Climate change information is being factored into the decision making process of a large majority of the investment firms that have signed on to the Carbon Disclosure Project, the London-based climate change action organization announced yesterday.
Seventy-five percent of CDP’s 80 investment industry participants around the world say that climate change information is factored into their investment decisions and asset allocation strategies. Of these, more than 80% say that climate change is “important relative to other issues impacting their portfolio.” Some said that they are willing to go beyond requesting companies to make energy and emissions disclosures by asking them to take steps to reduce their greenhouse gas emissions.
The results were released coincident with CDP issuing its annual 2009 carbon disclosure survey to its 3,700 listed company members. Now in its second year, the survey is made on behalf of CDP’s institutional investor sponsors, who together hold some $55 trillion of investments under management. The number of investment companies signing the annual information request is growing. A record 475 signed it this year as compared to 385 in 2008, an increase of nearly 25%.
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Accounting for Carbon, Emissions & Energy Use
Asset managers, pension funds, insurers and socially responsible investment funds are among the members of the global professional investment community that are incorporating the emissions and energy data from the CDP surveys in their financial analyses and investment decision making processes. They include Allianz, AXA Group, BlackRock, Goldman Sachs, Hermes Investment Management and Swiss Re.
CDP’s latest research, the result of analysis by the Mercer consulting group, found that “carbon risk” and potential legislation are the primary reasons for using CDP data. Eighty percent of members found CDP data useful and they are using it as a means of corporate engagement, according to the CDP.
“Climate change strategy, energy efficiency and carbon emissions are increasingly important aspects of companies’ ability to uphold competitive advantage across global industries. We incorporate company responses to the Carbon Disclosure Project within our GS SUSTAIN Research methodology,” commented Marc Fox, vice president of GS SUSTAIN Research at Goldman, Sachs & Co.
Political, Legislative Changes Spur Membership Growth
With the Obama administration and a Democratic-led Congress moving swiftly to enact a national energy policy that places much greater emphasis on energy resource diversification and addressing climate change and greenhouse gas emissions levels, the kind of data and information being gathered and compiled by the CDP comes at an opportune time for professional investors. Investment managers find themselves in need of a reliable, accurate and comprehensive gauge of the extent to which corporate managements are addressing the risks and opportunities of climate change, and working to meet enacted or anticipated legislative targets for CO2, greenhouse gas emissions, energy sources and energy efficiency.
“Following clear indications from the new US administration and other governments, we can expect to see a marked increase in climate change regulation globally. This will increase the materiality of climate change for investors and drive up costs for companies unable to manage their greenhouse gas inventories and our research shows that investors are already including climate change related issues into their investment decisions,” CDP chief operating officer Paul Simpson stated.
“In addition, a near 25% increase in signatories is a clear signal that institutional investors require listed companies to report to CDP as climate change related information becomes increasingly important to investment decisions.”
Spain’s BBVA banking group, the National Bank of Canada, South Korean insurer Hyundai Marine and Fire Group and Nordea Investment Management are among the 90 new professional investment groups that have joined the CDP so far this year.