UK Companies and the Global Environmental Challenge
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01 Leadership now: UK companies and the global environmental challenge CDP 2014 UK Corporate Environmental Report 02 03 Contents CEO foreword 4 Investor foreword 5 Executive summary 6 2014 UK climate change CPLI and CDLI 8 Key themes and highlights of 2014 responses 12 Appendix I: Investor members 25 Appendix II: Responding companies 26 Appendix III: Responding FTSE SmallCap climate change companies 29 Appendix IV: Non-responding climate change companies 30 Appendix V: Building on climate change leadership: Natural capital 31 Appendix VII: References 32 Appendix VI: Mind the Science, Mind the Gap 33 Important Notice The contents of this report may be used by anyone providing acknowledgement is given to CDP. This does not represent a licence to repackage or resell any of the data reported to CDP or the contributing authors and presented in this report. If you intend to repackage or resell any of the contents of this report, you need to obtain express permission from CDP before doing so. CDP has prepared the data and analysis in this report based on responses to the 2014 climate change, forests and water information requests. No representation or warranty (express or implied) is given by CDP or any of its contributors as to the accuracy or completeness of the information and opinions contained in this report. You should not act upon the information contained in this publication without obtaining specific professional advice. To the extent permitted by law, CDP and its contributors do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this report or for any decision based on it. All information and views expressed herein by CDP and its contributors are based on their judgment at the time of this report and are subject to change without notice due to economic, political, industry and firm-specific factors. Guest commentaries where included in this report reflect the views of their respective authors; their inclusion is not an endorsement of them. CDP and its contributors, their affiliated member firms or companies, or their respective shareholders, members, partners, principals, directors, officers and/or employees, may have a position in the securities of the companies discussed herein. The securities of the companies mentioned in this document may not be eligible for sale in some states or countries, nor suitable for all types of investors; their value and the income they produce may fluctuate and/or be adversely affected by exchange rates. ‘CDP’ refers to CDP Worldwide, a United Kingdom company limited by guarantee, registered as a United Kingdom charity number 1122330. © 2014 CDP Worldwide. All rights reserved. 04 05 CEO foreword Investor foreword One irrefutable fact is fi ltering There is wind in the sails of the through to companies and stranded assets argument. investors: the bottom line is at risk from environmental crisis. The global economy has bounced back from crisis and a cautious The anti-climax that was the Conference of the Parties interconnectedness is recognised in the format of optimism is beginning to pervade the markets. As we embrace recovery in Copenhagen in 2009 marked the beginning of a the CDP UK corporate environmental report 2014, period when the energy and will for action on climate which for the fi rst time includes company responses we must remember that greenhouse gas emissions continue to rise change was debilitated by understandable short- on water and forests, respectively. I’m pleased that and we face steep financial risk if we do not mitigate them. term worries over the global recession. Now that the 71% of the FTSE 350 has responded to CDP’s climate recession appears to be receding, we are getting back change information request and that more companies The unprecedented environmental challenges that we There is growing momentum on the policy front with a sense of opportunity, and a will – judging by President are looking at water and products associated with confront today—reducing greenhouse gas emissions, President Obama’s announcement of new federal rules Obama’s rear-guard action on regulating emissions in deforestation in their supply chain. Even so, the safeguarding water resources and preventing the to limit greenhouse gases in the US. In the EU, some the US and China’s planned action on pollution and standard of reporting and of planning is highly variable, destruction of forests—are also economic problems. 6,000 companies will be required to disclose on specifi c energy security – to have another go. even amid sectors most commonly associated with these risks. One irrefutable fact is fi ltering through to companies environmental, social and governance criteria as part There is wind in the sails of the stranded assets and investors: the bottom line is at risk from of their mainstream reporting to investors. In China argument, with even well-known City columnists for the At Royal London Asset Management, we are also environmental crisis. over 20,000 companies will be required to report their Financial Times and The Telegraph lending support. As trying to come to terms with what these issues mean greenhouse gas emissions to the government. The impact of climate events on economies around the Martin Wolf put it, the risk to investors “cannot be zero.” for our investments. Some of the long-dated debt we world has increasingly been splashed across headlines There is a palpable sea change in approach by Some hope a catalyst will be the Conference of the own is fi nancing climate-sensitive assets out to the in the last year, with the worst winter in 30 years companies driven by a growing recognition that Parties in Paris in 2015 (COP21), billed as the successor 2060s, for example. CDP has done the world a service suffered by the USA costing billions of dollars. Australia there is a cost associated with the carbon they emit. to Copenhagen – only hopefully better organised and by providing pressure and some consistency in how has experienced its hottest two years on record and Measurement, transparency and accountability with meaningful, binding targets. companies and cities report their risks, opportunities and actions on climate, water and forests. Still, I have the UK has had its wettest winter for hundreds of years drives positive change in the world of business Free market thinking argues that the tortured the sense that markets still don’t know what to do with costing the insurance industry over a billion pounds. and investment. Our experience working with over negotiations are a sideshow, but nil desperandum: this information, if they even know it’s there. We can Over three quarters of companies reporting to CDP this 4,500 companies shows the multitude of benefi ts for technology disruption may achieve what global but hope that, as momentum returns to the debate, year have disclosed a physical risk from climate change. companies that report their environmental impacts, regulation never could. Some sell-side commentators a strong price for carbon emerges and action on Investing in climate change–related resilience planning unveiling risks and previously unseen opportunities. are beginning to say the unsayable: that the dominance water and forests accelerates, these reports provide has become crucial for all corporations. and longevity of the oil economy are not assured. We are standing at a juncture in history. With the a rich seam of insight for those seeking to identify the They say the penetration of low-cost solar, likely Investor engagement on these issues is increasing. prospect of a global climate deal coming from the companies that will still be around in the 2050s having improvements in battery storage and electric vehicles In the US a record number of shareholder resolutions in United Nations process, governments, cities, the private adapted to a defi ning phenomenon of our time. the 2014 proxy season led 20 international corporations sector and civil society have a great opportunity to take are threatening to undermine the economic case for to commit to reduce greenhouse gas emissions or bold actions and build momentum in the run up to the dragging expensive and often risky marginal barrels sustainably source palm oil. Paris 2015 meeting. The decisions we make today can of oil and gas from the earth. Coal is taking a bruising lead us to a profi table and secure future. A future that at least in part thanks to regulation and the US shale As mainstream investors begin to recognize the real we can all be proud of. gas revolution, which is of course not without its own value at risk, we are seeing more action from some issues. of the 767 investors who request disclosure through Robert Talbut CDP’s climate change programme. The Norwegian And there is greater recognition of the energy-water- Chief Investment Offi cer pension fund, Norges Bank, with assets worth resources nexus. More desalination requires more Royal London Asset Management over US$800 billion, expects companies to show energy and emissions. Increasing yields in some crops strategies for climate change risk mitigation and water Paul Simpson through irrigation or expansion of agricultural areas management, and have divested from both timber and Chief Executive Offi cer, CDP may not be an option because of supply shortages, palm oil companies that did not meet their standards. the impact of deforestation, confl icts and so on. This 06 07 Executive summary The planet faces ever-growing pressure from the To help drive consensus and action toward an budgets; the Timber Procurement Policy11 to ensure demands of a rapidly increasing human population and agreement at COP21, CDP has launched CDP Road to the legality and sustainability of sourcing, as well as its myriad, often unpredictable impacts on every aspect Paris 2015, which invites businesses to commit to a set the Government’s commitment to sustainable palm oil of the natural environment.