Investment, transformation and leadership CDP S&P 500 Climate Change Report 2013 On behalf of 722 investors representing US$87 trillion in assets Report written for CDP by PwC The evolution of CDP CDP announced an exciting change this year. Over ten years ago CDP pioneered the only global disclosure system for companies to report their environmental impacts and strategies to investors. In that time, and with your support, CDP has accelerated climate change and natural resource issues to the boardroom and has moved beyond the corporate world to engage with cities and governments. The CDP platform has evolved significantly, supporting multinational purchasers to build more sustainable supply chains. It enables cities around the world to exchange information, take best practice action and build climate resilience. We assess the climate performance of companies and drive improvements through shareholder engagement. Our offering to the global marketplace has expanded to cover a wider spectrum of the earth’s natural capital, specifically water and forests, alongside carbon, energy and climate. For these reasons, we have outgrown our former name of the Carbon Disclosure Project and rebranded to CDP. Many of you already know and refer to us in this way. Our rebrand denotes our progress as we continue to catalyze action and respond to business, finance, investment and environmental needs globally. We now have a look and logo that reflect the scale of the work we must undertake in the coming years to move the markets ahead of where they would otherwise be on these issues and realize truly sustainable economies. Over 5,000 companies from all over the world have been asked to report on climate change through CDP this year; 81% of the world’s 500 largest public companies listed on the FTSE Global 500 engage with CDP to enable effective measurement of their carbon footprint and climate change action; CDP is a not-for-profit organization. If you would like to support our vital work through donations or sponsorship opportunities, please email [email protected] or telephone +1 212 378 2086. 01 Contents 02 Heather Zichal 40 Sector overview Deputy Assistant to President Obama 41 Leadership: A sector perspective 03 CEO foreword 42 Consumer Discretionary 04 Executive summary 46 Consumer Staples 06 Criteria for 2013 leaders 50 Energy 08 Disclosure leaders 54 Financials 09 Performance leaders 58 Health Care 10 Investor commentary 62 Industrials 11 CDP North America perspective 66 Information Technology 70 Materials 12 Value creation: Investing to cut 74 Telecommunications Services carbon emissions 78 Utilities 14 Emissions and progress through a sector lens 82 Appendixes 17 Commitments to reduce emissions 83 Appendix I: Table of scores, emissions, 18 Investments to reduce emissions and company detail by sector 90 Appendix II: Other responding companies 22 Business transformation: Preparing 91 Appendix III: Investor members for the impacts of climate change 92 Appendix IV: Investor signatories 24 Management focus on risks and opportunities 29 Assessing business transformation 30 Institutionalizing change 31 PwC commentary 32 Next-generation leadership: Addressing global climate change through multidimensional engagement 34 Measuring and managing Scope 3 emissions 37 Engaging on policy Measurement of emissions used throughout the report: 38 Orchestrating innovation and partnership 1 gigaton (Gt) CO²e = 1,000,000,000 metric tons CO²e 1 megaton (Mt) CO²e = 1,000,000 metric tons CO²e Important Notice The contents of this report may be used by anyone providing acknowledgement is given to Carbon Disclosure Project (CDP). This does not represent a license 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 CDP 2013 climate change information request. 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 any of its contributors is 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 posi- tion 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. ‘Carbon Disclosure Project’ and ‘CDP’ refer to Carbon Disclosure Project, a special project of Rockefeller Philanthropy Advisors. © 2013 Carbon Disclosure Project. All rights reserved. 02 Heather Zichal Deputy Assistant to President Obama for Energy and Climate double renewable energy and set the The same has been true for the busi- toughest fuel economy standards in nesses, both large and small, that I American history. have met with to discuss the presi- dent’s Climate Action Plan. For them, Even as we take these new steps, we the case for action on climate change must also prepare for the impacts of couldn’t be clearer. By reducing a changing climate that are already emissions and investing in efficiency, being felt across the country. Whether they have improved their competitive- we are fixing the infrastructure we ness and reduced uncertainty. They already have or building the new roads are shifting to cleaner, homegrown and bridges that will keep our country energy. They know that making their competitive, we need to do so in a way infrastructure more secure against that makes our communities more climate change will only make them resilient. Going forward, we will team more resilient down the road. Com- up with state and local governments panies have been hard at work on If there is one thing I have learned over to strengthen our roads, bridges, and this for years, and they’ve just been the past few years, it’s that America shorelines so we can better protect waiting for us to catch up. It makes responds well to a challenge. The chal- people’s homes, businesses, and sense for their businesses, for their lenge of climate change has come to ways of life from severe weather. the forefront for our communities and stockholders, and for the planet. Finally, the president’s climate plan businesses as they responded to se- That’s why I am glad to provide a fore- also calls on America to lead interna- vere weather, rising energy prices, and word to CDP. The companies featured tional efforts to combat global climate air pollution. But, while some in Wash- in this report are taking the kinds of change. Above all, it is imperative for ington waited, the rest of the country steps the president outlined in his cli- the United States to couple action at mate plan, showing that environmental home with leadership internationally. protection and economic growth President Obama showed his leader- are not at odds. What’s more, the re- ship in Copenhagen in 2009, and we sponding S&P 500 companies include saw it this year as we reached historic some of the most innovative business- The companies featured in this report are agreements with China and the G-20 es in the US, and represent about 30% taking the kinds of steps the president to combat global warming from HFC of our total national emissions. These outlined in his climate plan, showing that emissions. The world looks to us for companies know they have a stake leadership on climate change, and we environmental protection and economic in responding to climate change, and will deliver both at home and abroad. growth are not at odds. they aren’t afraid to lead. This kind of Every day, I have opportunities to disclosure lets investors, markets, and meet with leaders from across the customers know that their companies country, and what’s struck me is are addressing the risks of climate how ahead of the curve they are. change and taking steps to reduce Whether it is 1,000 mayors signing emissions, increase efficiency, and accepted the challenge, and decided agreements to cut carbon pollution, improve the bottom line. to tackle it head-on. This summer, or city councils encouraging energy Ultimately, these steps are about President Obama has made it clear efficiency in our homes and factories, building our future. A future where that we have an obligation to leave our they understand that the threat of America is more energy-secure and children a planet that’s not polluted or climate change is real and they are our communities and businesses are damaged, and he took action by laying taking action. Nearly a dozen states safe from the worst effects of climate out a Climate Action Plan. have already implemented or are im- change.