CDP Europe 300 Report 2011 Carbon Materiality

Transcription

1 CDP Europe 300 Report 2011 Carbon Materiality On behalf of 551 investors with assets of US$71 trillion report written by: report sponsor: Carbon Disclosure Project +44 (0)

2 2011 Carbon Disclosure Project Investor Members CDP works with investors globally to advance the investment opportunities and reduce the risks posed by climate change by asking almost 6,000 of the world s largest companies to report on their climate strategies, GHG emissions and energy use in the standardised Investor CDP format. To learn more about CDP s member offering and becoming a member, please contact us or visit the CDP Investor Member section at ABRAPP - Associação Brasileira das Entidades Fechadas de Previdência Complementar AEGON N.V. AKBANK T.A.S. Allianz Global Investors Kapitalanlagegesellschaft mbh ATP Group Aviva Investors Bank of America Merrill Lynch BlackRock BP Investment Management Limited California Public Employees Retirement System California State Teachers Retirement System Calvert Asset Management Company, Inc. Catholic Super CCLA Investment Management Ltd Ethos Foundation Generation Investment Management HSBC Holdings plc ING KB Kookmin Bank KLP Legg Mason, Inc. London Pensions Fund Authority Mitsubishi UFJ Financial Group (MUFG) Morgan Stanley National Australia Bank NEI Investments Neuberger Berman Newton Investment Management Limited Nordea Investment Management PFA Pension Raiffeisen Schweiz Royal Bank of Scotland Group Robeco Rockefeller & Co., Inc. SAM Group Schroders Scottish Widows Investment Partnership SEB Sompo Japan Insurance Inc. Standard Chartered Sun Life Financial Inc. TD Asset Management Inc. and TDAM USA Inc. The Wellcome Trust Zurich Cantonal Bank 2

3 2011 Carbon Disclosure Project Investor Signatories Carbon Disclosure Project financial institutions with assets of US$71 trillion were signatories to the CDP 2011 information request dated February 1st, 2011 Aberdeen Asset Managers Aberdeen Immobilien KAG mbh ABRAPP - Associação Brasileira das Entidades Fechadas de Previdência Complementar Active Earth Investment Management Acuity Investment Management Addenda Capital Inc. Advanced Investment Partners Advantage Asset Managers (Pty) Ltd AEGON Magyarország Befektetési Alapkezelo Zrt. AEGON N.V. AEGON-INDUSTRIAL Fund Management Co., Ltd AFP Integra AIG Asset Management Ak Asset Management AKBANK T.A.S. Alberta Investment Management Corporation (AIMCo) Alberta Teachers Retirement Fund Alcyone Finance Allianz Elementar Versicherungs-AG Allianz Group Altira Group Amalgamated Bank AMP Capital Investors AmpegaGerling Investment GmbH Amundi AM ANBIMA Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais Antera Gestão de Recursos S.A. APG Group Aprionis Aquila Capital ARIA (Australian Reward Investment Alliance) Arisaig Partners Asia Pte Ltd ARK Investment Advisors Inc. Arma Portföy Yönetimi A.S. ASB Community Trust ASM Administradora de Recursos S.A. ASN Bank Assicurazioni Generali Spa ATP Group Australia and New Zealand Banking Group Limited Australian Central Credit Union incorporating Savings & Loans Credit Union Australian Ethical Investment Limited AustralianSuper Aviva Aviva Investors AXA Group Baillie Gifford & Co. Bakers Investment Group (Australia) Pty Ltd Banco Bradesco S/A Banco de Credito del Peru BCP Banco de Galicia y Buenos Aires S.A. Banco do Brasil S/A Banco Nacional de Desenvolvimento Econômico e Social - BNDES Banco Santander Banesprev Fundo Banespa de Seguridade Social Banesto (Banco Español de Crédito S.A.) Bank of America Merrill Lynch Bank of Montreal Bank Sarasin & Cie AG Bank Vontobel Bankhaus Schelhammer & Schattera Kapitalanlagegesellschaft m.b.h. BANKINTER S.A. BankInvest Banque Degroof Barclays Baumann and Partners S.A. BAWAG P.S.K. INVEST GmbH Bayern LB BayernInvest Kapitalanlagegesellschaft mbh BBC Pension Trust Ltd BBVA Bedfordshire Pension Fund Bentall Kennedy Beutel Goodman and Co. Ltd BioFinance Administração de Recursos de Terceiros Ltda BlackRock Blumenthal Foundation BNP Paribas Investment Partners BNY Mellon BNY Mellon Service Kapitalanlage Gesellschaft Boston Common Asset Management, LLC BP Investment Management Limited Brasilprev Seguros e Previdência S/A. British Columbia Investment Management Corporation (bcimc) BT Investment Management Busan Bank CAAT Pension Plan Cadiz Holdings Limited Caisse de dépôt et placement du Québec Caisse des Dépôts Caixa Beneficente dos Empregados da Companhia Siderurgica Nacional - CBS Caixa de Previdência dos Funcionários do Banco do Nordeste do Brasil (CAPEF) Caixa Econômica Federal Caixa Geral de Depositos Caja de Ahorros de Valencia, Castellón y Valencia, BANCAJA Caja Navarra California Public Employees Retirement System California State Teachers Retirement System California State Treasurer Calvert Asset Management Company, Inc Canada Pension Plan Investment Board Canadian Friends Service Committee (Quakers) Canadian Imperial Bank of Commerce (CIBC) CAPESESP Capital Innovations, LLC CARE Super Pty Ltd Carlson Investment Management Carmignac Gestion Catherine Donnelly Foundation Catholic Super Cbus Superannuation Fund CCLA Investment Management Ltd Celeste Funds Management Limited Central Finance Board of the Methodist Church Ceres Christian Super Christopher Reynolds Foundation Church Commissioners for England Church of England Pensions Board CI Mutual Funds Signature Global Advisors Clean Yield Group, Inc. Cleantech Invest AG ClearBridge Advisors Climate Change Capital Group Ltd CM-CIC Asset Management Colonial First State Global Asset Management Comerica Incorporated Comite syndical national de retraite Bâtirente Commerzbank AG CommInsure Commonwealth Bank of Australia Compton Foundation, Inc. Concordia Versicherungsgruppe Connecticut Retirement Plans and Trust Funds Co-operative Financial Services (CFS) Corston-Smith Asset Management Sdn. Bhd. CRD Analytics Crédit Agricole Credit Suisse Gruppo Credito Valtellinese Daegu Bank Daiwa Securities Group Inc. de Pury Pictet Turrettini & Cie S.A. DekaBank Deutsche Girozentrale Deutsche Asset Management Investmentgesellschaft mbh Deutsche Bank AG Deutsche Postbank Vermögensmanagement S.A. Development Bank of Japan Inc. Development Bank of the Philippines (DBP) Dexia Asset Management Dexus Property Group DnB NOR ASA Domini Social Investments LLC Dongbu Insurance DWS Investment GmbH Earth Capital Partners LLP East Sussex Pension Fund Ecclesiastical Investment Management Ecofi Investissements - Groupe Credit Cooperatif Edward W. Hazen Foundation EEA Group Ltd Elan Capital Partners Element Investment Managers ELETRA - Fundação Celg de Seguros e Previdência Environment Agency Active Pension fund Epworth Investment Management Equilibrium Capital Group Erste Asset Management Erste Group Bank Essex Investment Management Company, LLC ESSSuper Ethos Foundation Eureko B.V. Eurizon Capital SGR Evangelical Lutheran Church in Canada Pension Plan for Clergy and Lay Workers Evli Bank Plc F&C Management Ltd FAELCE Fundacao Coelce de Seguridade Social FAPERS- Fundação Assistencial e Previdenciária da Extensão Rural do Rio Grande do Sul FASERN - Fundação COSERN de Previdência Complementar Fédéris Gestion d Actifs FIDURA Capital Consult GmbH FIM Asset Management Ltd FIPECq - Fundação de Previdência Complementar dos Empregados e Servidores da FINEP, do IPEA, do CNPq FIRA. - Banco de Mexico First Affirmative Financial Network, LLC First Swedish National Pension Fund (AP1) Firstrand Limited Five Oceans Asset Management Pty Limited Florida State Board of Administration (SBA) Folketrygdfondet Folksam Fondaction CSN Fondation de Luxembourg Fondiaria-SAI Fonds de Réserve pour les Retraites FRR Fourth Swedish National Pension Fund (AP4) FRANKFURT-TRUST Investment-Gesellschaft mbh Fukoku Capital Management Inc FUNCEF - Fundação dos Economiários Federais Fundação AMPLA de Seguridade Social - Brasiletros Fundação Atlântico de Seguridade Social Fundação Attilio Francisco Xavier Fontana Fundação Banrisul de Seguridade Social Fundação de Assistência e Previdência Social do BNDES - FAPES FUNDAÇÃO ELETROBRÁS DE SEGURIDADE SOCIAL - ELETROS Fundação Forluminas de Seguridade Social - FORLUZ FUNDAÇÃO ITAUBANCO Fundação Itaúsa Industrial Fundação Promon de Previdência Social Fundação Vale do Rio Doce de Seguridade Social - VALIA Fundação Rede Ferroviaria de Seguridade Social Refer Fundação Sistel de Seguridade Social (Sistel) FUNDIÁGUA - FUNDAÇÃO DE PREVIDENCIA COMPLEMENTAR DA CAESB Futuregrowth Asset Management Gartmore Investment Management Ltd GEAP Fundação de Seguridade Social Generali Deutschland Holding AG Generation Investment Management Genus Capital Management Gjensidige Forsikring ASA GLS Gemeinschaftsbank eg 3

4 Carbon Disclosure Project 2011 Global 500 Report Goldman Sachs Group Inc. GOOD GROWTH INSTITUT für globale Vermögensentwicklung mbh Governance for Owners Government Employees Pension Fund ( GEPF ), Republic of South Africa Green Cay Asset Management Green Century Capital Management Groupe Crédit Coopératif Groupe Investissement Responsable Inc. GROUPE OFI AM Grupo Banco Popular Grupo Santander Brasil Gruppo Credito Valtellinese Gruppo Montepaschi Guardian Ethical Management Inc Guardians of New Zealand Superannuation Guosen Securities Co., LTD. Hang Seng Bank Harbourmaster Capital Harrington Investments, Inc Hauck & Aufhäuser Asset Management GmbH Hazel Capital LLP HDFC Bank Ltd Health Super Fund Healthcare of Ontario Pension Plan (HOOPP) Henderson Global Investors Hermes Fund Managers HESTA Super HSBC Global Asset Management (Deutschland) GmbH HSBC Holdings plc HSBC INKA Internationale Kapitalanlagegesellschaft mbh Hyundai Marine & Fire Insurance. Co., Ltd. Hyundai Securities Co., Ltd. Ibgeana Society of Assistance and Security SIAS / Sociedade Ibgeana de Assistência e Seguridade (SIAS) IDBI Bank Ltd Ilmarinen Mutual Pension Insurance Company Impax Group plc IndusInd Bank Limited Industrial Bank (A) Industrial Bank of Korea Industry Funds Management Infrastructure Development Finance Company ING Insight Investment Management (Global) Ltd Instituto de Seguridade Social dos Correios e Telégrafos- Postalis Instituto Infraero de Seguridade Social - INFRAPREV Instituto Sebrae De Seguridade Social - SEBRAEPREV Insurance Australia Group Investec Asset Management Irish Life Investment Managers Itau Asset Management Itaú Unibanco Holding S A Janus Capital Group Inc. Jarislowsky Fraser Limited JPMorgan Chase & Co. Jubitz Family Foundation Jupiter Asset Management Kaiser Ritter Partner (Schweiz) AG KB asset Management KB Kookmin Bank KBC Asset Management NV KDB Asset Management Co., Ltd. KEPLER-FONDS Kapitalanlagegesellschaft m. b. H. KfW Bankengruppe KlimaINVEST KLP Korea Investment Management Co., Ltd. The Korea Teachers Pension (KTP) Korea Technology Finance Corporation (KOTEC) KPA Pension La Banque Postale Asset Management La Financiere Responsable Lampe Asset Management GmbH Landsorganisationen i Sverige LBBW - Landesbank Baden-Württemberg LBBW Asset Management Investmentgesellschaft mbh LD Lønmodtagernes Dyrtidsfond Legal & General Investment Management Legg Mason, Inc. LGT Capital Management Ltd. LIG Insurance Co., Ltd Light Green Advisors, LLC Living Planet Fund Management Company S.A. Local Authority Pension Fund Forum Local Government Super Local Super Lombard Odier Darier Hentsch & Cie London Pensions Fund Authority Lothian Pension Fund Lupus alpha Asset Management GmbH Macif Gestion Macquarie Group Limited MAMA Sustainable Incubation AG Man Maple-Brown Abbott Limited Marc J. Lane Investment Management, Inc. Maryland State Treasurer Matrix Asset Management McLean Budden MEAG MUNICH ERGO Asset Management GmbH Meeschaert Gestion Privée Meiji Yasuda Life Insurance Company Mendesprev Sociedade Previdenciária Merck Family Fund Meritas Mutual Funds MetallRente GmbH Metrus Instituto de Seguridade Social Metzler Investment Gmbh MFS Investment Management Midas International Asset Management Miller/Howard Investments Mirae Asset Global Investments Co. Ltd. Mirae Asset Securities Co., Ltd. Missionary Oblates of Mary Immaculate Mistra, Foundation for Strategic Environmental Research Mitsubishi UFJ Financial Group (MUFG) Mizuho Financial Group, Inc. Mn Services Monega Kapitalanlagegesellschaft mbh Morgan Stanley Motor Trades Association of Australia Superannuation Fund Pty Ltd Mutual Insurance Company Pension-Fennia Natcan Investment Management Nathan Cummings Foundation, The National Australia Bank National Bank of Canada National Grid Electricity Group of the Electricity Supply Pension Scheme National Grid UK Pension Scheme National Pensions Reserve Fund of Ireland National Union of Public and General Employees (NUPGE) NATIXIS Nedbank Limited Needmor Fund NEI Investments Nelson Capital Management, LLC Nest Sammelstiftung Neuberger Berman New Amsterdam Partners LLC New Mexico State Treasurer New York City Employees Retirement System New York City Teachers Retirement System New York State Common Retirement Fund (NYSCRF) New Zealand Earthquake Commission Newton Investment Management Limited NGS Super NH-CA Asset Management Nikko Asset Management Co., Ltd. Nikko Cordial Securities Nissay Asset Management Corporation NORD/LB Kapitalanlagegesellschaft AG Nordea Investment Management Norfolk Pension Fund Norges Bank Investment Management (NBIM) North Carolina Retirement System Northern Ireland Local Government Officers Superannuation Committee (NILGOSC) Northern Trust Nykredit Oddo & Cie OECO Capital Lebensversicherung AG Old Mutual plc OMERS Administration Corporation Ontario Teachers Pension Plan OP Fund Management Company Ltd Oppenheim Fonds Trust GmbH Opplysningsvesenets fond (The Norwegian Church Endowment) OPSEU Pension Trust Oregon State Treasurer Orion Asset Management LLC Parnassus Investments Pax World Funds Pensioenfonds Vervoer Pension Denmark Pension Fund for Danish Lawyers and Economists Pension Protection Fund Pensionsmyndigheten PETROS - The Fundação Petrobras de Seguridade Social PFA Pension PGGM Phillips, Hager & North Investment Management Ltd. PhiTrust Active Investors Phoenix Asset Management Inc. Pictet Asset Management SA PKA Pluris Sustainable Investments SA PNC Financial Services Group, Inc. Pohjola Asset Management Ltd Portfolio 21 Investments Porto Seguro S.A. PREVHAB PREVIDÊNCIA COMPLEMENTAR PREVI Caixa de Previdência dos Funcionários do Banco do Brasil PREVIG Sociedade de Previdência Complementar Provinzial Rheinland Holding Prudential Investment Management Psagot Investment House Ltd PSP Investments PSS - Seguridade Social Q Capital Partners Co. Ltd QBE Insurance Group Rabobank Raiffeisen Schweiz Railpen Investments Rathbones / Rathbone Greenbank Investments Real Grandeza Fundação de Previdência e Assistência Social Rei Super Reliance Capital Ltd Resolution Resona Bank, Limited Reynders McVeigh Capital Management RLAM Robeco Rockefeller Financial Rose Foundation for Communities and the Environment Royal Bank of Canada Royal Bank of Scotland Group RREEF Investment GmbH SAM Group SAMPENSION KP LIVSFORSIKRING A/S SAMSUNG FIRE & MARINE INSURANCE Samsung Securities Sanlam Santa Fé Portfolios Ltda SAS Trustee Corporation Sauren Finanzdienstleistungen GmbH & Co. KG Schroders Scotiabank Scottish Widows Investment Partnership SEB SEB Asset Management AG Second Swedish National Pension Fund (AP2) SEIU Master Trust Seligson & Co Fund Management Plc Sentinel Investments SERPROS - Fundo Multipatrocinado Seventh Swedish National Pension Fund (AP7) Shinhan Bank Shinhan BNP Paribas Investment Trust Management Co., Ltd Shinkin Asset Management Co., Ltd 4

5 CDP Signatories Siemens Kapitalanlagegesellschaft mbh Signet Capital Management Ltd SMBC Friend Securities Co., LTD Smith Pierce, LLC SNS Asset Management Social(k) Sociedade de Previdencia Complementar da Dataprev - Prevdata Solaris Investment Management Limited Sompo Japan Insurance Inc. Sopher Investment Management SPF Beheer bv Sprucegrove Investment Management Ltd Standard Chartered Standard Chartered Korea Limited Standard Life Investments State Bank of India State Street Corporation StatewideSuper StoreBrand ASA Strathclyde Pension Fund Stratus Group Sumitomo Mitsui Banking Corporation Sumitomo Mitsui Card Company, Limited Sumitomo Mitsui Finance & Leasing Co., Ltd Sumitomo Mitsui Financial Group The Sumitomo Trust & Banking Co., Ltd. Sun Life Financial Inc. Superfund Asset Management GmbH SUSI Partners AG Sustainable Capital Svenska Kyrkan, Church of Sweden Swedbank AB Swiss Re Swisscanto Holding AG Syntrus Achmea Asset Management T. Rowe Price T. SINAI KALKINMA BANKASI A.S. T.GARANTI BANKASI A.S. Tata Capital Limited TD Asset Management Inc. and TDAM USA Inc. Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF) Telluride Association Tempis Asset Management Co. Ltd Terra Forvaltning AS TerraVerde Capital Management LLC The Brainerd Foundation The Bullitt Foundation The Central Church Fund of Finland The Collins Foundation The Co-operative Asset Management The Co-operators Group Ltd The Daly Foundation The GPT Group The Hartford Financial Services Group, Inc. The Japan Research Institute, Limited The Joseph Rowntree Charitable Trust The Local Government Pensions Institution The Pension Plan For Employees of the Public Service Alliance of Canada The Pinch Group The Presbyterian Church in Canada The Russell Family Foundation The Shiga Bank, Ltd. The Standard Bank Group The United Church of Canada - General Council The University of Edinburgh Endowment Fund The Wellcome Trust Third Swedish National Pension Fund (AP3) Threadneedle Asset Management Tokio Marine & Nichido Fire Insurance Co., Ltd. Toronto Atmospheric Fund Trillium Asset Management Corporation Triodos Investment Management Tryg UBS UniCredit Group Union Asset Management Holding AG Unipension UNISON staff pension scheme UniSuper Unitarian Universalist Association United Methodist Church General Board of Pension and Health Benefits United Nations Foundation Universities Superannuation Scheme (USS) Vancity Group of Companies VCH Vermögensverwaltung AG Veris Wealth Partners Veritas Investment Trust GmbH Vermont State Treasurer Vexiom Capital, L.P. VicSuper Pty Ltd Victorian Funds Management Corporation VietNam Holding Ltd. Vision Super VOLKSBANK INVESTMENTS Waikato Community Trust Inc Walden Asset Management, a division of Boston Trust & Investment Management Company WARBURG - HENDERSON Kapitalanlagegesellschaft für Immobilien mbh WARBURG INVEST KAPITALANLAGEGESELLSCHAFT MBH Wells Fargo & Company West Yorkshire Pension Fund WestLB Mellon Asset Management (WMAM) Westpac Banking Corporation White Owl Capital AG Winslow Management, A Brown Advisory Investment Group Woori Bank Woori Investment & Securities Co., Ltd. YES BANK Limited York University Pension Fund Youville Provident Fund Inc. Zegora Investment Management Zevin Asset Management Zurich Cantonal Bank Figure 1: 2011 Signatory Investor Breakdown 23% Asset Managers Asset Owners Banks Insurance Other Figure 2: CDP Investor Signatories & Assets over time Number of Signatories % 1% 37% 34% Signatories Assets Assets (US$ trillions) 5

