also satisfactory. 19 percent of ties for your company? companies are able to at least provide Maximizing Opportunities: Do you invest rudimentary quantified information. A fur- in, or have plans to invest in products and ther 45 percent carry out very well-ground- services that are designed to minimize or ed reporting on opportunities. Only 27 per- adapt to the effects of climate change? cent report in a more general nature.

37 Carbon Disclorsure Project 2008

We observe that new, more Regulatory opportunities ic statements. 29 percent only give a general answer and 22 percent do not give severe regulations related to As in the previous year, companies recog- any valuable detailed information. climate change lead to stronger nise numerous regulatory opportunities demand for more energy and that could arise as a result of climate It therefore appears that companies change. A total of 73 percent of respon- expect positive changes in market and material efficient technologies dents are able to derive opportunities for competitive conditions as a result of the with lower emissions. their companies from current or anticipat- regulatory measures. ed regulatory requirements, for example The high significance of opportunities will Duerr AG from regulations on product standards; have to be proven in the competitive envi- only 27 percent do not recognise any reg- ronment. The next few years will reveal ulatory opportunities. 41 percent of com- who is able to convert this opportunity panies that identified regulatory opportu- into business success. Climate change offers the nities believe that these are direct opportunities for their products in the form of chance for BASF as the leading Physical opportunities chemical company to position improved competitive conditions. 22 percent expect that their products will be The identification of physical opportuni- itself in the market as a solution able to increase the efficiency of other ties, which was undertaken for the first provider for climate protection products, meaning that a reinforcement or time in CDP6, facilitates an initial overview and vis-à-vis customers. improvement of the competitive position is of the varying potential for opportunities. also expected here. 16 percent of compa- 45 percent of respondents perceive physi- BASF SE nies expect regulation measures to result cal opportunities. These opportunities can in pressure to implement savings, which be attributed to weather extremes in par- increase the efficiency of products and ticular. Companies are particularly expect- processes. 16 percent are furthermore ing increased sales and further innova- anticipating the development of complete- tions in building and dyke construction ly new markets. materials (26 percent). In addition to this, Figure 9: Climate change as an increasing sea levels, longer periods of opportunity It is surprising that there is a significantly sun and heavier storms all contribute to higher estimation of opportunities in par- an expected increase in the efficiency of ticularly affected industry sectors. 87 per- alternative energies (13 percent). Likewise, cent believe that opportunities will arise General numerous companies believe new product opportuni- from regulatory changes in particular. In 74% solutions will come about (13 percent), in ties terms of competition, it is apparent that particular concerning the increasing the companies already feel prepared for demand for cooling (15 percent). An the issues that climate change will bring increase in conservation and a rise in about. In comparison, only 40 percent Regulatory plant robustness are expected for the 73% recognise opportunities in the less affect- opportuni- agricultural sector (10 percent). ties ed industry sectors. Also in the case of physical opportunities, According to the CDLI it is possible to 57 percent of the particularly affected develop a rationale when it comes to industry sectors believe that there are sig- Physical opportunities. 21 percent report in great nificantly more opportunities than the opportuni- 45% detail and quantify their statements and industry sectors which are less affected ties 28 percent at least make company-specif- (16 percent). 0% 20% 40% 60% 80%

Table 5: Evaluation of opportunities by industry Sector Regulatory Physical General opportunities opportunities opportunities

Automotive 100 % 33 % 100 %

Energy providers 80 % 80 % 80 %

Financial services provider 89 % 75 % 50 %

Capital goods 77 % 63 % 81 %

Insurance 100 % 100 % 100 %

Transport/logistics 100 % 57 % 100 %

Raw materials, consumables and supplies 89 % 55 % 90 %

Non-intensive 40 % 16 % 52 %

38 Analysis of the Answers of German Companies in the CDP6

According to the CDLI, reporting on Investments due to In 2007, we spent a total of opportunities is not yet at a convincing 1,380 million Euro on research level. Only 33 percent are able to report in the Consequences of detail on the opportunities. Most compa- and development (2006: 1,277 nies are only able to give very general Climate Change million Euro), which represents statements (33 percent) or do not make For CDP6, the companies were asked 2.4 percent of sales and 19 per- statements at all (34 percent). what investments they had made or cent of our EBIT. About one third An overview of the industry-specific planned as a reaction to climate change. A total of 81 percent of the companies of this expenditure went into the opportunities demonstrates that it is pri- research areas energy efficiency, marily the general and regulatory opportu- indicated that they carry out such invest- nities which are estimated as being high. It ments. The types of investment here differ climate protection, resource is only in the case of energy suppliers and greatly. A large number of companies conservation and renewable raw classify changes to their own products for insurance that the risk is equally shared materials. across all types of opportunities. reducing the use of resources as such investments (30 percent). 16 percent aim It is revealing in this context how the rela- to increase the efficiency of the added BASF SE tionship between opportunity and risk is value chain. A number of companies have rated for the individual companies and started special projects (8 percent), for industries. For this an opportunity/risk instance introducing area-wide video con- Bayer has set aside 1 billion coefficient was established. If this is ferences or making the company CO2- greater than 1, the company rates the neutral. Euro in our budgets for invest- opportunities arising from climate change ment in climate-relevant R & D The high proportion of investments used higher than the connected risks. We see and projects between 2008 and that for energy suppliers it is the regulato- to avoid GHG emissions is surprising. ry opportunities, and for trans- Although, according to the CDLI, 63 per- 2010. port/logistics companies and non-inten- cent of the companies can also explain sive companies that it is the physical very clearly which measures they have Bayer AG opportunities which are clearly overcom- implemented or are planning, only 19 per- pensated by the risks. Capital goods pro- cent of these could quantify these invest- ducers and financial services providers ments. However, in individual cases the recognise a significant bias towards regu- impression is given that reinvestments latory opportunities. These are seen main- derived from the classic business model ly in the development of new financial are classified as climate friendly merely if products and in the increased demand for energy consumption can be reduced by consulting. It is the production of raw technical progress, such as IT infrastruc- material-saving machines which presents ture. high potential for opportunities for the The companies are similarly reserved capital goods producers. when providing information on the finan- In summary, the opportunities appear to cial effects of these measures. A total of be perceived significantly higher than the 67 percent indicate that they estimate risks. However, this can also be due to the these. A detailed analysis of the answers fact that companies do not know the full shows, however, that according to the extent of the risks and opportunities are CDLI only 6 percent of these can actually overestimated in the value proposition. quantify these effects or publish this infor-

Table 6: Opportunity/risk factor Sector Regulatory Physical General

Automotive 1,00 0,33 1,00

Energy providers 0,80 1,07 1,00

Financial services providers 2,02 1,70 1,47

Capital goods 1,97 3,00 1,69

Insurance 1,49 1,00 1,49

Transport/logistics 1,16 0,80 1,41

Raw materials, consumables and supplies 1,11 1,00 1,64

Non-intensive 1,21 0,39 1,08

39 Carbon Disclorsure Project 2008

Commerzbank is currently an mation. Numerous companies state that GHG Emissions active player in renewable ener- they collect the information in classic risk management or classic earnings state- Reporting gy with approximately over 3.5 ments but do not disclose it separately as billion Euro of outstanding loans. the effect is still too low (36 percent). Emissions Reporting in the CDP Many companies only make very general Reporting Boundary: Please indicate Commerzbank AG (44 percent) or no specifications (20 per- the category that best describes the cent) on the financial effects of the invest- company, entities or group for which ments. your response is prepared: Our telephone, data and video a Companies over which financial control conferences offer considerable is exercised – per consolidated audited Financial Statements. potential for CO2 savings – particularly if these virtual confer- b Companies over which operational con- ences replace international trav- trol is exercised. el. If our national and interna- c Companies in which an equity share is tional customers had travelled held. instead of using our services, d Other (please provide details). they would have emitted 4.6 mil- Please use the same approach for all lion tonnes of CO2 according to answers. our estimates. Between 2006 Reporting Year: Please explicitly state the and 2007, the number of tele- dates of the accounting year or period for phone and data conferences which GHG emissions are reported. rose by around 50 percent. Methodology: Please specify the methodology used by your company to Deutsche Telekom AG calculate GHG emissions. More and more companies are keen to measure their own GHG emissions. Some 75 percent of companies are now able to make statements regarding the measurement of their own emissions (previous year 63 percent). With regard to the method of reporting, the GHG protocol is becoming the domi- nant standard. The following table gives an overview of the systems in place.

