Euro 300 companies 'need clear and ambitious energy and climate policy'

European companies are benefiting from taking action on climate change, see strong climate policy benefiting their businesses, and are seeking climate policy signals to support low carbon investment. So finds analysis released today (15 October) by CDP, an international NGO that drives sustainable economies. The research is published in The A List: The CDP Climate Performance Leadership Index 2014, which was created at the request of 767 investors who represent more than a third of the world’s invested capital, and in a policy briefing: Investment and Growth from Climate Action, produced to support the EU 2030 Climate and Energy Package.

Many of Europe’s largest listed companies see benefits from a strong EU 2030 climate and energy package. Data examined by CDP includes climate disclosures from 91% of the Euro 300 companies, Europe’s 300 largest listed companies that have a market capitalization of €7.81 trillion, representing 68% of total EU market capitalization. These companies constitute the engine-house of EU prosperity and do not favour further delay or a wait-and-see approach for emissions reductions at an EU level.

“Climate policy debates in Brussels have recently tended to pitch climate action against industrial competitiveness,” said CDP Europe Managing Director Steven Tebbe. “Our research presents an alternative narrative of green growth and clearly demonstrates the need for a balanced policy debate at the European level. It is evident that there is a significant number of large listed companies that look forward to future growth and competitiveness under an ambitious regulatory environment.”

To identify global leaders on climate change, information provided by nearly 2,000 listed companies has been independently assessed against CDP’s widely respected scoring methodology and ranked accordingly. 187, including BMW AG, Centrica, Royal Philips and Unilever, have been awarded an A grade for their performance and a position on the first global ranking of corporate efforts to mitigate climate change: The A List: The Climate Performance Leadership Index (CPLI).

The index demonstrates that a low carbon future does not mean low profit. Collectively, the climate performance leaders have reduced their total (absolute) emissions by 33 million tonnes in the past reporting year, equivalent to turning Berlin’s car owners into cyclists for six years.  The index of climate leaders outperformed the Bloomberg World Index over a four year period since 2010, with an increase of 37.53% compared to 34.24%.

An A List leader will:

Yield win-win results

The investments of companies on the Climate Performance Leadership Index (CPLI) 2014 to reduce carbon output yield average annual emissions reductions of 9% per company and achieve impressive financial results, with an average internal rate of return (IRR) of 57% for each project.  'A Lister' Iberdrola, the electric utility company, discloses an investment of US$3.8 billion in energy monitoring and distributions systems to cut its emissions by 50,000 metric tons.  Car manufacturer General Motors implemented route redesigns, mode changes from road to rail, and other measures that have resulted in emissions savings of 244,000 tonnes a year and cost savings of US$287 million.

Apply a business lens to climate change

A List leaders demonstrate robust accountability for their contribution to climate change and have a heightened understanding of the business implications as a result.  Although 96% disclose that climate change poses a risk to their business, 99% identify opportunities through mitigation strategies.  Construction group Samsung C&T Corporation, for example, has assessed that responding to consumer demand for green products can increase its sales profits by at least 9% within the next seven years.

Raise the bar on investment

The A List represents just 9% of the 1,971 companies scored this year but accounts for US$23 billion of the annual investment to reduce carbon emissions, which is just under half of the US$50 billion invested by the full sample.  Leaders go beyond the easy-to-achieve approach of energy efficiency.  Spanish industrial technology firm Abengoa saves US$911 million annually having diversified its energy supply by installing two solar power plants.

Shift away from short-termism

Projects to reduce emissions have an average life span of 12 years, which demonstrates a willingness for some long-term investing.  Targets to reduce emissions tend not to go beyond 2016/17, which suggests a lack of long term strategy to meet the global carbon budget.  Ambition must be raised to realize the longer-term transition to sustainable economies.  Policy is cited by leaders as a risk and opportunity in almost equal measure.  It is likely that a lack of clear long-term policy is stalling corporate progress toward ambitious long-term targets.  Companies and their trade associations should therefore engage more with governments to influence national polices that will unlock the full potential of business to decrease greenhouse gases worldwide.

Take a global approach to leadership

Three quarters (78%) of the A List engages with policy makers on climate change, versus just under half (49%) of the remaining pack.  Companies such as AstraZeneca, the British-Swedish pharmaceutical giant, goes one step further and promotes industry best practice through national and international trade associations in addition to key government and international agency stakeholders.

Paul Simpson, chief executive officer of CDP, said: “The bottom line is at risk from the climate crisis.  The unprecedented environmental challenges that we confront today are also economic problems.  This irrefutable fact is filtering through to companies and investors.The businesses that have made it onto our first ever global list of climate performance leaders are to be congratulated for their progress; they myth-bust economic arguments against reducing emissions.  However, global emissions continue to rise at an alarming rate.  Businesses and governments must raise their climate ambition. The data shows that there is neither an excuse nor the time for lethargy.”

Almost half of the performance leaders are headquartered in Europe, with a further third located in USA or Japan.  More than a quarter of the Spanish and Belgian companies that took part in CDP’s climate change program were awarded an A, proportionally giving Spain and Belgium the most leaders. Portugal, the Netherlands and South Korea have also performed well in this regard.

The A List: CDP Climate Performance Leadership Index 2014 along with the EU policy briefing Investment and Growth from Climate Action are available on CDP’s website.

About CDP

CDP is an international, not-for-profit organization providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information.  CDP works with market forces, including 767 institutional investors with assets of US$92 trillion, to motivate companies to disclose their impacts on the environment and natural resources and take action to reduce them.  CDP now holds the largest collection globally of primary climate change, water and forest risk commodities information and puts these insights at the heart of strategic business, investment and policy decisions.  Visit their website or follow at @CDP to find out more.

Share this article: