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September 21, 2005
Third Carbon Disclosure Project Survey Finds Increasing Action on Climate Change
by William Baue
CDP3, now sponsored by 155 institutional investors with more than $21 trillion in assets, also
reveals some significant footdragging by the Financial Times 500 companies.
Last week, the Carbon Disclosure Project (CDP) released the results of its third survey (called CDP3) of how Financial Times 500 (FT500) companies are
responding to climate change. The survey revealed heightened activity in many areas compared to
the second survey (2004's CDP2). For example, response to the survey increased to 70 percent, up
from 59 percent in CDP2, and the number of companies flagging climate change as a risk as well as
an opportunity doubled from 45 percent in CDP2 to 90 percent in CDP3. CDP signatories have
significantly increased from CDP2, when 95 institutional investors representing $10 trillion in
assets signed on, to 155 signatories with $21 trillion in assets in CDP3.
Street is waking up to climate change risks and opportunities," said CDP Chair James Cameron.
"Considerably more of the world's largest corporations are getting a handle on what climate change
means for their business and what they need to do to capture opportunities and mitigate risks."
"This all points to a continued elevation of climate change as a critical shareholder
value issue for investors," Mr. Cameron added.
Since CDP2, heavyweight institutions such
as the California Public Employees Retirement System (CalPERS--the largest US public pension fund) and the
California State Teachers Retirement System (CalSTRS--the third largest) have come onboard CDP.
The past year has also seen companies coming around on the issue of climate change. For
example, Cinergy (ticker: CIN), which is merging with Duke
answered a shareholder resolution by issuing a report on its responses to climate
change, as well as including stakeholder interviews on climate change in its 2004 annual report.
world is warming, and human activities have contributed to that warming--what the impacts will be I
don't think we yet fully understand," said Jim Rogers, CEO of Cinergy and CEO designate of Duke, at
a press conference for the release of CDP3. "Paul Anderson, the Duke Energy chairman, has been out
there talking about a carbon tax--now, I tend to go more in the direction of cap and trade, but the
thing that we share the most is the notion that we will live in a carbon constrained world in the
Both carbon taxes and emissions trading are market based tools for effecting
carbon emissions reductions. Carbon taxes are "price-based" policy instruments that set a fixed
cost on carbon emissions to increase price as a means of decreasing demand. Emissions trading, on
the other hand, sets a fixed amount of total carbon emissions, thus allowing trading to set a
market value on emissions so that they can be traded as an incentive for reduction. Examples of
emissions trading are the Chicago Climate Exchange (CCX) and the European Union Greenhouse Gas Emission
Trading Scheme (EU ETS).
advocates simplicity ("simple is good, simple is practical") in government responses to carbon
"I want Congress to deal with greenhouse gases now for practical reasons," he
stated, implying that doing so would level the playing field between first movers and laggards.
"As a practical Midwesterner--with a Kentucky accent, of course--I need to know now what
environmental requirements we need to meet, and when we need to meet them."
conference, UK Secretary of State for Environment, Food, and Rural Affairs (DEFRA) Margaret Beckett said that she is very optimistic that
the world is beginning to understand the implications of global climate change. "Slow, peak,
reverse" is the trend she sees in climate change mitigation. She applauded investors for asking
companies to disclose information on their responses to climate change.
investment power that encourages businesses to take action," she said.
CDP3 finds evidence
of some action. For example, 86 percent of the 354 responding FT500 companies reported allocating
management responsibility for climate change, and 80 percent disclosed emissions data. Almost
two-thirds of respondents (63 percent) are taking steps to assess their climate risk and institute
strategies to reduce emissions of greenhouse gases (GHGs), the primary pollutants associated with
On the other hand, CDP3 also reveals significant inaction when it comes to
actually implementing changes. While just over half of the FT500 reported GHG emissions in CDP3,
less than 50 FT500 companies made GHG emissions reductions in the last year. A little over half
(51 percent) of respondents have implemented emissions reduction programs, and less than half (45
percent) have established emission reduction targets. And only about a third (34 percent) have
taken early action in emissions trading.
CDP3 recognized a number of "best-in-class"
companies "Climate Leadership Index." This list includes industrial conglomerate General Electric
(GE), Duke, and
American Electric Power (AEP) in the utilities sector,
Citigroup (C) in
finance, Bristol-Myers Squibb (BMY) in pharmaceuticals, Ford (F) in autos, and UPS
(UPS) in the
transport and logistics sector.
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