CDP Programs of Climate Change
Discuss about the Carbon Disclosure Project and Programs.
Carb0n Discl0sure Pr0ject (abbreviated as CDP), functi0ns in a way aimed t0 transf0rm the appr0ach the w0rld takes in regard t0 d0ing business and pr0tect the w0rld’s natural res0urces by preventing danger0us changes in the climate. In t0day’s w0rld, it is c0mm0n t0 capital that is well all0cated t0 make pr0sperity that is l0ng-term rather than sh0rt-term gain and this is at the expense 0f the envir0nment. Insight and evidence are imp0rtant when it c0mes t0 driving change that is tangible and we use the p0wer 0f inf0rmati0n discl0sure and measurement t0 impr0ve the envir0nmental risk management.
By leveraging market f0rces including shareh0lders, cust0mers and g0vernments, CDP has incentivized th0usands 0f c0mpanies and cities acr0ss the w0rld’s largest ec0n0mies t0 measure and discl0se their envir0nmental inf0rmati0n. We put this inf0rmati0n at the heart 0f business, investment and p0licy decisi0n making. CDP h0lds the largest c0llecti0n gl0bally 0f self-rep0rted climate change, water and f0rest-risk data (Harrison, 2014). Thr0ugh 0ur gl0bal system, c0mpanies, invest0rs, cities and sub-nati0nal g0vernments are better able t0 mitigate risk, capitalize 0n 0pp0rtunities and make investment decisi0ns that drive acti0n t0wards a m0re sustainable w0rld.
In 2015, CDP’s climate change pr0grams engaged and received data fr0m all 0ver the w0rld fr0m:
- M0re than 5,500 c0rp0rati0ns
- M0re than 300 cities
- M0re than 40 sub-nati0nal g0vernments
These pr0grams pr0vide invest0rs, purchasing c0mpanies and the w0rld with access t0 high quality climate change inf0rmati0n, s0 that we can effectively manage 0ur individual and c0llective resp0nses t0 the gl0bal climate challenge.
M0re than 70 large purchasing c0mpanies (including Walmart, Unilever, U.S. G0vernment’s General Services Administrati0n, Micr0s0ft, L’0real and C0ca C0la C0.) with a c0mbined annual purchasing spend 0f 0ver US$2 trilli0n are members 0f CDP’s Supply Chain pr0gram and request th0usands 0f their supplier c0mpanies t0 discl0se thr0ugh CDP.
M0re than 5,500 c0mpanies rep0rted climate change inf0rmati0n thr0ugh CDP in 2015 (Ramiah, 2016). CDP als0 0bjectively sc0res and benchmarks the perf0rmance and pr0gress 0f c0mpanies that participate in its climate change pr0gram. CDP’s c0rp0rate climate leadership indices and the sc0ring system which underpins them have been independently ranked as the m0st credible c0rp0rate envir0nmental ranking system in the w0rld.
M0re than 300 0f the w0rld’s largest cities rep0rted thr0ugh CDP’s cities pr0gram in 2015, including: Bangk0k, Jakarta, L0nd0n, L0s Angeles, New Y0rk, Ri0 de Janeir0, R0me, Se0ul, Singap0re, T0ky0, Wellingt0n and five Australian cities. In t0tal, these cities are resp0nsible f0r 0ver 1.67 billi0n metric t0nnes 0f greenh0use gas emissi0ns. CDP’s cities pr0gram has f0und that cities are better managing their risk and increasing resiliency thr0ugh m0re than 4,800 activities t0 mitigate and adapt t0 climate change.
Corporate Programs of Climate Change
CDP is the 0fficial rep0rting partner 0f the C0mpact 0f States and Regi0ns which brings t0gether the c0ntributi0ns 0f 44 sub-nati0nal g0vernments fr0m ar0und the w0rld. T0gether, they represent m0re than 325 milli0n citizens and 0ne eighth 0f the gl0bal ec0n0my. Jay Weatherill, Premier 0f S0uth Australia, is the c0-chair 0f the C0mpact 0f States and Regi0ns.
Carb0n Discl0sure Pr0ject has been requesting climate change inf0rmati0n fr0m ASX-listed c0mpanies since 2006, when it began its w0rk in Australia in partnership with the Invest0r Gr0up 0n Climate Change (Australia & NZ). In 2011, CDP established an Australia & NZ 0ffice in Sydney t0 manage its engagement with c0mpanies, invest0rs, p0licymakers and 0ther stakeh0lders in the regi0n. CDP als0 currently requests water inf0rmati0n fr0m 0ver 50 ASX c0mpanies, and f0rest c0mm0dity inf0rmati0n fr0m 15 ASX firms.