Table 7: Methods of emissions reporting Method Proportion

GHG protocol 32 %

Energy usage 28 %

EU Emission Trading System (EU ETS)/Germany TEHG 7 %

VfU Indicators 6 %

Globales Emission Model for Integrated Systems (GEMIS) 6 %

Others 11 %

The GHG protocol has therefore become significantly more popular compared to the previous year (16 percent). Yet indirect determination of CO2 emissions from

40 Analysis of the Answers of German Companies in the CDP6

resource consumption (in particular ener- b. Total Scope 1 activity in metric The use-phase of a car in com- gy consumption) has also increased com- tonnes CO2-e emitted for Annex B bination with the related fuel pared to the previous year (11 percent). countries. Additionally, the reporting methods in production contributes around accordance with EU ETS/TEHG and the Scope 2 Indirect GHG Emissions 80 percent of the overall GHG industry-specific VfU Indicators are still c. Total global Scope 2 activity in emissions of the entire life cycle. relevant, predominantly for financial serv- metric tonnes CO2-e emitted. ices providers. It is encouraging that com- d. Total Scope 2 activity in metric Volkswagen AG panies are keen to employ various meth- tonnes CO2-e emitted for Annex B ods with a view to achieving transparency countries. regarding their own emissions and the Electricity consumption risks associated with this. Increased stan- e. Total global MWh of purchased At the beginning of 2008, dardisation is desirable, as this would electricity. BASF`s emission reduction offer improved comparability of emissions f. Total MWh of purchased electricity data. targets were revised. They are a for Annex B countries. reduction in specific greenhouse However, the fact that more and more g. Total global MWh of purchased companies are now having or planning on electricity from renewable sources. gas emissions per metric tonne having their GHG emission reporting sys- h. Total MWh of purchased electricity of sales product by 25 % by tems validated through external audits is from renewable sources for Annex 2020 and compared with 2002. also a step in the right direction. A total of B countries. 36 percent (previous year 24 percent) of ii If you are unable to detail your Scope BASF SE all companies have an external audit per- 1 and Scope 2 GHG emissions formed on their system of GHG emissions and/or electricity consumption, reporting. Some 38 percent of companies please reportthe GHG emissions you state that they have implemented a are able to identify together with a method which ensures the correctness of description of those emissions. Figure 10: Availability of emis- their GHG emissions recording. sions data The majority of companies are already The credibility of the data supplied has able or willing to quantify their GHG emis- therefore risen significantly compared to sions. Some 59 percent of companies 59% the previous year. Both internal and exter- who responded quantified their CO emis- nal monitoring systems contribute to this. 2 sions (previous year 50 percent). The results also underline the improvements in the standardisation of GHG Companies also differentiate emissions emissions measurements. according to type (scopes 1 to 3)23 and their region of origin (industrialised nations Scope and Distribution of Emissions in accordance with the Kyoto protocol (so-called Annex B countries) and other a Direct and Indirect Emissions – countries). However, companies are not Scope 1 and 2 of the GHG Protocol always able to attribute emissions to their 41% (CDP5 Question 2b) countries of origin. i Are you able to provide a breakdown Scope 1 covers all emissions caused by In place of your direct and indirect emissions the companies directly. This includes all Not in place under Scopes 1 and 2 of the GHG emission sources belonging to or con- Protocol and to analyse your electric- trolled by the company, such as power ity consumption? stations, production facilities and vehicles. If so, please provide the following 46 percent (previous year 31 percent) of information together with a break- companies offer information on their down of the emissions reported scope 1 emissions, 30 percent (previous under each category by country year 19 percent) can make statements where possible. If not, please pro- regarding industrial nations within scope 1 ceed to question 2b ii: emissions, to which 80 percent of these emissions are assigned. Scope 1 Direct GHG Emissions a. Total global Scope 1 activity in Scope 2 emissions include indirect emis- metric tonnes CO2-e emitted. sions resulting from the consumption of purchased energy. Some 39 percent of

23 Please refer to the Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, revised version (www.ghgprotcol.org).

41 Carbon Disclorsure Project 2008

Figure 11: Provision of emissions data according to type Meeting Targets a Reduction Plans (CDP5 Questions 1d and 4a) Energy consumption 54% i Does your company have a GHG emissions reduction plan in place? If so, please provide details along with Other indirect the information requested below. If 23% emissions there is currently no plan in place, (Scope 3) please explain why. Indirect ii What is the baseline year for the 39% emissions emissions reduction plan? (Scope 2) iii What are the emissions reduction targets and over what period do Direct emissions 46% (Scope 1) those targets extend? iv What activities are you undertaking 0%10 % 20% 30% 40 % 50% 60% to reduce your emissions eg: renewable energy, energy efficiency, process modifications, offsets, sequestration etc? What targets companies (previous year 23 percent) PUMA measures and publishes have you set for each and over what communicated their CO emissions in this 2 timescales do they extend? its average emissions (from area. For the 27 percent of companies electric energy consumption at (previous year 17 percent) that made v What investment has been or will be the manufacturer) based on one statements about regional emissions in required to achieve the targets and product (pair of shoes, piece of developed countries, their share of total over what time period? emissions was also an average of 80 per- vi What emissions reductions and apparel). cent. associated costs or savings have PUMA AG These scope 2 emissions can also partly been achieved to date as a result of be determined from details about pur- the plan? chased and consumed electricity. 54 per- The basic willingness to reduce emissions cent (previous year 41 percent) of compa- is reflected in the strategies chosen. Con- nies provided information on this. To concrete implementation is driven by the tar- vert this consumption into CO emissions, 2 gets set for reduction in emissions. A total Figure 12: Emissions targets assumptions have to be made about the of 49 percent of companies stated that CO emission factor based on the German 2 they have formulated targets for reducing 51% electricity mix. The Federal Environment emissions within their organisation. Agency currently uses the factor 596 30 percent offer detailed information on g/kWh.24 the time periods, the targets and the As many as 23 percent of companies were measures employed to meet the targets. able to supply detailed responses regard- 19 percent state a more general intention ing scope 3 for CDP6 (previous year to reduce GHG emissions. 16 percent), for example regarding CO 2 One thing we can observe is that the 19% emissions due to the consumption and reduction goals are based on very recent 30% use of products (7 percent), in the supply figures, i. e. have just been set or updated. chain (5 percent) or due to business trips The most common basis year is 2006. The (23 percent). reduction targets are predominantly set to No reduction targets There has been a significant increase in be achieved within a period of 6 years, i. e. Quantified reduction targets the overall transparency of all types of by 2012. Companies are generally aiming General reduction targets) emissions. for an average reduction of 3 percent in GHG emissions per year.

24 See Machat, M./Werner, K.: Entwicklung der spezifischen Kohlendioxid-Emissionen des deutschen Strommix, Dessau 2007. http://www.umweltbundesamt.de/energie/archiv/co2-strommix.pdf

42 Analysis of the Answers of German Companies in the CDP6

The measures selected for this are diverse Energy costs make up an average of In 2000, Bayer initiated a pro- and multifaceted. Increasing the efficiency 3.6 percent of operating costs. There are, gram for reducing its direct GHG of energy usage (34 percent) is viewed as however, clear differences between com- the most important goal. Yet modifications panies, with values given ranging from emissions by 50 % between to processes (16 percent) and the use of less than 1 percent up to 17 percent. 1990 and 2010. renewable energy (13 percent) are also The base of information for planning future being targeted. The optimisation of build- Bayer AG emissions has also improved. 46 percent ings (6 percent) and a reduction in the of companies state that they do plan their amount of travel (4 percent) are other sig- emissions. A further 26 percent of compa- nificant factors. nies provide some additional information Emissions intensity is measured on factors such as investment volumes, Emissions Intensity methods and so on. Competitive aspects and reported as CO2 emissions The question of how to measure CO2 that have a negative effect on the willing- per vehicle for each division. emissions must also be seen as sector- ness of companies to provide information specific. Some 46 percent (previous year are the key factors named here. The Daimler AG 18 percent) of companies have specified approaches to emissions planning apply individual approaches for measuring the predominantly to the main drivers of emis- intensity of emissions. This significant increase underlines the fact that companies are getting to grips with the opportu- Figure 13: Measures for reducing emissions nities and risks of their own emissions. A statement about absolute CO2 discharge is therefore often only of limited benefit. Travelling 4% The majority of companies that supplied figures on this state their CO2 output with reference to the underlying product (37 Buildings 9% percent). To do this it is necessary to specify the product. Depending on the type of product, the values are related Renewable energy 13 % either to a unit of measurement, e. g. CO2 per tonne of the product, or to product Process modification 16 % units, e. g. CO2 per finished product. In some cases, the KPIs are very sector-specific (for example CO /Gigabyte, 2 Energy efficiency 34% CO2/tonne of product, CO2/vehicle, CO2/produced MWh, CO2/passenger). As such, these KPIs can often only be com- 0%5% 10% 15 %20% 25% 30% 35 % 40% pared in an international context. Alongside this, the emissions are set as a ratio to a success factor (21 percent). The success factors applied are typically rev- Figure 14: KPIs for emissions measurement enue and EBIT/EBITDA. A further group of companies calculates emissions per staff member (9 percent). These are mainly (financial) service CO2/product 37% providers. 9% The proportion devoted to energy costs can be seen as a further indicator of the risk of CO2-related price increases and therefore the risks of climate change. For CO2/sucess factor 21% competitive reasons, however, many companies refuse to publish details of their energy costs, whether absolute or relative. For CDP6, 30 percent of companies pub- CO2/employee 9% lished details on their energy costs. The proportion of renewable energy is at around 9.8 percent and thereby slightly 0%5% 10% 15 %20% 25% 30% 35 % 40% below the energy mix in Germany.

