CDP Studies: Growth of Sustainability and Profitability

The findings of two reports released on September 23rd, demonstrates more convincingly than ever before the increase in corporate environmental action and the bottom line benefits of such action. These reports were released by CDP, PwC and Sustainable Insight Capital Management, Inc. (SICM) in the wake of the CDP’s annual analysis of S&P 500 companies’ efforts to reduce and respond to climate change. The two new studies demonstrate that CDP leaders who incorporate environmental factors into their business strategies are mitigating climate related risks, finding opportunities to strengthen their businesses and delivering higher profitability than their industry peers.


CDP S&P 500 Climate Change Report

According to CDP’s President, North America, Tom Carnac, “The release of today’s report findings show the link between climate change management and superior financial performance is building. These two studies validate that relationship by exhibiting how companies incorporating environmental stewardship into their business model and investment decision making process can gain strength and protect their competitive advantage.”

The CDP S&P 500 Climate Change Report, provides an annual update on greenhouse gas emissions data and climate change strategies at America’s largest public corporations. CDP’s disclosure request were sent out to 722 investors representing $87 trillion. In 2013 a total of 77 percent of respondents (258 companies) reported an increase in climate change exposure, up from 61 percent in 2012. According to the report, S&P 500 companies leading on climate change action have doubled in number demonstrating the significance of incorporating climate change risks and opportunities into their overall business strategy. The report indicates that superior environmental disclosure is linked to financial performance. The report indicates that extreme weather represents the area of highest-impact.

Other key findings in the report:

· Senior level leadership at 100 percent of leading CDP S&P 500 companies have board or executive level oversight for climate change strategy

· S&P 500 companies reported $4 billion in monetary savings from their investments in emissions reductions, including product design innovations ($1.2 billion), energy efficiency processes ($991 million), and changes to their transportation fleet and use ($709 million)

· This year, there is a 22 percent increase to 68 percent in the number of responding companies able to communicate the link between investments and emissions reductions.

· S&P 500 companies investing on average over four percent of annual capital expenditure in emissions reductions, representing $50 billion worth of investments on a range of emissions reduction activities and energy-saving processes. The energy sector leads with a reported $27.3 billion invested, followed by utilities with $13.7 billion invested. Greenhouse gas emissions were reported to have been reduced on aggregate by 6.1%.

· S&P 500 companies reported $4 billion in monetary savings from their investments in emissions reductions, including product design innovations ($1.2 billion), energy efficiency processes ($991 million), and changes to their transportation fleet and use ($709 million).

· Twenty companies generated 85 percent ($3.5 billion) of the monetary savings reported by all the respondents and twenty companies accounted for nearly 90 percent of the carbon emissions reductions. The seven companies who overlap both of these lists are Ameren Corporation, AT&T, Dell, Exelon Corporation, Northeast Utilities, Wal-Mart Stores, Inc. and Waste Management.

· Companies from the S&P 500 on the 2013 Climate Performance Leadership Index (CPLI)[1] more than doubled in number from 2012, demonstrating the significance of incorporating climate change risks and opportunities into their overall business strategy.

PwC SBS partner Doug Kangos added that the results of the 2013 report indicate a turning point in the corporate response to climate change. “The overarching story is business transformation. Leading companies are innovating to create value on many levels while demonstrating increasing sophistication and confidence in addressing the risks and opportunities associated with climate destabilization,” Kangos said.

Linking Climate Engagement to Financial Performance: An Investor’s Perspective

The complementary report covering the Global 500 is called Linking Climate Engagement to Financial Performance: An Investor’s Perspective and was co-written by CDP and SICM. It shows that superior transparency on climate engagement is associated with higher financial performance. This analysis is one of the most extensive studies
demonstrating the link between corporate profitability and climate
change engagement.

The analysis is based on the CDP disclosure scores of 702 companies covered in CDP’s Global 500 climate change reports from 2008 to 2012. The analysis shows that industry leaders provide a higher return on equity (+5.2%), more stable cash flow generation (+18.1%) and higher dividend growth (+1.6%).

Industry leaders are taking critical steps to address environmental factors and they are generating superior profitability, cash flow stability and dividend growth for investors in the process. In sum this report shows that the strategic management of climate change risks is on the increase and this is providing improved financial performance.

© 2013, Richard Matthews. All rights reserved.

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The CDP’s 2013 Top Fourteen US Companies (Disclosure and Performance)
CDP Global Climate Change Leaders 2013: Top 12 Companies According to Both CPLI and CDLI

CDP Global 500 Climate Disclosure Leadership Index 2013
CDP Global 500 Climate Performance Leadership Index 2013