6 CEO Commentary CEO Commentary Corporations, investors and governments today are faced with a choice: to compete aggressively for finite resources, or to advance towards a low-carbon economy that enables sustainable, profitable growth, whilst reducing reliance on increasingly scarce materials. Last year global energy-related carbon dioxide emissions reached a record high. The International Energy Agency estimates made for bleak reading but compounded the necessity to take bold and decisive action if we are to have any chance of limiting temperature increase to the 2 C level agreed by world leaders to protect against catastrophic climate change. What s more, rising energy demands are competing for a limited supply of fossil fuels. The competition for increasingly scarce natural resources is putting pressure on commodity prices and having a growing impact both socially and economically. It is clear that today, more than ever, we must build momentum to decouple economic growth from emissions. Managing carbon emissions and protecting the business from climate change impacts is fundamental to achieving sustainable and strong shareholder returns. Earlier this year, investment consultancy Mercer released a report concluding that the best way for institutional investors to manage portfolio risk associated with climate change may be to shift 40% of their portfolios into climate-sensitive assets with an emphasis on those that can adapt to a low-carbon environment. An important part of an investor s strategy should be to engage with the companies in which they invest to encourage performance improvement. Carbon Action is a new initiative launched by CDP this year. It is driven by a leading group of investors to encourage their portfolio companies to reduce emissions by investing in emissions reducing activities with a satisfactory payback period. Carbon Action reflects a growing recognition that there is a huge range of carbon reducing activities that companies can undertake that have a very clear business case. It is therefore in the interests of all investors and not just the more active owners of investments to ensure these actions are taken. As the management of carbon continues to move into companies core business strategies and mainstream investment thinking, demand for primary corporate climate change information grows around the world. As well as working on behalf of 551 institutional investors to gather relevant information from large corporations around the world, CDP is also working with global businesses and governments to strengthen the resilience and sustainability of their supply chains through the CDP Supply Chain program. CDP Cities has launched to help the world s major cities reduce climate change risk and bolster economic growth; and CDP Water Disclosure is now in its second year of working with major global companies to improve water management. A key part of CDP s strategy is to ensure the effective use of data collected. To assist with this companies are able to obtain tools that help them to measure, report and manage carbon more effectively, through CDP Reporter Services. It is through partnerships that CDP can achieve the largest impact. We are delighted to be working again this year with PwC, our Global Advisor, as well as with ENDS Carbon, who have authored this report, and Europe sponsor AXA. These and our other partners around the world are integral to the acceleration of CDP s mission. Whilst we wait patiently for much needed global regulation, business must continue to forge ahead, innovate and seek out opportunities by doing more with less. The decisions that perpetuate a legitimate, low-carbon and high growth economy will bring considerable value to those that have the foresight to make them. The information contained in this report and the companies responses assist in illuminating that path. Paul Simpson CEO Carbon Disclosure Project 6