43 Carbon Disclorsure Project 2008

The EU commission is consider- sions. These include energy consumption Governance ing to include shipping compa- (47 percent) or the development of prices within the scope of the EU ETS (12 per- nies, together with airlines, in the a Responsibility (CDP5 Question 5a) cent). Planning energy consumption, and Does a Board Committee or other EU emissions trade. This could the emissions directly related to this, is executive body have overall responsi- lead to higher costs related to typically integrated into production plan- bility for climate change? ship transportation. ning. Actual details on the effects are If not, please state how overall respon- either not given or refer only to the speci- sibility for climate change is managed. fied targets for reducing emissions. HHLA AG If so: Around 50 percent of companies that are subject to emissions trading are either i Which Board Committee or execu- currently or in the near future planning to tive body has overall responsibility for climate change? We are working on a strategy implement the Clean Development Mech- anism (CDM) and Joint Implementation (JI) to participate in CDM and JI ii What is the mechanism by which the stipulated in the Kyoto protocol. Board or other executive body projects, although we are not reviews the company’s progress and included in the EU ETS. status regarding climate change? b Individual Performance Linde AG (CDP5 Question 5b) Do you assess or provide incentive mechanisms for individual management of climate change issues including attainment of GHG targets? If so, please provide details. c Communications (New to CDP6) Please indicate whether you publish information about the risks and opportunities presented to your company by climate change, details of your GHG emissions and plans to reduce emissions through any of the following communications: i the company’s Annual Report or other statutory filings, and/or ii formal communications with shareholders or external parties, and/or iii voluntary communications such as Corporate Social Responsibility reporting. If so, please provide details and a link to the document(s) or a copy of the relevant excerpt. d Public Policy (New to CDP6) Do you engage with policymakers on possible responses to climate change including taxation, regulation and carbon trading? If so, please provide details.

Responsibility and Individual Perform- ance With regard to anchoring the concepts within companies and their culture, Exec- utive Boards have clear responsibility for questions of climate change. 38 percent have anchored responsibility directly with the CEOs. 19 percent see this issue as the

44 Analysis of the Answers of German Companies in the CDP6

responsibility of the entire Board. Howev- Figure 15: Responsibility for climate change er, this is often assigned to Boards not as a standalone topic, but rather together with other topics of environmental protection and/or social responsibility (CSR) CEO 38% (16 percent). Yet Research Boards (5 percent) and COOs (8 percent) are also Entire executive 19 % responsible for the subject of climate board change. At 17 percent of companies, Middle Management 16 % responsibility is assigned solely to middle management, for example in the form of CSR 14 % workgroups.

Around 22 percent of companies can COO 6% already demonstrate or are planning a link between responsibilities and incentive R & D 5% schemes. The spectrum of variable remu- Other executive neration components is extremely com- members 2% prehensive here. For example, a large, variable proportion is based on reducing 0% 10%20% 30% 40% emissions in products manufactured or reducing the overall energy consumption within a sphere of responsibility. However, no specifics were given regarding the rela- Emissions – tive levels of these remuneration compo- A Value Driver nents and thereby their incentive effects. The effect of emissions on success is Communication influenced by many factors. And these factors are in turn shaped by certain com- The question of communication, which pany characteristics. The following was first raised in CDP6, was answered describes an extended model based on by 80 percent of companies – despite the the analysis of how CO2 emissions are fact that all responses were voluntary. taken into account in company ratings by Communication of the opportunities and analysts and investors from the chapter risks of climate change is considered rele- “CO2 - Risks and valuation”. The calcula- vant by the majority of companies. tions are based on information provided Indeed, some 52 percent of companies by the companies within the scope of communicate climate-related information CDP6 with the addition of data available in their annual reports. Here, 53 percent on the market. communicate this information voluntarily, such as within CSR reports. A total of The starting point is the emissions intensi- 63 percent report on the opportunities and ty, often used when assessing emissions. risks of climate change. The CDP thereby Here, a company’s entire CO2-equivalent not only offers standardisation and com- emissions are expressed in relation to a parability, it also fundamentally increases success factor, for example EBITDA or transparency in questions of climate revenue. This intensity is then often multi- change relevant for the capital market. plied by the current or planned market price for emissions rights. This then gives a cross-sector KPI, which represents the current or potential emissions costs per unit of the success factor, for example per 1 million Euro EBITDA. This figure allows statements to be made regarding the maximum risk a company is exposed to under the current framework conditions. However, this approach is open to the risk of misinterpretation (see also CDP5, p. 51). 1) Emissions are calculated differently and sometimes incompletely by different

45 Carbon Disclorsure Project 2008

companies, which makes comparison ditions for scope 1 emissions and the tions with regard to regulation and market difficult. ability of resource suppliers to pass on price development. In one scenario, price changes to those causing scope 2 Société Générale stated prices of up to 2) In some cases the emissions are emissions. A key factor again here is the €62 per tonne of CO2 based on their own already monetized: Values for acquired country in which the scope 2 emissions prognoses and expectations in publica- or sold emissions rights are already are generated (Annex B). tions such as the “Stern Review on the used in accounting. These amounts, Economics of Climate Change”. With however, are often not stated separately • Risks from scope 3 emissions, for exam- scope 1 emissions, only those emissions in the annual financial statements. ple from business trips and transport, in the so-called Annex B states of the result from the market power of the sup- 3) Direct emissions (scope 1) are some- Kyoto protocol are initially recorded. The pliers of these services. If these suppliers times already factored into the prices emissions rights assigned free-of-charge are able to pass any potential additional on a proportional basis as opportunity are then deducted. The emissions deter- emission costs to those causing the costs or expenses. Companies have mined in this way are quantified by multi- scope 3 emissions, these scope 3 emis- already factored in their indirect emis- plying them by the market price. It is then sions then represent additional costs. sions through higher energy purchase important to take into account what pro- prices. These prices are passed on to • The final influential factor is then to portion of these costs can be transferred consumers depending on the compa- determine per sector whether a compa- to the consumer. The current costs of ny’s market power. ny’s market power allows price increas- scope 1 emissions are calculated using es from all three emissions types (scope formula 1. 4) Climate change not only influences the 1–3) to be passed on the end consumer. added value of a company through direct and indirect emissions, but can also influence its success much more strongly through its reputation, new Formula 1 product lines etc. The economic effect Current scope 1 costs = (scope 1 emissions – emissions outside Annex B countries – is simply reduced to the emissions here free-of-charge emissions rights) price for 1 tonne CO2 cost transfer factor and can, therefore, in reality often be much higher. • Risks outside a company’s own emis- A similar approach is also suitable for 5) The emissions represent the current sions cannot be taken into account, as scope 2 emissions. The costs of CO2 and not the planned emissions. there is simply not enough data to sup- emissions already taken into account are Changes to the constraints, for example port this. due to the fact that suppliers – predomi- due to regulation measures, are there- nantly providers – have already accounted To be able to include these factors in risk fore only determined indirectly. for the CO emissions created directly by analysis and risk planning, assumptions 2 themselves. In empirical investigations, To take these points of criticism into must be made or scenarios developed assumptions are made that providers can account, the following includes several regarding the proportion of emissions transfer around 50 percent of CO costs amendments compared with the simple rights that can be acquired via auction, 2 to the end consumer. The impact of scope intensity model. The following adjust- the price of the emissions rights, the abili- 25 2 emissions on companies depends large- ments are particularly relevant : ty to transfer costs to the respective ly on whether these companies are able to users, the proportion of emissions caused • Risks from scope 1 emissions are regu- pass the additional costs on to their end in the Annex B countries and the develop- lated and predominantly based on the customers (see formula 2). sectors taken into account, power plant ment of scope 1–3 emissions. outputs, country of origin (Annex B) and, in particular, the emissions rights assigned either free of charge or by auc- Formula 2 tion. A further risk comes about from the Current scope 2 costs = question of to what extent energy (scope 2 emissions – emissions outside Annex B countries) price for 1 tonne CO2 providers’ market power allows them to cost transfer factor of energy provider cost transfer factor pass these additional costs on to the consumer – based on the marginal costs of the last power plant. The scope 1 emissions of companies form This approach can also be adopted for the initial basis for determining the current scope 3 emissions. However, in the CDP • Risks from scope 2 emissions are based and anticipated costs. The price of emis- no differentiation according to country is on the level of resource consumption. sions rights and the free-of-charge alloca- necessary, meaning that this adjustment The risk from CO2 emissions results tion or auctioning are critical factors here. can simply be ignored. It is also important from the changes in the regulatory con- In the literature there are various expecta- to note with scope 3 emissions to what

25 see also Lucas-Leclin, V./ Nahal, S./ Lannegrace, M.-G./ Ouaknine, Y.: CREAM-ing Carbon risk exposure, Equity research report, Société Générale, 2007, Carbon Trust, Climate Chance and Shareholder Value, 2006.

