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December 06, 2011
Largest South African Companies are Responding to Climate Change but Need to do More
by Robert Kropp
With the COP17 climate change conference occurring in South Africa, EIRIS analyzes the climate
change performance of the 40 largest companies listed on the Johannesburg Stock Exchange.
Representatives from more than 190 of the world's governments are currently meeting at the COP17 climate change conference in
Durban, South Africa. Like most of the continent, South Africa is highly vulnerable to the effects
of climate change, and since 2009 the nation's government has been implementing mitigation
strategies, which include a National Climate Change Response Policy.
Speaking at COP17,
Environment Minister Edna Molewa said that negotiations should "pave the way for a comprehensive
multilateral, rules-based climate regime."
One South African organization that has
been instrumental in addressing climate change and other sustainability issues is the Johannesburg Stock Exchange (JSE). Since last
year, the exchange has mandated that its more than 450 companies produce integrated reports, in
which environmental, social, and corporate governance (ESG) information is included in corporate
The JSE recently commissioned EIRIS, the investment research firm, to assess the corporate
responses to climate change of the 40 largest companies listed on the exchange. EIRIS published its
EIRIS noted "encouraging signs of progress" among the companies, finding that 95%
of them "demonstrate at least some form of response to climate change." Seventy-five percent of
companies successfully address eleven key indicators measuring performance in the areas of
governance, strategy, and disclosure.
In addition, 95% of companies are disclosing
absolute CO2 emissions, and 85% are disclosing normalized emissions. According to the Climate Disclosure Standards Board (CDSB),
normalized emissions, or emissions intensity, refer to "the ratio of GHGs (greenhouse gases)
produced to a financial measure or a measure of activity."
However, while 60% of companies
have set short-term GHG emissions targets, only 23% have set long-term targets, EIRIS found,
"leaving considerable room for improvement."
Furthermore, only 30% of the companies have
reduced their operational GHG emissions over the past two years.
"Overall South African
companies are responding to climate change risks," EIRIS concluded. "JSE Top 40 companies should
expand their management of climate change risks beyond climate change mitigation to also include
adaptation strategies. Companies should also consider the climate change impacts arising from their
EIRIS recommended that investors "engage with companies on climate change
and to encourage them to link board/senior management remuneration to climate change mitigation
targets, establish long-term GHG emissions reduction targets and quantitative climate change
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