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5 Insights From Experts Behind the Scenes of the 2012 CDP Global 500 Report

Raz Godelnik
| Thursday September 20th, 2012 | 0 Comments

As we reported earlier this week, the 2012 CDP Global 500 report was just released, providing a comprehensive outlook on the progress of the business sector towards a low-carbon future. For the second year in a row the release was accompanied by a global teleconference with some very interesting participants from around the world, discussing “how businesses can succeed in an uncertain, resource-constrained world.”

This discussion was a great opportunity to hear some of the people behind the report and better understand its findings. In a way, it was like a backstage tour where you have a chance to meet the performers and learn a thing or two besides what you saw on stage. To those who didn’t have the chance to watch the broadcast (you can still do it here), I want to share five interesting points that came up during the discussion:

1. The window of opportunity is about to close

As we mentioned in the report’s coverage, one of the bad news that came out of it was that the average longer-term target for companies’ emissions reductions is currently only one percent per year, well below the four percent required to limit global warming to two degrees. The problem is that it looks like that even this “modest” goal might be be off the table soon. According to Dr. Fatih Birol of the International Energy Agency (IEA), if there aren’t major changes in investors’ trends, the door to this goal will be closed forever in 2017.

2. Are investors really there?

While 655 institutional investors representing $78 trillion in assets back up CDP’s work, there is a growing question to what degree these investors, as well as investors in general, actually take climate change into consideration. “If we address the question of whether investors today really are focused on the types of topics we’re discussing, I think the blunt answer is no,” Paul Abberley, CEO of Aviva Investors, said. His advice was to look for ways to extend the time horizon in the engagement between investors and borrowers so it can be longer term in nature. He added that even though we hear about trillions of dollars that, in theory, are “aligned with what we’re talking about,” in reality we see a major deficit in the appetite for this sort of discussion.”

Alan Brown, senior advisor at Schroders, also mentioned there is too little engagement with climate change by investors and that too little capital is flowing to the projects we need. He suggested that pension funds can and should lead the way in deploying funding to infrastructure development projects, given their natural interest in long-term returns. But to do that, he added, they will need a degree of certainty regarding the pricing and taxation frameworks they will be exposed to, which brings us to the next point – governments.

3. In need: Political leadership

While the CDP report presents many examples of business leadership on climate change, there was a consensus on the lack of political leadership. Brown talked about the fact that climate change is slipping down the political agenda and reminded the audience that it’s the citizens’ duty to “use every trick under the sun” to push it back onto the politicians’ agenda.

4. Short-term vs. long-term

The tension between short-term and long-term was also a theme that kept coming up. Malcolm Preston of PwC UK explained that while we see businesses taking many short-term measures that provide cost efficiency and operational benefits, we see very few long-term investments, which is really what we need in order to reduce emissions. He also connected it to the lack of political leadership, explaining that you can’t expect CEOs to take long-term action with the current level of uncertainty. We need transparent, long-term and consistent (TLC) policies to see CEOs making a commitment for 10-20 years, he said.

5.  China (and India) is really where we should be looking

Some of the discussion centered around the growing importance of countries like China, but there was not even one Chinese participant. Dr. Birol of the IAE noted that even if Europe and the U.S. would stop their economic activities right now and ceased for the next 25 years, but China, India and others continued with business as usual, we’ll still be on the path to a six degree increase in temperature.

It was a good reminder that while Europe and the U.S. might set the tone for the discussion and provide an example for others, in terms of overall reductions, they don’t matter that much anymore – at least not comparing to China and India. Given the financial pressures in Europe and the relative lack of action in the U.S. on one hand, and the level of experimentation and piloting we do see in China, as Rachel Kyte of the World Bank indicated, on the other hand, Europe and the U.S. might soon become irrelevant, even in these terms.

Final word: “If we don’t internalize the costs of climate change and resource scarcity into business decisions and investment decisions, then nature will do it for us and that will be far more costly and far harder to plan for.” – Paul Simpson, CEO of the CDP.

[Image credit: CDP]

Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and the New School, teaching courses in green business, sustainable design and new product development.


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