46 Analysis of the Answers of German Companies in the CDP6

extent the logistics and transport compa- Based on the current emissions data of 1–3 emissions determined using the nies, who in turn generate scope 1 emis- the companies within CDP6, a scenario approach described above and rated with sions through their services, can pass this for future risks from CO2 emissions can be prices. Column (6) then outlines the influ- on to the companies investigated with derived in the attached table. Assump- ence of emissions costs on EBIDTA regard to scope 3 emissions. And for tions are made here, in line with the plan- expected in 2013, based on the data scope 3 emissions there is also the ques- ning of the European Commission, that 60 available. tion of what proportion of the costs can percent26 (for energy providers 100 per- The particularly heavy weighting on the actually be passed on to the end cus- cent) of the emissions rights will have to side of the energy providers is striking. tomer (see formula 3). be won at auction from 2013 onwards. This is due to the fact that the planned assignment of emissions rights, which will Formula 3 take place entirely via auction, will lead to high costs – particularly with a CO2-inten- Current costs of scope 3 = scope 3 emissions price for 1 tonne CO2 sive energy mix. And EBITDA will also cost transfer factor for logistics companies cost transfer factor drop significantly in the field of transport and capital goods. Total emissions will be For planning purposes the level of Whether this would lead to an increase in predominantly made up of scope 1 emis- planned reduction in CO2 emissions by energy prices and thereby to indirect sions here too. These sectors are there- the companies is then subtracted from the emissions costs as per scope 2 and fore first and foremost exposed to regula- sum of emissions. scope 3 is a contentious issue, since the tory risks. It is also interesting that the emissions rights should already be fac- influence in all other sectors, with regard The following is an example of how these tored in as opportunity costs. This would to scope 2 and 3 emissions, is less signifi- calculations work. A company generates then lead solely to a reduction in profits cant. This is above all due to the fact that EBIDTA of 10,316 million Euro. The scope among energy providers, unlike changes the effects of scope 1 emissions in the 1 emissions come to 23,463,147 tonnes of to costs for emissions certificates, which sectors heavily affected by this are already CO2. The proportion of this in Annex B would lead to a change in prices. factored into the costs and/or can only be states is 89 percent. In future, only 40 per- passed on partially. In addition, the emis- cent of the emissions rights will be grant- The table shows the maximum variance in sions within scope 3 so far recorded are ed free-of-charge. The scope 2 emissions emissions for selected sectors in the year not satisfactory. Aggregate details regard- come to 4,050,202 tonnes of CO2. The 2013. The large variance is explained by ing the emissions in the added value chain proportion in the Annex B states is 68 per- the rather rough sector division. The start- and, above all, a company’s own products cent here. The energy providers can pass ing point is the emissions intensity, calcu- are few and far between. on 50 percent of the emissions costs to lated as CO2 emissions in tonnes with ref- the company. The total of scope 3 emis- erence to EBITDA in million Euro (column The model therefore takes a range of fac- sions comes to 28,190,000. The transport 2). These emissions costs are calculated tors into consideration which to date have companies can pass on 50 percent of taking into account the formula for current not been considered in analyses of CO2 their emissions to the company. The sum scope 1 costs (column 3). An assumption emissions. The key issue here is that the of emissions then comes to 55,703,349 is made here that the future price for level of total emissions does not tell the tonnes of CO2. Free-of-charge emissions emissions will be 50 Euro. A calculation is full story. The risks caused by direct rights are granted for 5,455,534 tonnes of performed to determine the difference rel- (scope 1) and indirect (scope 2) emissions CO2. An assumption is made that 50 per- ative to the former (current) emissions as well as cost transfers via the prices are cent of emissions costs can be trans- costs and the by what percentage this taken into account. The regional pattern of ferred. The goal is to lower CO2 emissions reduces EBITDA. how the costs occur is also incorporated. 4 percent by 2012. The current price for However, it is vital to note that assump- The formulae are used similarly for scope one tonne of CO2 is 25 Euro, although the tions regarding price trends and the trans- 2 and scope 3 costs. The total, modified price is expected to reach 50 Euro (see ferability of emissions costs have to be emissions costs result from the scope formula 4). made. Also, very little information has so

Formula 4 Influence EBIDTA = ((23,463,147 tonnes CO2 0.89 – 5,455,534 tonnes CO2 0.4) 50 Euro 10,316 million Euro + 4,050,202 tonnes CO2 0.68 0.5 25 Euro – 4,050,202 tonnes CO2 – 5,455,534 tonnes CO2 0.68 0.5 50 Euro 10,316 million Euro + 28,190,000 tonnes CO2 0.5 25 Euro – 4,050,202 tonnes CO2 0.5 50 Euro) 0.96 = 4.54% 10,316 million Euro

26 These values represent a conservative estimate, as the final decision of the EU Commission is still to be reached.

47 Carbon Disclorsure Project 2008

far been supplied by companies concerning the business risks due to the emissions of products and the added value chain. Yet this is one key area in which information is required, as this is the only way to assess risks to sales and reputation, which have a significant influence on EBITDA. A high degree of risk also makes investments necessary to reduce CO2 output. Translated into emissions costs, this would mean a further increase.

Table 8: Effect of emissions on success

Sector Emissions intensity Scope 1 Scope 2 Scope 3 Total emissions (tonnes CO2/Mio. emissions costs: emissions costs: emissions costs: emissions costs: EBITDA) influence EBITDA influence EBITDA influence EBITDA influence EBITDA in % in % in % in %

Automotive 89.3 to 1,160 0.00 to 0.01 0.09 to 0.42 0.00 to 0.05 0.15 to 0.9

Capital goods 3.7 to 16,795 0.00 to 12.80 0.00 to 0.45 0.00 to 0.48 0.02 to 13.26

Products for house- 110 to 1,120 0.04 to 0.46 0.03 to 0.11 0.00 to 0.23 0.08 to 0.80 hold cleaning and body care

Raw materials, consumables and 391 to 7,188 0.01 to 8.50 0.01 to 0.26 0.84 to 1.71 0.54 to 8.51 supplies

Transport 370 to 14,213 0.06 to 17.33 0.00 to 0.22 0.00 to 0.01 0.41 to 17.55

Energy providers 8,700 to 33,292 10.86 to 79.98 0.15 to 2.79 0.00 to 0.02 10.86 to 80.79

