Backed by $7.6 Trillion Worth of Investors, CDP Urges Companies to Cut Emissions

by | Apr 5, 2011

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Institutional investors managing $7.6 trillion yesterday called on companies in the FTSE Global 500 to institute cost-effective programs to reduce greenhouse gas emissions.

A group of 34 investors, including Aviva Investors, CCLA Investment Management and Scottish Widows Investment Partnership, called for the changes through Carbon Action, a new initiative of the Carbon Disclosure Project.

Investors participating in Carbon Action will encourage companies to make year-on-year emissions reductions, and implement investment in greenhouse gas (GHG) reduction initiatives that deliver a positive return on investment, the CDP said. Carbon Action will also call on companies without emissions reduction targets to set such goals and publicly disclose them.

Carbon Action is urging companies to disclose carbon levels, and any examples of best practice, through CDP’s reporting system. Meanwhile, CCLA said that its charity clients will divest from any Global 500, developed-nation energy, utility, industrial or material companies that do not disclose reduction targets to the CDP by 2013.

“This initiative focuses on cases where companies do not need to make a choice between emissions reductions or higher financial returns,” said Craig Mackenzie, head of sustainability at Scottish Widows Investment Partnership. “In the face of rising energy costs, reducing a company’s emissions often means higher profits. Efficient management of energy offers a huge win-win: lower carbon emissions, higher returns for shareholders.”

The CDP cited research by McKinsey and others, finding that most companies can reduce carbon emissions and cut costs at the same time. Currently available technologies could reduce GHG emissions 35 percent below 1990 levels by 2030, according to the McKinsey report, Pathways to a Low Carbon Economy.

“We believe that the external costs of greenhouse gas emissions will become internalised into company cash flows and profitability,” Steve Waygood, the head of sustainability, research and engagement at Aviva Investors, said. “We encourage companies to consider what action that they can take now to reduce emissions.”

Aviva Investors is a founding signatory to Carbon Action and has been vocal in its demands for companies to report on and reduce emissions. In February it signed on to an open letter urging the world’s 30 biggest stock exchanges to force corporate sustainability reporting.

Also in February, Aviva Investors London chief Paul Abberley attacked the U.K.’s financial system for what he called “amoral” behavior in the face of climate change. And Waygood said that Aviva chairman Lord Sharman called 18 months ago for the CDP to move from simply operating a disclosure system, to actually challenging companies to reduce emissions.

As well as support from institutional investors, the Carbon Action project also won praise from logistics company UPS. “The CDP’s Carbon Action program is the latest way for corporations to address climate change in a systematic, quantitative and credible way,” chief sustainability officer Scott Wicker said.

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