7 ENDS Carbon Introduction ENDS Carbon Introduction ENDS Carbon is a specialist carbon research provider. For the last two years we have been working with CDP and FTSE to develop the FTSE CDP Carbon Strategy Index series. The European version of this index is scheduled for launch at the end of 2011 and we are pleased to have been able to include analysis from the new index in this Europe 300 report (see Sections 5 and 6) alongside our analysis of CDP CDLI results. The FTSE CDP Carbon Strategy Index takes two approaches to evaluating companies. Firstly, all companies are analysed against a set of indicators for basic carbon performance and efficiency focusing on ability to deliver emissions intensity reductions, setting strong, and management and disclosure indicators. In addition, companies in sectors materially exposed to climate change risks also receive an assessment of their financial risk exposure. This second approach models their cost of carbon (or other risks) over the next 10 years based on their exposure to the EU Emissions Trading Scheme and other regulations. The results of the two kinds of analysis are then combined to produce a tilted version of the standard FTSE European index. Companies well positioned for climate change are overweight in the FTSE CDP Carbon Strategy Index compared to the standard index, companies poorly positioned are underweight. The UK version of the index has outperformed its benchmark in its first year of operation and we hope for the same for the new Europe index. The results of our analysis show that, despite the recession and despite the failure of Copenhagen, action on climate change amongst the largest European companies is alive and well. Many companies have increasingly ambitious plans to take action on their carbon emissions. A substantial number are demonstrating lengthening track records of emissions intensity reductions, and strong to continue reductions. However, the picture is patchy. There are still a significant number of European companies not responding fully to CDP, and many that do not have basic elements of carbon management in place though the picture in Europe is better than other regions. One particular area to single out is emissions reduction. There are quite a few big listed companies who no longer report carbon including some of the biggest companies in Europe. This appears to be a backward step. CDP s new investor-backed Carbon Action Programme will be targeting these and other companies for engagement in the coming months. ENDS Carbon provides companies with a benchmarking tool to tell them how well they are doing on the metrics used by the index compared to their peer group, and a gap analysis indicating possible next steps. The other picture that emerges from the ENDS Carbon analysis is that for some European companies, carbon emissions are a material financial risk. This will be of no surprise to investment analysts in the utilities sector, but how many airline analysts have started factoring in the significantly adverse impact of the EU ETS on the low-cost airlines? Climate regulation is again gathering momentum around the world with emissions trading schemes under development or discussion in Australia, China, South Africa and several other countries. As more and more companies are affected by this risk, we hope the FTSE CDP Carbon Strategy Index will offer pension funds and other investors an effective investment risk mitigation tool. Dr. Craig Mackenzie Technical Director ENDS Carbon 7

8 Guest Foreword Guest Foreword We are living in difficult times, facing one of the most severe economic crises in decades. If all of us play our part, at all levels together with all concerned actors, we can restore a well-functioning economic cycle. However, climate change another global threat already stands as a real and present danger for our societies. It is now clearer than ever that all our efforts to secure economic growth must also encompass effective and concrete actions in the coming years to trigger the transition to a low-carbon economy and so combat the dangers of uncontrolled climate change. This year s Europe 300 Report clearly demonstrates that the majority of large corporations have climate change actions embedded as part of their business strategy. This is very encouraging because it demonstrates a clear link between energy efficiency and increased profitability. According to the report, there is a strong correlation between companies achieving the best scores in terms of emissions disclosure or carbon performance and financial results. The first step in addressing climate change is to measure and manage the emissions that cause it. In this case, the evergreen management rule If you can t measure it, you can t manage it! could not be more valid. Any serious effort to address the problem of climate change must be based on accurate measurement and reporting to allow the effective management and reduction of greenhouse gas emissions. The success of emission reduction policies and programmes is to a great extent defined by the integrity and credibility of greenhouse gas measurement and accounting systems. The accuracy of baseline studies, credible emissions measurements, solid monitoring systems, and independent verification are at the heart of any global mitigation strategy, as illustrated by the provisions of the EU Emissions Trading System. This is equally true for voluntary initiatives at company level aimed at disclosing carbon emissions. The EU 2050 Low-Carbon Roadmap presented by the European Commission in spring 2011 is a response to the urgent need for clear signals, predictability, directions and milestones for businesses, investors and stakeholders. It offers an integrated framework in particular for climate, transport and energy policies which can leverage economic benefits and trigger innovation alongside the reduction of greenhouse gas emissions. The Roadmap suggests how to reach the EU s long-term emission reduction objective of % by 2050, by giving direction to business on how to get there from where we are today. Emission reductions of 40% and 60% below 1990 levels by 2030 and 2040 are the identified intermediate milestones on a cost-effective pathway to the long-term goal. The 2050 Roadmap indicates a massive need for capital investment. The transition to a low carbon economy requires an extra annual investment equivalent to 1.5% of EU s GDP, or around 270 billion a year over the next 40 years. To put it in perspective, however, this increase would merely restore Europe s investment to the level it was at before the economic crisis. And this additional investment would be largely or even entirely offset by energy savings and public health benefits associated with reduced air pollution. To these benefits can be added the jobs that an increased effort in energy efficiency will deliver. The extra investment provides the opportunity for increased added value and output from a wide range of industries (automotive, power generation, industrial and grid equipment, energy efficient building materials, construction sector etc). This fosters competitiveness and the creation of sustainable jobs. The fight against climate change is going to be long but I am also confident that it offers the opportunity to reshape a world economy and a global society that is both economically and environmentally sustainable. Thanks to the Carbon Disclosure Project for continuing to mobilise so many companies to start the action needed. Connie Hedegaard Member of the European Commission Climate Action 8