48 Analysis of the Answers of German Companies in the CDP6

49 5

Appendix

CDP 6 Questionnaire v Financial and Business Implica- down of the emissions reported tions: How do you assess the cur- under each category by country The CDP questionnaire has been devel- rent and/or future financial effects of where possible. If not, please pro- oped over six years through consultation the opportunities you have identified ceed to question 2b ii: with signatory investors, corporations and and how those opportunities might Scope 1 Direct GHG Emissions other stakeholders. The CDP6 question- affect your business? a. Total global Scope 1 activity in naire represents a best practice frame- metric tonnes CO -e emitted. work for the information companies 2 Greenhouse Gas (GHG) Emissions 2 b. Total Scope 1 activity in metric should measure and report regarding the Accounting tonnes CO -e emitted for Annex B impact of climate change on their busi- 2 Objective: To determine actual absolute countries. ness. Greenhouse Gas emissions. Scope 2 Indirect GHG Emissions 1 Risks and Opportunities The term GHG Protocol below refers to c. Total global Scope 2 activity in The Greenhouse Gas Protocol: A Corpo- metric tonnes CO -e emitted. Objective: To identify strategic risks 2 rate Accounting and Reporting Standard d. Total Scope 2 activity in metric and opportunities and their implica- (Revised Edition) developed by the World tonnes CO -e emitted for Annex B tions. 2 Resources Institute (WRI) and the World countries. a Risks (CDP5 Question 1a) Business Council for Sustainable Devel- Electricity consumption opment (WBCSD). This may be found on i Regulatory Risks: How is your com- e. Total global MWh of purchased the GHG Protocol Website pany exposed to regulatory risks electricity. www.ghgprotocol.org related to climate change? f. Total MWh of purchased electrici- a Accounting Parameters ty for Annex B countries. ii Physical Risks: How is your compa- (CDP5 Question 2a) g. Total global MWh of purchased ny exposed to physical risks from cli- electricity from renewable mate change? i Reporting Boundary: Please indi- sources. cate the category that best describes iii General Risks: How is your compa- h. Total MWh of purchased electrici- the company, entities or group for ny exposed to general risks as a ty from renewable sources for which your response is prepared: result of climate change? Annex B countries. a. Companies over which financial iv Risk Management: Has your com- ii If you are unable to detail your Scope control is exercised – per consoli- pany taken or planned action to 1 and Scope 2 GHG emissions dated audited Financial State- manage the general and regulatory and/or electricity consumption, ments. risks and/or adapt to the physical please report the GHG emissions risks you have identified? b. Companies over which operational you are able to identify together with control is exercised. a description of those emissions. v Financial and Business Implica- tions: How do you assess the cur- c. Companies in which an equity c Other Emissions – Scope 3 of GHG rent and/or future financial effects of share is held. Protocol: (CDP5 Question 2c) the risks you have identified and how d. Other (please provide details). How do you identify and/or measure those risks might affect your busi- Scope 3 emissions? Please provide ness? Please use the same approach for all where possible: answers. b Opportunities (CDP5 Question 1b) i Details of the most significant Scope ii Reporting Year: Please explicitly i Regulatory Opportunities: How do 3 sources for your company. state the dates of the accounting current or anticipated regulatory year or period for which GHG emis- ii Details in metric tonnes CO2-e of requirements on climate change offer sions are reported. GHG emissions in the following cate- opportunities for your company? gories: iii Methodology: Please specify the ii Physical Opportunities: How do methodology used by your company a. Employee business travel. current or anticipated physical to calculate GHG emissions. changes resulting from climate b. External distribution/logistics. change present opportunities for b Direct and Indirect Emissions – c. Use/disposal of company’s prod- your company? Scope 1 and 2 of the GHG Protocol ucts and services. (CDP5 Question 2b) iii General Opportunities: How does d. Company supply chain. climate change present general i Are you able to provide a breakdown opportunities for your company? of your direct and indirect emissions iii Details of the methodology you use under Scopes 1 and 2 of the GHG to quantify or estimate Scope 3 iv Maximizing Opportunities: Do you Protocol and to analyse your elec- emissions. invest in, or have plans to invest in tricity consumption? products and services that are designed to minimize or adapt to the If so, please provide the following effects of climate change? information together with a break-

51 Carbon Disclorsure Project 2008

d External Verification ii What is your company’s strategy for ii Please state your GHG emissions (CDP5 Question 2a iii) trading or participating in regional intensity in terms of total tonnes of and/or international trading schemes CO -e reported under Scope 1 and Has the information reported in 2 (eg: EU ETS, RGGI, CCX) and Kyoto Scope 2 per m US dollar turnover response to Questions 2b–c been mechanisms such as CDM and JI and EBITDA for the reporting year. externally verified or audited or do you projects? plan to have the information verified or iii Has your company developed emis- audited? h Energy Costs (CDP5 Question 4d) sions intensity targets? If so: If so: i Please identify the total costs in US i Please provide a copy of the audit or dollars of your energy consumption a. Please state your emissions inten- verification statement or state your eg from fossil fuels and electric sity targets. plans for verification. power. b. Please state what reductions in ii Please specify the Standard or Pro- ii What percentage of your total oper- emissions intensity have been tocol against which the information ating costs does this represent? achieved against targets and over has been or will be audited or veri- what time period. iii What percentage of energy costs are fied. incurred on energy from renewable If not, please explain why. e Data Accuracy (New to CDP6) sources? c Planning (CDP5 Question 4e) Does your company have a system in 3 Performance Do you forecast your company’s future place to assess the accuracy of GHG emissions and/or energy use? emissions inventory calculation meth- Objective: To determine performance If so: ods, data processes and other systems against targets and plans to reduce relating to GHG measurement? GHG emissions. i Please provide details of those fore- If so, please provide details. If not, casts, summarize the methodology a Reduction Plans please explain how data accuracy is used and the assumptions made. (CDP5 Questions 1d and 4a) managed. ii How do you factor the cost of future i Does your company have a GHG f Emissions History emissions into capital expenditure emissions reduction plan in place? (CDP5 Question 2a iv) planning? If so, please provide details along Do the emissions reported for your last with the information requested iii How have these considerations made accounting year vary significantly com- below. If there is currently no plan in an impact on your investment deci- pared to previous years? place, please explain why. sions? If so, please explain the reasons for the ii What is the baseline year for the variations. 4 Governance emissions reduction plan? g Emissions Trading Objective: To determine responsibility iii What are the emissions reduction (CDP5 Question 4b) and management approach to climate targets and over what period do change. i Does your company have facilities those targets extend? covered by the EU Emissions Trading a Responsibility (CDP5 Question 5a) iv What activities are you undertaking Scheme? to reduce your emissions eg: renew- Does a Board Committee or other If so: able energy, energy efficiency, executive body have overall responsi- a. Please provide details of the process modifications, offsets, bility for climate change? annual allowances awarded to sequestration etc? What targets have If not, please state how overall respon- your company in Phase I for each you set for each and over what sibility for climate change is managed. of the years from 1 January 2005 timescales do they extend? If so: to 31 December 2007 and details v What investment has been or will be i Which Board Committee or execu- of allowances allocated for Phase required to achieve the targets and tive body has overall responsibility II commencing on 1 January over what time period? for climate change? 2008. vi What emissions reductions and asso- ii What is the mechanism by which the b. Please provide details of actual ciated costs or savings have been Board or other executive body annual emissions from facilities achieved to date as a result of the reviews the company’s progress and covered by the EU ETS with effect plan? status regarding climate change? from 1 January 2005. b Emissions Intensity b Individual Performance c. What has been the impact on (CDP 5 Question 4c) (CDP5 Question 5b) your company’s profitability of the EU ETS? i What is the most appropriate meas- Do you assess or provide incentive urement of emissions intensity for mechanisms for individual management your company?

52 Appendix

of climate change issues including attainment of GHG targets? If so, please provide details. c Communications (New to CDP6) Please indicate whether you publish information about the risks and opportunities presented to your company by climate change, details of your GHG emissions and plans to reduce emissions through any of the following communications: i the company’s Annual Report or other statutory filings, and/or ii formal communications with shareholders or external parties, and/or iii voluntary communications such as Corporate Social Responsibility reporting. If so, please provide details and a link to the document(s) or a copy of the relevant excerpt. d Public Policy (New to CDP6) Do you engage with policymakers on possible responses to climate change including taxation, regulation and carbon trading? If so, please provide details.

53 Carbon Disclorsure Project 2008

Response of the 200 Largest Companies in Germany Note. Company names of organisation that answered the questionnaire have been highlighted

