Do investors care about carbon footprints?

The Carbon Disclosure Project’s annual report on Canada is a good source for reliable information on how climate change is impacting Canadian businesses.

The CDP—which provides a framework for corporations around the world to disclose greenhouse gas emissions and reduction strategies—sent its 2011 questionnaire to 200 of Canada’s largest companies. Over 100 responded, representing $1.2 trillion in market capitalization.

“Understanding the opportunities that lie ahead in a carbon- reduced economy will bring considerable value to those that have the foresight to make this goal a priority today,” says Zoe Tcholak-Antitch, director, CDP North America. “This report provides a window into how the largest public companies in Canada are managing carbon and addressing climate change.”

The results of the study reveal climate change is providing commercial opportunities for Canadian business. Fifty-four percent of respondents indicated they were providing products and services to aid third parties in reducing greenhouse gas emissions.

In addition, respondents noted communicating about climate friendly practices and emission reducing activities could increase brand value.

In its response, Bank of Montreal said “measuring, managing and setting reductions to reduce our climate impacts as well as being transparent about our climate change policies and practices could potentially improve our reputation with stakeholders.”

THE RESULTS

• Nearly 75% of respondents reported integrating climate change into their business strategies.
• Over one-third of companies have set active greenhouse gas reduction targets and close to 30% reported having dedicated budgets for energy efficiency or emission-reduction activities.
• Over 85% of respondents say they are disclosing climate change and greenhouse gas emissions via annual reports or other voluntary communications.

Eighty-one of the 108 company responses are publicly available on the CDP’s website, cdproject.net.

Tcholak-Antitch says the investment community uses the information contained in CDP reports to get a better sense of how well prepared the companies in their portfolios are to deal with the ongoing impacts of climate change.

More than 500 institutional investors have signed on to the CDP, including the Canada Pension Plan Investment Board. “Initiatives like the CDP are important catalysts to encourage companies to assess and disclose the potential impact of environmental factors such as climate change,” the CPPIB said in an e-mail. “The CDP data is considered in our investment decisions and contributes to activities such as communicating our views to companies, regulators and industry associations regarding gaps in disclosure.”

Advisors and investors can use the information in the CDP report to identify corporate leaders on climate change issues. “It’s a huge resource of self-reported information straight from the companies,” says Tcholak-Antitch.

ESG (environmental, social and governance) research firm Sustainalytics makes extensive use of the CDP database, says chief operating officer Bob Mann.

“It informs our overall rating of a company, on issues like disclosure, targets and performance,” he says. The data are also used in Sustainalytics’ engagement reports. In fact, CDP information is commonly used to assist in engagement, says Tcholak-Antitch. “This would take the form of investors identifying companies that have either not responded to the CDP or provided a poor-quality response. They would then encourage them to disclose their climate change risk and opportunity to get a better sense of where they sit compared to their peers.”

The CDP report includes the Carbon Disclosure Leadership Index, a list of 20 companies that scored the highest on the quality and comprehensiveness of their responses to the survey.

“Companies scoring high are fairly good disclosers,” says Tcholak-Antitch. “You could assume they have a pretty good grasp on how climate change is impacting their business.”

Mann says he sees a strong correlation between companies in the leadership index and those that are strong ESG reporters in a more general sense. As examples, he points to Suncor and Cenovus, CDP sector leaders in energy and utilities which are also two of Sustainalytics’ highest overall ESG performing companies.

Doug Watt is an Ottawa-based writer and editor.