390 c0mpanies 0perating in Australia, including 94 ASX200-listed c0mpanies, rep0rted GHG emissi0ns (Sc0pe 1 and/0r Sc0pe 2) and 0ther climate change inf0rmati0n thr0ugh CDP in 2015. 0f these rep0rting c0mpanies:
- 301 c0mpanies rep0rted Sc0pe 1 emissi0ns t0taling 182.56 milli0n metric t0ns carb0n di0xide equivalent (C02–e) in Australia, representing 40% 0f Australia’s t0tal greenh0use gas emissi0ns3 (excluding emissi0ns categ0ries 0f agriculture, land use, land use change and f0restry, which are n0t currently within the sc0pe 0f CDP’s rep0rting system), and
- 370 c0mpanies rep0rted Sc0pe 2 emissi0ns t0taling 47.54 milli0n metric t0ns C02–e in Australia (Freedman, 2000).
T0 rec0gnize and incentivize higher quality climate discl0sure, CDP 0rganizes the Australian Climate Leadership Awards, which have been presented t0 Australian c0mpanies f0r the past 3 years. The awards are 0bjective and data-driven, based 0n inf0rmati0n discl0sed in CDP’s climate change pr0gram and its 0bjective discl0sure and perf0rmance sc0res. In 2015, ten CDP climate leadership awards were presented t0 Australian c0mpanies.
A 2015 rep0rt by Mercer identified Australia, the UK and Canada as being particularly susceptible t0 carb0n risk, due t0 the carb0n-intensive nature 0f their ec0n0mies and the c0mpanies listed 0n their st0ck exchanges. Australia was identified as being at an even higher risk because 0f the greater level 0f climate p0licy uncertainty, which exp0ses the ec0n0my t0 p0licy sh0ck. The energy sect0r 0f the Australian ec0n0my makes up 7% 0f GDP, and is currently resp0nsible f0r pr0ducing $65.4 billi0n (20%) 0f Australia’s t0tal exp0rt earnings12. Australia is the:
- 4th largest c0al pr0ducer after China, India and the US with 491Mt – 6.2% 0f the gl0bal t0tal,
- 2nd largest c0al exp0rter after Ind0nesia, with 0ver 300Mt 0f thermal and metallurgical c0al exp0rted annually, which represent 30% 0f gl0bal c0al exp0rts,
- 10th largest net exp0rter 0f natural gas, including LNG, with 25 billi0n cubic metres,
- 9th largest pr0ducer 0f electricity fr0m c0al,13 and
- 3rd largest pr0ducer 0f uranium after Kazakhstan and Canada, and has the w0rld’s largest kn0wn uranium res0urces with 31% 0f the w0rld t0
97% 0f metallurgical c0al, 71% 0f thermal c0al, 84% 0f 0il and 50% 0f gas extracted annually in Australia is exp0rted and Australia’s c0al exp0rts al0ne represent 11.9% 0f its t0tal g00ds and services trading (Hart, 2015). As a result, the Australian ec0n0my is highly exp0sed t0 fluctuati0ns in internati0nal demand f0r these c0mm0dities and changes in 0verseas markets and p0licies. 195 c0untries, including Australia’s maj0r c0al and LNG trading partners – Japan, China, India, K0rea and Taiwan – have recently appr0ved the Paris Agreement 0n climate change, which is expected t0 lead t0 a large reducti0n in the demand f0r f0ssil fuels as nati0ns seek t0 h0n0r their climate c0mmitments and limit their pr0ducti0n 0f carb0n emissi0ns. 0ther gr0wing c0ncerns, such as air p0lluti0n, are als0 expected t0 result in further reducti0ns in c0al pr0ducti0n and use in China in particular and in 0ther devel0ping ec0n0mies (Metz, 2009).
Program of Cities
Research by Carb0n Tracker has f0und that Australia is 0ne 0f the five c0untries in the w0rld which is m0st at risk fr0m stranded f0ssil fuel assets. They estimate that if we are t0 limit emissi0ns bel0w 2?C, pr0ducti0n fr0m s0me 0f the existing c0al mines is sufficient t0 meet the v0lume 0f c0al required under the Internati0nal Energy Agency’s 450 scenari0 and that n0 new c0al mines are needed anywhere in the w0rld. Up t0 US$103 billi0n 0f planned investment in new f0ssil fuel pr0jects in Australia c0uld be unneeded and bec0me stranded acc0rding t0 Carb0n Tracker’s estimates.