Name Sector CDP5 CDP6 Aareal Bank AG Banks No response No response Adidas AG Consumer Durables and Apparels Answered questionnaire Answered questionnaire ADLINK Internet Medien AG Software and Services No response No response Air Berlin plc Transportation Information provided No response Aixtron AG Semiconductors and Semiconductor Equipment Decline to participate Decline to participate Allianz SE Insurance Answered questionnaire Answered questionnaire Alstria Office Reit AG Commercial Services and Supplies Not in CDP5 No response Altana AG Materials Answered questionnaire Answered questionnaire AMB Generali Holding AG Insurance Decline to participate Answered questionnaire Andreae-Noris Zahn AG Retailing No response No response Arcandor AG Retailing Answered questionnaire Answered questionnaire ARQUES Industries AG Capital Goods No response Answered questionnaire Audi AG – see Volkswagen Automobiles and Components Answered questionnaire Answered questionnaire AWD Holding AG Diversified Financials Answered questionnaire No response AXA Konzern AG – see AXA Group Insurance Answered questionnaire Answered questionnaire Axel Springer AG Media Answered questionnaire Answered questionnaire Balda AG Capital Goods No response No response BASF SE Materials Answered questionnaire Answered questionnaire Bauer AG Capital Goods Information provided Information provided Bayer AG Materials Answered questionnaire Answered questionnaire Bayerische Hypo und Vereinsbank – Banks Answered questionnaire Answered questionnaire see UniCredit Group BayWa AG Capital Goods No response No response Bechtle AG Software and Services No response No response Beiersdorf AG Household and Personal Products Answered questionnaire Answered questionnaire Berlin-Hannoversche Hypothekenbank AG Banks Decline to participate No response BERU AG Automobiles and Components No response No response BHW Holding AG – see Deutsche Post Diversified Financials Answered questionnaire Answered questionnaire Bijou Brigitte modische Accessoires AG Consumer Durables and Apparels Decline to participate No response Bilfinger Berger AG Capital Goods Decline to participate No response BMW Bayerische Motorenwerke AG Automobiles and Components Answered questionnaire Answered questionnaire Carl Zeiss Meditec AG Healthcare Equipment and Services Answered questionnaire Answered questionnaire Celesio AG Retailing Answered questionnaire Answered questionnaire Centrotherm Photovoltaics AG Capital Goods Not in CDP5 No response Colonia Real Estate AG Commercial Services and Supplies Answered questionnaire Answered questionnaire ComBOTS AG Software and Services No response Decline to participate Comdirect bank AG Diversified Financials Answered questionnaire No response Commerzbank AG Banks Answered questionnaire Answered questionnaire CompuGroup Holding AG Software and Services Not in CDP5 No response Conergy AG Capital Goods No response No response Constantin Film AG Media Not in CDP5 No response Continental AG Automobiles and Components Decline to participate Decline to participate CropEnergies AG Capital Goods No response No response CTS EVENTIM AG Media Decline to participate No response Custodia Holding AG Diversified Financials Not in CDP5 No response D+S europe AG Media Decline to participate Answered questionnaire DAB bank AG Diversified Financials No response No response Daimler AG Automobiles and Components Answered questionnaire Answered questionnaire

54 Appendix

Name Sector CDP5 CDP6 DBV-Winterthur Holding AG – see AXA Group Insurance Answered questionnaire Answered questionnaire Demag Cranes AG Capital Goods Decline to participate No response Deutsche Bank AG Banks Answered questionnaire Answered questionnaire Deutsche Beteiligungs-AG Banks Decline to participate Answered questionnaire Deutsche Boerse AG Diversified Financials Answered questionnaire Answered questionnaire Deutsche EuroShop AG Real Estate Answered questionnaire Answered questionnaire Deutsche Hypothekenbank AG Banks No response No response Deutsche Lufthansa AG Transportation Answered questionnaire Answered questionnaire Deutsche Post AG Transportation Answered questionnaire Answered questionnaire Deutsche Postbank AG Banks Answered questionnaire Answered questionnaire Deutsche Telekom AG Telecommunication Service Answered questionnaire Answered questionnaire Deutsche Wohnen AG Commercial Services and Supplies Answered questionnaire No response DEUTZ AG Capital Goods No response Answered questionnaire DIC Asset AG Commercial Services and Supplies Decline to participate No response DIS Deutscher Industrie Service AG Capital Goods No response No response Douglas Holding AG Retailing No response No response Draegerwerk AG Healthcare Equipment and Services No response Decline to participate Duerr AG Capital Goods Decline to participate Answered questionnaire DVB Bank AG Banks Information provided Information provided Dyckerhoff AG - see Buzzi Unichem Capital Goods Answered questionnaire Answered questionnaire E.ON AG Utilities Answered questionnaire Answered questionnaire EADS Transportation Answered questionnaire Answered questionnaire Eisen- und Huettenwerke AG – Capital Goods Answered questionnaire Answered questionnaire see ThyssenKrupp ElringKlinger AG Automobiles and Components Answered questionnaire Answered questionnaire EnBW Energie Baden-Württemberg Utilities Answered questionnaire Answered questionnaire Envitec Biogas AG Capital Goods Not in CDP5 No response EPCOS AG Technology Hardware and Equipment Answered questionnaire Answered questionnaire ERGO Versicherungsgruppe AG – Insurance Answered questionnaire Answered questionnaire see Munich Re ErSol Solar Energy AG Capital Goods Answered questionnaire Answered questionnaire Escada AG Consumer Durables and Apparels Decline to participate No response Eurohypo AG Diversified Financials No response Answered questionnaire Fielmann AG Retailing No response No response Francotyp-Postalia Holding AG Capital Goods Answered questionnaire No response Fraport AG Transportation Answered questionnaire Answered questionnaire freenet.de AG Software and Services No response No response Fresenius AG Healthcare Equipment and Services Information provided Answered questionnaire Fresenius Medical Care KGaA Healthcare Equipment and Services Information provided Answered questionnaire FUCHS PETROLUB AG Materials Answered questionnaire Answered questionnaire GEA Group AG Capital Goods Answered questionnaire Answered questionnaire Gelsenwasser AG Utilities No response No response Gerresheimer AG Healthcare Equipment and Services Not in CDP5 Decline to participate GERRY WEBER INTERNATIONAL AG Consumer Durables and Apparels Information provided Information provided GfK Group Capital Goods Answered questionnaire Answered questionnaire GILDEMEISTER AG Capital Goods No response No response GRENKELEASING AG Diversified Financials Decline to participate Information provided H&R WASAG AG Materials No response Answered questionnaire Hamburger Hafen und Logistik AG Transportation Not in CDP5 Answered questionnaire Hannover Rueckversicherung AG Insurance Answered questionnaire Answered questionnaire HCI Capital AG Diversified Financials Answered questionnaire Answered questionnaire Heidelberg Cement AG Capital Goods Answered questionnaire Answered questionnaire Heidelberger Druckmaschinen AG Capital Goods Answered questionnaire Answered questionnaire

55 Carbon Disclorsure Project 2008

Name Sector CDP5 CDP6 Henkel KGaA Household and Personal Products Answered questionnaire Answered questionnaire HOCHTIEF AG Capital Goods Answered questionnaire Answered questionnaire Homag Group AG Capital Goods Not in CDP5 Decline to participate Hornbach Holding AG Retailing Answered questionnaire Answered questionnaire HUGO BOSS AG Consumer Durables and Apparels No response No response Hymer AG Retailing No response No response Hypo Real Estate Holding AG Diversified Financials Answered questionnaire Answered questionnaire IDS Scheer AG Software and Services Decline to participate Answered questionnaire IKB Deutsche Industriebank AG Banks No response No response INDUS Holding AG Capital Goods Decline to participate No response Infineon Technologies AG Semiconductors and Semiconductor Equipment Decline to participate Decline to participate Interhyp AG Diversified Financials Answered questionnaire Answered questionnaire INTERSEROH Aktiengesellschaft Materials Answered questionnaire Answered questionnaire zur Verwertung von Sekundärrohstoffen IVG Immobilien AG Real Estate Answered questionnaire Answered questionnaire Jenoptik AG Capital Goods Answered questionnaire Answered questionnaire Jungheinrich AG Capital Goods Decline to participate No response K + S AG Materials Answered questionnaire Answered questionnaire Klöckner-Werke AG Capital Goods No response No response Kloeckner + Co AG Capital Goods Not in CDP5 Decline to participate Koelnische Rückversicherungs-Gesellschaft AG Insurance No response No response Koenig & Bauer AG Capital Goods Answered questionnaire No response Kontron AG Technology Hardware and Equipment No response No response Krones AG Capital Goods Answered questionnaire Answered questionnaire KSB AG Capital Goods Decline to participate Answered questionnaire KUKA AG Capital Goods Not in CDP5 Answered questionnaire KWS SAAT AG Food Beverage and Tobacco Decline to participate No response Landesbank Berlin Holding AG Banks Decline to participate No response Lanxess AG Materials Answered questionnaire Answered questionnaire Lechwerke AG Utilities No response No response Leoni AG Automobiles and Components Decline to participate Answered questionnaire LHS AG Telecommunication Service Not in CDP5 Decline to participate Linde AG Capital Goods Answered questionnaire Answered questionnaire MAN AG Capital Goods Answered questionnaire Answered questionnaire Mannheimer AG Holding Insurance Decline to participate Decline to participate MEDION AG Retailing Answered questionnaire Answered questionnaire Merck KGaA Pharmaceuticals, Biotechnology and Life Sciences Decline to participate Answered questionnaire Metro AG Retailing Answered questionnaire Answered questionnaire MLP AG Diversified Financials Answered questionnaire Answered questionnaire MorphoSys AG Pharmaceuticals, Biotechnology and Life Sciences Answered questionnaire No response MPC Capital AG Diversified Financials Decline to participate No response MTU Aero Engines Holding AG Capital Goods Answered questionnaire Answered questionnaire Munich Re Insurance Answered questionnaire Answered questionnaire MVV Energie AG Utilities Answered questionnaire Answered questionnaire Norddeutsche Affinerie AG Materials Answered questionnaire Answered questionnaire Nordex AG Capital Goods Answered questionnaire Answered questionnaire Nürnberger Beteiligungs-AG Insurance No response No response Patrizia Immobilien AG Commercial Services and Supplies Decline to participate Decline to participate Pfeiffer Vacuum Technology AG Capital Goods Answered questionnaire Answered questionnaire Pfleiderer AG Capital Goods Answered questionnaire Answered questionnaire Pilkington Deutschland AG Capital Goods Decline to participate Decline to participate Porsche AG Automobiles and Components No response No response