9 Guest Foreword Guest Foreword While the sovereign-debt crisis in Europe absorbed much of the attention of political leaders in 2011, the threat of climate change remains. Europe understandably needs to focus on the economy, finding ways to increase our prosperity without increasing resource use and environmental impacts. Put simply, we need to become more resource efficient. By itself, however, increased resource efficiency alone won t guarantee steady or declining resource use. After all, we could become more efficient but still put excessive demands on the environment. For that reason, in order to achieve sustainability we also need to focus on ecosystem resilience and the limits of natural systems. The importance of ecosystem resilience is implicitly recognised with the internationally agreed target to hold the increase in global average temperature below 2 C above preindustrial levels. Temperature rises of 2 C or more above the pre industrial level are likely to cause major disruptions. They would challenge our ability to adapt at affordable economic, social and environmental cost. Robust and transparent information is one of the key elements to track progress towards the emission reductions needed to achieve the internationally agreed objective. Since 1996, many of the industrialised countries provide such information when submitting an annual inventory of their greenhouse gas emissions to the United Nations Framework Convention on Climate Change (UNFCCC). The inventories build on harmonised guiding principles and undergo thorough reviews. For the European Union, the European Environment Agency (EEA) compiles and analyses greenhouse gas data. The EEA s latest data for the year 2010 reveal that greenhouse gas emissions in the European Union were 15.5% below the 1990 level. They increased by 2.4% compared to the previous year, following a 7% drop in 2009 that was largely due to the economic recession and growth of renewable energy generation. One of our recent analyses also identified emission reductions from rather unexpected areas, such as efforts to reduce water pollution from agriculture. This shows that a careful analysis of transparent information can help us to harvest further options to reduce emissions. Building trust on the basis of transparent and robust information is crucial not only for countries, but it also can support entrepreneurship. The current economic climate shows how vital it is for companies to foster trust and confidence with potential investors and other stakeholders. While we take for granted a comprehensive and comparative disclosure of financial information, it is often more challenging to get a comprehensive overview of non-financial information. Over the past two decades, significant progress was made to improve environmental information. Many companies are supporting public bodies, such as the EEA, in that endeavour, for example by transmitting information on releases of greenhouse gas emissions, air and water pollutants to the European Pollutant Release and Transfer register. Moreover, the example of the European Union s emission trading system shows that improved environmental data can go hand in hand with financial information, relevant to public and private decision-makers. While we can learn a lot from data collected and analysed by public authorities, voluntary initiatives from the private sector such as the Carbon Disclosure Project (CDP) are essential elements to achieve a better common knowledge base among public and private actors. The CDP 2011 provides a timely and insightful overview of the progress made by companies in disclosing and tackling their greenhouse gas emissions and climate policies. The more comprehensive, the more robust and the more transparent the information we have at our disposal, the better we will be at taking the right decisions together for the future. This is particularly true when it comes to identifying potentials for synergies between environmental performance and business opportunities. The CDP 2011 report illustrates, once again, that tackling climate change in a comprehensive manner is a no-regrets measure from a business perspective, pursuing sustainability as we find new ways to increase our prosperity. Professor Jacqueline McGlade Executive Director European Environment Agency 9

10 Report sponsor commentary Mainstreaming climate risks Scientific facts are the starting point of the climate change debate. Science tells us that atmospheric carbon concentration is rising at an unprecedented rate, that this rise is unequivocally induced by human activity and that unprecedented carbon concentration will likely cause unprecedented temperature increases. Indeed, this increase, which is ~50 times faster than the natural variability, and its consequences, have already started to materialise. A 2 C increase compared to the pre-industrial reference is largely accepted as being a critical level in temperature variation beyond which dramatic and un-controllable impacts should be expected. However, this threshold may already no longer be achievable unless massive cuts in emissions were to be implemented urgently. These are the uncomfortable facts of climate change. It is natural to be tempted to respond to these facts with delay, denial or resignation. Society will then be ill-prepared to face the consequences of these new man-made natural disasters. We may also approach this situation as a chance to rise to this new challenge, understand its risks and leverage new opportunities. Insurers and reinsurers are well equipped to address those risks. They can fund and promote risk research and education. They possess loss data, as well as models and tools to analyse and project this data. They have a duty to unveil and disseminate knowledge about such new risks, including poorly known threats to society. Once a proper risk assessment is made, insurers can leverage this information in order to catalyse necessary changes. They can give incentives to induce behaviour changes in consumption and living habits that impact both the causes and the consequences of climate change. Indeed risk-based insurance premiums and adapted claims management are strong incentives for society to address risks and improve its resilience. The development of new energy technologies can be hindered by the lack of funding for R&D but also by a lack of insurance. Even in absence of solid historical data, insurers can choose to take this risk and help society shift to a low carbon economy at the necessary pace. The UN Principles for Sustainable Insurance, which will be unveiled at Rio +20 in 2012, provide a comprehensive and collective approach. Insurers, through their significant investments, are also well positioned to send the right signals to the investment community and to specific invested companies. Finally, they can and ought to reduce their own direct environmental footprint, however limited it may be. These initiatives, combined, address both the mitigation and the adaptation dimensions of climate change. They are not solely self-interested or commercially driven, but they need to be global and collective to be effective. This is why AXA supports collaborative and complementary frameworks such as the CDP, the UN Principles for Responsible Investment, or the upcoming UN Principles for Sustainable Insurance. Green products or carbon emissions alone are not sufficient the climate challenge requires a full mainstreaming across sectors and individual organisations. We must all make our contribution. Together, we will make the difference. Jean-Christophe Menioux Chief Risk Officer AXA Group 10