Australia’s electricity is highly carb0n intensive in c0mparis0n with its peers in 0ther advanced ec0n0mies and its trading partners. Am0ngst 0ECD nati0ns, 0nly Est0nia pr0duces m0re C02 emissi0ns per unit 0f electricity generated (kWh) than Australia. A 2015 paper in Nature Climate Change als0 highlighted h0w carb0n-intensive Australia’s electricity generati0n is in c0mparis0n t0 its 0ther large carb0n emitting nati0ns, many 0f which are maj0r trading partners – see chart bel0w.
D0mestically, Australia has the sec0nd highest per capita GHG emissi0ns in the 0ECD, sec0nd 0nly t0 Luxemb0urg. Its per capita emissi0ns 0f 16.7 t0nnes are higher than the USA’s 16.2 t0nnes per capita, and are ar0und 75% higher than the 0ECD average 0f 9.55 t0nnes per capita. Appr0ximately 75% 0f Australia’s emissi0ns are created by the energy sect0r, and 68% 0f Australia’s electricity generati0n is c0al-p0wered. With the falling c0st 0f renewable energy infrastructure, investment in f0ssil-fuels is bec0ming less financially attractive and the risk 0f stranded assets is increasing. In additi0n, many superannuati0n schemes are heavy invested in carb0n-intensive sect0rs. With m0st 0f Australia’s p0pulati0n c0ncentrated in c0astal areas, Australia is als0 particularly exp0sed t0 physical climate risks. Australia’s biggest banks are heavily invested in residential pr0perty, with m0rtgages making up 66% 0f their assets. This makes the Australian ec0n0my m0re exp0sed t0 the physical impacts 0f climate change, which is further exacerbated by the fact that many residential pr0perties are underinsured.
A recent analysis by Bey0nd Zer0 Emissi0ns f0und that Australia has am0ngst the best renewable energy res0urces in the w0rld. They estimated that the ec0n0mic renewable energy p0tential 0f Australia is 75% greater than its c0al, gas, petr0leum and uranium res0urces c0mbined. Unlike Australia’s f0ssil fuel reserves, these abundant and s00n-t0-be l0w-c0st renewable energy res0urces can be expl0ited in a manner that is c0mpatible with climate science and the Paris Agreement.
There are a number 0f benefits t0 c0mpanies fr0m discl0sing climate change and sustainability inf0rmati0n.
Higher valuation of a company
A study by the Harvard Business Sch00l has sh0wn that the st0ck price perf0rmance 0f c0mpanies is p0sitively influenced by g00d sustainability practices, finding that firms with g00d ratings 0n material sustainability issues significantly 0utperf0rm firms with p00r ratings 0n these issues. These findings have been supp0rted by meta-studies by the University 0f 0xf0rd31 and Deutsche Bank. Climate change discl0sure has sh0wn s0me str0ng linkages t0 valuati0n 0utperf0rmance. F0r instance, in his 2015 M0sk0witz Prize winning paper, Philipp Krüger f0und that L0nd0n St0ck Exchange firms which were m0st heavily affected by the intr0ducti0n 0f mandat0ry greenh0use gas rep0rting regulati0ns experienced significant increases in their valuati0ns (Boubaker, 2018). Kruger identified that the underlying reas0n f0r this increase is the value placed by invest0rs 0n greater transparency regarding c0rp0rate climate change risks, particularly f0r large firms 0r th0se 0perating in carb0n intensive sect0rs. A number 0f gl0bal studies by CDP have als0 f0und financial 0utperf0rmance by climate change leaders c0mpared t0 the benchmark st0ck index.
Pr0grams t0 impr0ve sustainability discl0sure and perf0rmance can drive reducti0ns in energy, material, transp0rtati0n, manufacturing, and disp0sal c0sts, and increase pr0fit margins. F0r instance, IDC (2009) f0und that manufacturing c0mpanies included in the D0w J0nes Sustainability Index achieved superi0r pr0fit margins, which impr0ved 0ver time, as sh0wn in the figure bel0w:
References
Air & Waste Management Association. (1996). EM: Air & Waste Management Association’s magazine for environmental managers. Pittsburgh, Pa, The Association.
Boubaker, S., Cumming, D., & Nguyen, D. K. (2018). Research handbook of finance and sustainability. https://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=1797172.
Freedman, M., & Jaggi, B. (2000). Advances in environmental accounting & management. New York, Elsevier JAI.
Harrison, N. E., & Mikler, J. (2014). Climate innovation: liberal capitalism and climate change. https://www.palgraveconnect.com/doifinder/10.1057/9781137319890.
Hart, M. (2015). Hubris: the troubling science, economics and politics of climate change.
Metz, B. (2009). Controlling climate change. Cambridge, Cambridge University Press.
Ramiah, V., & Gregoriou, G. N. (2016). Handbook of environmental and sustainable finance. https://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=1090579.
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