56 Appendix

Name Sector CDP5 CDP6 Praktiker Bau- und Heimwerkermärkte AG Retailing Decline to participate Decline to participate Premiere AG Telecommunication Service Answered questionnaire Answered questionnaire ProSiebenSat.1 Medien AG Telecommunication Service No response Decline to participate Puma AG Consumer Durables and Apparels Answered questionnaire Answered questionnaire Q-Cells AG Capital Goods Answered questionnaire Answered questionnaire QSC AG Telecommunication Service Answered questionnaire No response Rational AG Capital Goods Answered questionnaire Answered questionnaire REpower Systems AG Utilities Answered questionnaire No response Rheinmetall AG Capital Goods No response No response Rhon Klinikum AG Healthcare Equipment and Services Answered questionnaire Answered questionnaire Rofin-Sinar Technologies Inc. Capital Goods Answered questionnaire Answered questionnaire RSE Grundbesitz und Beteiligungs-AG Diversified Financials No response No response RWE Utilities Answered questionnaire Answered questionnaire Saint-Gobain Oberland AG – see Saint-Gobain Materials Answered questionnaire Answered questionnaire Salzgitter AG Stahl und Technologie Materials Decline to participate No response SAP AG Software and Services Answered questionnaire Answered questionnaire Sartorius AG Capital Goods No response Decline to participate SCA Hygiene Products AG – Household and Personal Products No response Answered questionnaire see SCA AB (Sweden) Schering AG – see Bayer Pharmaceuticals, Biotechnology and Life Sciences Answered questionnaire Answered questionnaire Schwarz Pharma AG Pharmaceuticals, Biotechnology and Life Sciences Answered questionnaire Decline to participate SGL Carbon AG Materials No response No response Siemens AG Technology Hardware and Equipment Answered questionnaire Answered questionnaire Sixt AG Transportation No response No response Software AG Software and Services Answered questionnaire Answered questionnaire SolarWorld AG Capital Goods Answered questionnaire Answered questionnaire Solon AG Capital Goods Not in CDP5 No response Stada Arzneimittel AG Pharmaceuticals, Biotechnology and Life Sciences Decline to participate No response Stinag Stuttgart Invest AG Diversified Financials No response No response Strabag AG Capital Goods No response No response Südzucker AG Mannheim/Ochsenfurt Food Beverage and Tobacco Decline to participate No response SURTECO AG Consumer Services Decline to participate Answered questionnaire Symrise AG Materials Answered questionnaire Answered questionnaire TAKKT AG Retailing Answered questionnaire Answered questionnaire Techem AG Capital Goods No response No response Telegate AG Telecommunication Service No response No response ThyssenKrupp AG Capital Goods Answered questionnaire Answered questionnaire Tognum AG Capital Goods Not in CDP5 Decline to participate TUI AG Real Estate Answered questionnaire Answered questionnaire United Internet AG Software and Services Decline to participate No response Vattenfall Group Utilities Answered questionnaire Answered questionnaire Versatel AG Telecommunication Service Not in CDP5 No response Vivacon AG Real Estate Not in CDP5 Answered questionnaire Volkswagen Automobiles and Components Answered questionnaire Answered questionnaire Vossloh AG Capital Goods Answered questionnaire Answered questionnaire VTG AG Transportation Not in CDP5 Answered questionnaire Wacker Chemie AG Materials Answered questionnaire Answered questionnaire Wella AG – see Proctor & Gamble Consumer Services Answered questionnaire Answered questionnaire Wincor Nixdorf AG Technology Hardware and Equipment Answered questionnaire Answered questionnaire Wirecard AG Software and Services No response No response Wüstenrot & Württembergische AG Diversified Financials No response Decline to participate Zhongde Waste Technology AG Consumer Services Not in CDP5 No response

57 Carbon Disclorsure Project 2008

“CDP extends its sincere thanks The most important In some of the emerging economies where to all of our partners and spon- CDP has recently expanded such as Asia, trends from the other China and India there are significant chal- sors around the world for their lenges caused by: lack of familiarity with help in making the CDP process regional and sector- CDP amongst companies new to the a global success.” based CDP reports process, language and cultural barriers and a lack of regulation on climate change Paul Dickinson which all contribute to a lower response Chief Executive, The sixth iteration of the Carbon Disclo- rates from these regions. CDP is working Carbon Disclosure Project sure Project saw even greater coverage closely with its global partners to over- than in previous years, with information come these barriers. being requested from over 3,000 compa- The increasing media focus on climate nies worldwide. change and the regulatory and policy In 2008 CDP was expanded to cover 21 changes in many countries is increasing geographical samples (up from 16 in the pressure on corporations to consider 2007) and 2 sector samples (Electric Utili- what climate change means for their busi- ties and Transport). New geographical ness. Compared to CDP5 there has been expansions in 2008 include China, Korea, a sharp increase across nearly all samples Latin America, the Netherlands, and in the percentage of companies address- Spain. The corporations’ responses and ing climate change at board level. Espe- reports analysing findings from these cially notable is the increase in board samples will be posted on the CDP web- members taking responsibility for climate site as they are launched worldwide. change. In the FTSE 100 this has risen Please see www.cdproject.net for further from 53 % (48) to 89 % (80) of responding details. companies and in the FTSE 250 there has been an increase from 24 % (35) to 84 % Response rates across the vast majority (121). For meaningful corporate change to of samples are above 50 % with an aver- occur, it must come from the board room, age rate of 55 %; the highest being the and these trends imply that awareness is FTSE 100 reporting a 90 % (90 compa- likely to lead to action. nies) response rate. The Brazil 75 came a close second with 83 % (60) of companies While the increased focus on climate answering the questionnaire compared to change can be attributed to a variety of the Global 500 which saw 77 % (383) of factors, companies are increasingly com- companies answer the questionnaire. menting on the specific risks and opportu- Responses from S&P 500 companies nities driving new management plans. improved significantly: up from 56 % (282) Both regulatory and physical risks factor in 2007 to 64 % (321) this year. This heavily into corporate strategy, as can be increase sends a positive message from seen in the key trends table. The Australia corporate America, signalling that compa- 200, Electric Utilities 250, FTSE 100, nies are preparing for the inevitable car- Japan 150 and Spain 35 expansions are bon-constrained economy. particularly attuned to potential risks from climate change. There has been an overall increase in response rates in ten of the samples com- The results show a significant increase in pared to CDP5; Asia, Brazil, Canada, the percentage of responding companies Electric Utility, France, Germany, Italy, that have GHG emissions reductions New Zealand, S&P 500 and Transport. The plans. Especially notable are the Nordic Global 500, FTSE 100/250 and Japan 150 190 sample’s increase: from 23 % (19) to samples reported similar response rates 62 % (68) of responding companies who to last year. India was also similar in terms have reduction plans, and the FTSE 100’s of absolute responses but declined overall progress from 41% (37) to 81% (73) when due to a doubling of the sample size. Four compared to CDP5. While this increase in further samples reported an increase in attention to climate change targets is a the absolute numbers of responses but an positive step, there is still a need for for- overall percentage decrease because the mal verification of emissions figures and sample size was expanded this year; Aus- reductions. This will become fundamental tralia 200, Nordic 190, South Africa 100 as further regulation comes into force and and the Switzerland 100. the price for carbon globalizes. Given the significant increase in companies making reduction plans we anticipate

58 Appendix

that in the coming years there may be a Figure 16: CDP6 Response by Figure 17: CDP5 Response by subsequent uptake in companies verifying Sample* Sample* their emissions data.