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12 Contents CDP Signatories 2 CEO Commentary: Paul Simpson, CEO, Carbon Disclosure Project 6 Report Writer Introduction: Dr. Craig Mackenzie, Technical Director, ENDS Carbon 7 Guest Foreword: Connie Hedegaard, European Commissioner for Climate Action 8 Guest Foreword: Professor Jacqueline McGlade, Executive Director, European Environment Agency 9 Guest Foreword: Jean-Christophe Menioux, Chief Risk Officer, AXA Group 10 Executive Summary 13 1: Overview of the Europe : Analysis of CDLI scores 35 3: Analysis of CPLI scores 40 4: Verification 43 5: Carbon Scorecard Analysis 44 6: Material Carbon Risk Exposure 58 Appendices Appendix 1: Table of scores, emissions and sector information by company 70 Appendix 2: Global Key Trends Summary 78 Appendix 3: Material Carbon Risk Models 80 12

13 Executive Summary This year s Europe 300 report represents a departure from previous reports. For the first time, as well as providing an overview of the state of carbon reporting and management in the index based on the wellestablished CDLI and CPLI criteria, an analysis of carbon performance linked directly to an investor-oriented product is provided. The FTSE CDP Carbon Strategy Index (CSI) Series, launched in the UK in 2010, and now covering Europe, Australia and Japan, is a unique collaboration between FTSE and CDP, with analysis provided by ENDS Carbon, authors of this report. The CSI aims to provide investors with in-depth, future-orientated assessments of the world s largest listed companies using a simple-tounderstand and transparent process, and translate it directly into a platform from which investment-orientated decisions can be launched. Disclosure Highlights Disclosure rates and quality for the Europe 300 continue to rise saw disclosures for 271 companies (2010: 251), which equates to 90% (2010: 84%). The FTSE Global 500, constituents of which appear in the Europe 300, discloses at a rate of 80% by comparison. Emissions growth and economic growth show no evidence of becoming decoupled. There was a net increase in respondents this year, but nine respondents left from last year and were replaced by 17 respondents. These 17 new respondents exhibit average emissions twice as high as the respondents which left. 87% of emissions are reported from three sectors (Utilities, Materials and Energy), which account for only 23% of index companies. Overall, reported Scope 1 and Scope 2 emissions ( core emissions) for the Europe 300 amount to 2.44bn tco 2 e (2010: 2.27bn tonnes). Scope 1 emissions are up by 7% to 2.1bn tonnes (2010: 1.9bn). Scope 2 emissions amount to 329mn tco 2 e, up by 9% from 2010 (302mn). Where Scope 3 emissions are reported they are frequently enormous by comparison with core emissions, emphasising the urgent job of establishing the full atmospheric impact of index companies. Though total Scope 1 emissions have risen sharply among the Europe 300, those emissions within European boundaries have actually fallen, while Scope 1 emissions throughout the rest of the world where Europe 300 companies operate have risen. CDP responses are unclear as to why emissions discharge has shifted so dramatically to non-european countries but it is likely that the more stringent European regulations regarding emissions reductions has a part to play. More ETS-regulated companies are choosing to disclose emissions figures to CDP. Total reported emissions for the ETS have increased since last year by nearly 50%. The increase is due in large part to companies choosing to disclose figures to CDP for the first time, rather than representing a real increase in activity. Since ETS emissions are a large percentage of overall emissions, it is imperative that all major emitters make full disclosure to CDP. Investors play a key role in encouraging firms to make these disclosures. Risk perceptions are mainly short-term and focused on regulatory drivers. The key concern is the lack of an international consensus response to climate change and consequently how companies can comply efficiently with the emerging regulatory patchwork around the world. In the longer term (5+ years) companies are beginning to highlight potential physical risks. A large percentage (40%) of these risks are reported as impacting insurance companies and electric utilities in particular, though it is unclear Figure 3: Europe 300 at a glance Disclosing Scope 3 related to use/disposal of products Disclosing any Scope 3 emissions Any portion of Scope 1 emissions independently verified Having emissions reduction target Disclosing Scope 2 emissions Disclosing Scope 1 emissions Responding companies Europe 300 sample 13

