This week, CDP revealed its list of 187 companies illustrating that a low-carbon future does not mean low profit.
The 2014 Climate Performance Leadership Index (CPLI), which highlights companies taking action to mitigate climate change, outperforms The Bloomberg World Index by 9.6 percent.
The “A List” was created at the request of 767 investors who represent US$92 trillion — more than a third of the world's invested capital. Information provided by nearly 2,000 listed companies has been independently assessed against CDP's scoring methodology and ranked accordingly.
The CPLI names 187 businesses from around the world — including BMW AG, Centrica and Samsung — that demonstrate a superior approach to climate change mitigation (Among the "A List" are SB Corporate Members Cisco, Coca-Cola, CVS Health, DirecTV, H&M, HP, L'Oréal, Microsoft, Novozymes, Philips, SAP, Sprint and Unilever). Awarded an “A” for their performance, they earn a position on the first global ranking of corporate efforts to mitigate climate change. Collectively, CDP says the climate performance leaders have reduced their total (absolute) emissions by 33 million metric tons in the past reporting year, equivalent to turning London's car owners into cyclists for two-and-a-half years.
The news follows a renewed political focus on climate commitments at the UN Secretary General's Climate Summit in New York last month and a growing consensus on the scale of the economic threat of climate change. Former U.S. Treasury Secretary Henry Paulson calls climate change "the single biggest risk that exists to the economy today." Earlier this year, Standard & Poor's Ratings Services stated that climate change will hit countries' economic growth rates and public finances.
- Yield win-win results — The investments of companies on the CPLI 2014 to reduce carbon output yield average annual emissions reductions of 9 percent per company and achieve impressive financial results, with an average internal rate of return (IRR) of 57 percent for each project. "A Lister" Iberdrola, an 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. And General Motors implemented route redesigns, mode changes from road to rail, and other measures that have resulted in emissions savings of 244,000 metric tons 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 percent disclose that climate change poses a risk to their business, 99 percent 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 percent within the next seven years.
- Raise the bar on investment — The A List represents just 9 percent 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 with 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.
"The businesses that have made it onto our first-ever global list of climate performance leaders are to be congratulated for their progress; they debunk economic arguments against reducing emissions," said CDP CEO Paul Simpson. "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."
James Bevan, chief investment officer at CCLA, a CDP investor member, added: "The risks associated with climate change call for leadership from politicians, investors and businesses. CDP's A List and our own ‘Aiming for A’ initiative help investors with this stewardship challenge. We're currently focusing on the ten largest UK extractives and utilities companies, and are delighted to see Centrica and SSE join CDP's 2014 A list. Following AGM questions last year we'll be moving on to filing supportive shareholder resolutions focusing on the London-listed oil and gas majors in 2015*.*"
The largest leading companies by market capitalization include Apple, Microsoft and Google. 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 also performed well in this regard.
Canada, Switzerland and Australia have small proportional representation on the leader board.
Of those corporations that failed to disclose vital climate change data, the three largest in terms of market capitalization are Berkshire Hathaway, Amazon and Comcast.