While the China 100 sample answered Australia 200 (201***) 48% Answered Questionnaire Aust/NZ 150 (141) 50% Answered Questionnaire questionnaire rate was lowest, it can still 96 728 70 70 6 20 45 be interpreted positively. 2008 was the Asia 80 (80) 35% Answered Questionnaire Asia 80 (77) 19% Answered Questionnaire first time the China 100 was asked to 28 2 32 18 15 4 44 14 respond to the CDP information request. A variety of factors, including language, Brazil 75 (72) 83% Answered Questionnaire Brazil 60 (57) 82% Answered Questionnaire cultural differences and a lack of historical 60 11 1 47 2 7 1 requirements on Chinese companies to Canada 200 (187) 55% Answered Questionnaire Canada 200 (194) 47% Answered Questionnaire measure and report climate change infor- 103 7 30 47 91 2 58 43 mation made the initial approach chal- Electric Utility 250 (250) 52% Answered Questionnaire Electric Utility (240) 47% Answered Questionnaire lenging. However the fact that 5% of Chi- 131 1513 91 113 16 16 95 nese companies answered the question- France 120 (120) 63% Answered Questionnaire France 120 (120) 56% Answered Questionnaire naire and a further 18% provided informa- 76 10 6 28 67 3 10 40 tion is a promising start and it is likely that the number of responses will grow in the FTSE 100 (100) 90% Answered Questionnaire FTSE 100 (100) 91% Answered Questionnaire future as CDP develops a presence in 90 13 6 91 12 6 China. FTSE 250 (250) 58% Answered Questionnaire FTSE 250 (250) 59% Answered Questionnaire 144 26 37 43 148 18 37 47 Germany 200 (200) 55% Answered Questionnaire Germany 200 (200) 52% Answered Questionnaire 109 4 18 69 104 7 35 54 Global 500 (500) 77% Answered Questionnaire Global 500 (500) 77% Answered Questionnaire 383 11 27 79 383 16 39 62 India 200 (200)19% Answered Questionnaire India 110 (110) 35% Answered Questionnaire 39 15 155 38 2 70 Italy 40 (39) 46% Answered Questionnaire Italy 40 (40) 45% Answered Questionnaire 18 4 17 18 11 20 Japan 150 (152) 72% Answered Questionnaire Japan 150 (151) 74% Answered Questionnaire 110 14 37 112 3 4 32 Nordic 190 (188) 58% Answered Questionnaire Nordic 125 (125) 68% Answered Questionnaire 109 3 40 36 86 6 21 12 South Africa 100 (98) 58% Answered Questionnaire South Africa 40 (38) 68% Answered Questionnaire 58 18 28 26 1 3 8 Switzerland 100 (96) 57% Answered Questionnaire Switzerland 50 (50) 78% Answered Questionnaire 54 23 19 39 5 6 S&P USA 500 (500) 64% Answered Questionnaire S&P USA 500 (500) 56% Answered Questionnaire 321 22 64 93 282 25 76 117 Transport 100 (100) 58% Answered Questionnaire Transport 100 (100) 47% Answered Questionnaire 58 4 4 34 47 8 12 33 China 100 (100) 5% Answered Questionnaire 51817 60 0 20 40 60 80 100% Korea 50 (50) 32% Answered Questionnaire 16 27 7 Sample (number of companies) Latin America 40 (38) 52% Answered Questionnaire Answered questionnaire 20 11 16 Provided information Declined to participate Netherlands 50 (50) 52% Answered Questionnaire No response * Response rates calculated at 31 July 2008; 26 3 8 13 numbers may differ from local report that calcu- New Zealand 50**** (50) 50% Answered Questionnaire lated response rates before or after this date. 25 2 3 20 ** Response rate as published in CDP5 Report. *** The first listing is the official sample name, the Spain 35 (35) 71% Answered Questionnaire number in brackets is the actual number of 25 1 9 companies that were included in CDP6 for that sample. **** New Zealand is included as an individual sam- 0 20 40 60 80 100% ple for the first time, having previously been combined with Australia.

59 Carbon Disclorsure Project 2008

Table 9: Global Partners of CDP6* Country/Expansion Partner Web Address

Asia ex-Japan Association for Sustainable and Responsible Investment in Asia (ASrIA) www.asria.org

Australia & New Zealand Investor Group on Climate Change Australia/New Zealand (IGCC) www.igcc.org.au

Brazil Brazilian Association of Pension Funds (ABRAPP) & Banco Real www.abrapp.org.br www.bancoreal.com.br

Brazil Brazil Facilitation Team: Fabrica Ethica Brasil www.fabricaethica.com.br

Canada The Conference Board of Canada www.conferenceboard.ca

China China Facilitation Team: SynTao www.syntao.com

France AXA www.axa.com

Germany BVI Bundesverband Investment und Asset Management e.V. & WWF Germany www.bvi.de www.wwf.de

India WWF India www.wwfindia.org

Korea Korea Sustainability Investing Forum (KoSIF), Eco-Frontier & ASrIA www.kosif.org www.ecofrontier.co.kr www.asria.org

Latin America Brazilian Institute of Investor Relations (IBRI) www.ibri.org.br

Latin America Latin America Facilitation Team: Fabrica Ethica Brasil www.fabricaethica.com.br

Netherlands VROM (The Dutch Ministry of Housing, Spatial Planning and the Environment) www.vrom.nl

Nordic ATP, Folksam, KLP & Nutek (Swedish Agency for Economic and Regional Growth) www.atp.dk www.folksam.se www.klp.no www.nutek.se

South Africa National Business Initiative (NBI) www.nbi.org.za

Spain Ecodes www.ecodes.org

Switzerland Ethos/Pictet Asset Management www.ethosfund.ch www.pictet.com

* All other samples are managed by CDP directly.

60 Appendix

Table 10: International Key Trends Number of % of companies that % of companies % of companies that see % of companies that see responses analyzed* see regulatory risks that see physical risks regulatory opportunities physical opportunities

Asia 80 28 71 79 79 71 Australia 200 94 84 82 82 61 Brazil 75 47 49 77 83 57 Canada 200 90 70 63 78 58 China 100 3 33 33 33 33 Electric Utilities 250 109 88 77 86 62 France 120 71 60 52 79 56 FTSE 100 88 81 76 80 65 FTSE 250 125 71 66 75 61 Germany 200 109 51 46 68 40 Global 500 384 74 74 80 62 India 200 27 33 70 82 52 Italy 40 17 71 77 82 65 Japan 150 104 90 82 79 64 Korea 50 15 67 93 100 60 Latin America 40 15 73 73 80 60 Netherlands 50 26 64 68 84 52 New Zealand 50 25 72 64 80 60 Nordic 190 109 72 61 81 57 S&P 500 318 60 64 70 50 South Africa 100 53 76 89 85 64 Spain 35 25 84 68 80 56 Switzerland 100 53 45 49 59 45 Transport 100 59 80 81 75 51

% of responding % of responding com- % of responding % of companies that % of companies companies that panies that had their companies that have have a Board Committee engaged/considering disclosed GHG GHG emissions data a GHG emissions responsible for CC participation in emissions data externally verified reduction plan emissions trading**

Asia 80 57 36 54 68 18 Australia 200 78 39 49 73 17 Brazil 75 49 19 43 60 21 Canada 200 70 28 46 72 18 China 100 0 0 66 33 33 Electric Utilities 250 70 57 60 75 46 France 120 75 56 75 69 42 FTSE 100 91 71 81 89 41 FTSE 250 65 35 50 84 14 Germany 200 51 3 50 68 33 Global 500 80 57 74 80 35 India 200 41 19 52 52 23 Italy 40 77 65 53 59 53 Japan 150 95 50 90 94 43 Korea 50 67 13 60 80 40 Latin America 40 73 33 47 73 53 Netherlands 50 84 68 64 76 36 New Zealand 50 60 40 48 56 8 Nordic 190 71 42 61 80 28 S&P 500 67 35 53 64 22 South Africa 100 79 30 45 81 21 Spain 35 96 80 76 84 40 Switzerland 100 64 34 53 68 17 Transport 100 71 46 70 85 24

* calculated on 31 July 2008, the number does not include those companies which refer to a parent or subsidiary company response ** based on their approaches to both EU ETS and other regional and optional emissions trading and offset schemes

61 Carbon Disclorsure Project 2008

Key to abbreviations

CAPM: Capital Asset Pricing Model CDLI: Carbon Disclosure Leadership Index CDM: Clean Development Mechanism CDSB: Carbon Disclosure Standards Board CEO: Chief Executive Officer COO: Chief Operating Officer CORE: COrporate REsponses CSR: Corporate Social Responsibility DCF: Discounted Cashflow EBITDA: Earnings Before Interest, Tax, Depreciation, Amortisation ETS: Emissions Trading System GEMIS: Global Emission Model for Integrated Systems GRI: Global Reporting Initiative IIGCC: Institutional Group on Climate Change IPCC: International Panel on Climate Change JI: Joint Implementation NAP: National Allocation Plan NOPLAT: Net Operating Profit Less Adjusted Taxes R&D: Research and Development ROIC: Return on Invested Capital TEHG: German Greenhouse Gas Emission Entitlements Trading Act GHG: Greenhouse Gas WACC: Weighted Average Cost of Capital WBCSD: World Business Council for Sustainable Development WRI: World Resources Institute