14 Executive Summary whether other sectors have simply not completed their risk analysis or have found physical risks to be insignificant. Most of the physical risks cited are related to water issues, including availability, rising temperatures and longer term rises in sea levels. Companies see more opportunities (2/3) than risk (1/3) from changes in consumer behavior, with impacts arising over the short-term (within five years). If that is realised, direct value drivers for change could become a significant support to regulation, and might quicken the pace of developments especially in consumerfacing sectors. Emissions are primarily shortterm (achieve-by dates within three years). The Energy sector stands out as having only short-term, all ending before Target portfolios for many companies are being rebalanced to include with more distant delivery dates (between 2013 and 2020). Some sectors take a longer term view. Information Technology (IT) and Telecommunications Services are unusual in both having more mid range (up to 2020) than short range (up to 2015). These sectoral patterns may be variously ascribed to differing regulatory environments, asset lifespans, and the ease with which comprehensive, system-wide shifts in emissions can be achieved. Within this overall picture, emissions reduction exhibit some disconcerting trends. While short-term (up to 2016) in the highest emitting sectors (Utilities, Materials, Energy, Industrials) exceed the level of 2.65% pa warranted by IPCC recommendations, over other timescales fall far short of this goal. Targets to 2020 for these sectors cumulatively average only 1.7%, and underperform all other sectors combined for both 2016 and 2020 target years (by 1.5% and 1.3%, respectively). 14 Consequently it is instructive to compare the trajectory of emissions reductions and emissions burdens, on a cumulative basis, to The four highest emitting sectors deliver cumulative reductions of not even one-half one percent of their cumulative emissions over this timeframe. When viewed at this scale, all other messages are drowned out: current reduction efforts are making an insignificant impact on the overall atmospheric emissions burden. Such inconvenient truths underline CDP CEO Paul Simpson s call for companies to take bold and decisive action if we are to have any chance of limiting temperature increase to the 2 C level agreed by world leaders to protect against catastrophic climate change. Scoring Highlights Despite tightening of the scoring criteria from year to year, average scores for disclosure among the Europe 300 are rising. The average disclosure score in 2011 is 71, a rise of 2.5 points from 2010 and 11 points from 2009, or 13%; the average CDLI score is 93 this year (2010: 91, 2009: 81). Since 2009 CDLI average scores have risen by 16%. The CPLI has only been in existence for two years and tougher qualifying criteria set by CDP this year over last year reduce the opportunity for trend analysis. In 2011, 32 companies qualified for inclusion in the CDLI (top 10%) and 21 companies reached the CPLI (Band A) (Table 1). Four companies (asterisked) achieved CPLI inclusion without CDLI inclusion; this is achieved through a combination of a strong but not leading disclosure score with meeting the additional tests set for CPLI leadership. The Utilities sector achieves the highest average CDLI score (96) while Energy and Telecommunications Services both sit last with an average of 90. While Financials has significantly increased its presence in the CDLI for 2011, represented by seven companies compared to two last year, it is still underrepresented in the CDLI (22%) compared to the index as a whole (24%). HSBC, Royal Bank of Scotland, Bayer, Siemens, Lafarge, BASF and Centrica have maintained a place on the CDLI since 2009, while Bayer has the additional distinction of being its sector leader in all three years of the Europe 300 CDLI. This year, 245 companies (90%) qualified for a performance score (2010: 87%). The highest scoring companies were split into two bands: Band A companies met all qualifying criteria for the CPLI; Band A- companies met only the qualifying score criteria (70+), or the score criteria and a part of the remaining criteria. This separated out the leaders of the leaders, which accounts for the low numbers of Band A companies (8%). What is encouraging is that Band A companies are more numerous than Band A- companies (7%). Average disclosure scores per band descended by about ten points at each level from Band A(-) (91) through to Band E (57). Comparison of disclosure scores and the CPLI outcomes demonstrates conclusively that credible carbon performance rests on a platform of very good information capture and disclosure. Given the needs of investors to manage climate-related risks, the urgent and demanding task for all companies is to do the best job possible of comprehensively reporting on their carbon and climate-related strategies; the CDP is an excellent platform on which to base those efforts. The FTSE CDP Carbon Strategy Index The FTSE CDP Carbon Strategy Index Series is based on data supplied to CDP through its annual information request, supplemented with research into other public domain information. The index centres on the expectation that carbon risks will have material impact on corporate earnings in certain

15 Executive Summary Table 1: Companies in the CDLI and CPLI Sector Company Disclosure score CDLI Consumer Philips Electronics 99 BMW 96 Fiat 93 Volkswagen 91 METRO 90 British Sky Broadcasting 90 Consumer Staples Tesco 97 British American Tobacco 91 Nestle 91 Energy Royal Dutch Shell 90 BG * 85 Financials HSBC 95 Allianz 92 AXA 92 Swiss Re 91 UBS 91 Royal Bank of Scotland 91 British Land Company 90 Health Care Bayer 99 Novartis 94 GlaxoSmithKline 93 Industrials Deutsche Post 99 Siemens 97 Saint-Gobain 94 Schneider Electric 91 FERROVIAL 90 ACCIONA * 86 IT SAP 96 Alcatel - Lucent * 89 Materials Lafarge 96 BASF 93 Telecommunication Telefonica 90 Utilities Fortum 97 Centrica 96 Gas Natural 95 ENEL * 89 Total number of index constituents *Companies in the CPLI but not CDLI CPLI industry sectors over the next decade and beyond. Carbon risks are more material in some sectors than others, and the index aims to identify and discriminate between them, as well as discriminating between the companies themselves. The index assessment process emphasises future risks, trends and strategy, not simply current emissions and aims to use the simplest credible models and to be transparent about its assumptions. Companies in the index series are assessed using two frameworks a series of sector-specific Carbon Risk Models and a Carbon Scorecard (details on page 43). Companies in the sectors with the highest material financial risks and opportunities associated with GHG emissions are assessed using both models. Other companies are assessed using the Carbon Scorecard only. Overall CSI scorecard results demonstrate a wide range of performance at the company and sector level. With an average score of 37.6 for low risk and 42.1 for high risk companies (out of a maximum of 100) there is room for considerable improvement, from every aspect of the scorecard. High risk companies outperform lower risk companies on average and on 33 of 35 individual scorecard measures. Both the carbon scorecard and CDP disclosure analysis rank Health Care as the worst performing sector (on the basis of average scores); there is less agreement about top performance, reflecting the difference in structure and relative importance of the indicators used in each assessment. Both sets of results do, however, emphasise the need for companies to respond fully to the CDP information request. There is an observable but incomplete correspondence between the leaders identified from the CPLI assessment and the CSI scorecard; three of the top 15