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1StevenTebbe,CDP,2016
Steven Tebbe Executive and Managing Director CDP Europe
CDP An investor lead initiative
Climate Leadership Council February 17th, 2016
Helsinki, Finland
2StevenTebbe,CDP,2016
Agenda
{ What is CDP and what we do { What we don’t do { Why we do it { How we do it { Results and next steps
{ Questions and Answers
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What we do
We are in the information business.
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What we do
We rate and score companies.
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… in order to create a level playing field
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for carbon, water and forestry reporting.
… and a credible, common standard
The “Gold Standard”
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What gets measured, gets managed.
Why this is important
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“Not everything that can be counted counts,
and not everything that counts can be counted.“
Be selective
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Measurement criteria
Governance & Strategy
Targets & Performance
Risks & Opportunities
GHG Emissions
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”A prosperous global economic system that operates within sustainable environmental
boundaries and prevents dangerous climate change”
“To leverage the power of organizations and information to drive urgent action at scale by
business, investors and regulators”
Vision & Mission statements
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Information is the lifeblood of
financial markets.
The key
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We harness the power of investors.
Our leverage
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> 800 institutional investors with US$ 100 trillion in assets
> 50% of world’s invested capital &
75 corporate buyers covering US$ 2 tn procurement spend & >7800 suppliers
5.500 companies from > 80 countries reporting to CDP
= 60% of global market cap &
>300 major cities
AUTHORITY DECISION CRITERIA
Investors give us the mandate
INFORMATION
AUTHORITY
AUTHORITY
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Forests
180 Reported in 2015
Water
571 Reported in 2015
Climate change
5,500 Reported in 2015
0
10
20
30
40
50
60
70
80
90
100
0
100
200
300
400
500
600
700
800
900
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Assets(U
S$Trillio
n)
Num
bero
fSigna
torie
s
ClimateChangeSignatories WaterSignatories CarbonAcConSignatories
ForestsSignatories ClimateChangeSignatoryAssets WaterSignatoryAssets
CarbonAcConSignatoryAssets ForestsSignatoryAssets
Over half of the world’s invested capital wants environmental data
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58 Nordic investors
Including:
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Not a niche anymore
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{ 149 for investors, e.g. H&M, Nordea, KONE, Nokia, SSAB, Novo Nordisk, Statoil
{ 39 for customers (supply chain, e.g. Lantmännen, Lego, Tetrapak
{ 17 more e.g. Vattenfall
CDP in the Nordic region (Sweden, Finland, Denmark, Norway)
85% of Nordic market cap
205 Nordic corporations disclosed in 2015
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Disclosure (100-0)
Performance (A-D)
Measuring transparency and performance
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What gets measured, gets managed.
Why this is important
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www.cdp.net | @CDP Page 9
Measurement turns into action …
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{ Board-level responsibility for climate change
{ Staff incentives
{ Integration with business strategy
{ Integrated communication
{ Risk assessment and management
{ Implementation of GHG emissions reduction
project
{ Setting Science based GHG emissions
reduction targets
{ Emissions intensity reduction
{ Data verification
115 companies on the global
A list
… actions turn into leadership …
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… leadership turns into financial outperformance …
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CPLIndexoutperformsDJSWIndexby19,6%&BloombergWorldIndex
by9,6%overpast10years
(CDPClimatePerformanceLeadershipIndex)
24StevenTebbe,CDP,2016
Company Score Examples of emission reductions for A listers
100 A 12 Emission reduction activities implemented in the reporting year leading to 74210 estimated annual CO2e savings in metric tonnes CO2e à 7% CO2 total global decrease through proactive measures. Extensive engagement w value chain, Scope 3 reductions namely through purchased goods and services:e.g. increased energy efficiency by the data center service providers.
100 A 4,6% (6,600 tCO2e) reduction & avoided emissions (S1&2) through proactive measures target to reduce our operational carbon footprint by 3% annually relative to net sales and to further reduce the energy consumption and thereby GHG emissions of our solutions.
100 A Kesko’s Responsibility Programme and K-responsibility Concept provide information, ideas and support to e.g. retailers to improve energy and material efficiency and other activities to mitigate CC, and to customers on how to do environmentally and climate friendly choices with their purchases - more than 1600 activities reported and 12,980 tonnes CO2 avoided emissions
99 A decrease of 11% (110,000 tonnes CO2) in overall emissions through proactive measures
99 A 36% reductions in emissions/tonne of product (S1 & S2), namely through investment in Skärblacka Mill, cutting the annual electricity requirement, RE: Seven units have contracted deliveries with guarantees of origin with low carbon emissions
Top Nordic companies to put on your watch list
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Nordic Climate Disclosure Leaders
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CDP data
INVESTORS
DISCLOSING COMPANIES
PROCURING COMPANIES
POLICY ACTORS
ACADEMICS
Need for data
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Financial markets
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SIGNATORY INVESTORS
REQUESTING SUPPLY CHAIN
MEMBER
INDICES
/finance
www.cdp.net
CDP ANALYTICS
YOUR INVESTORS DISCLOSING COMPANIES YOUR CUSTOMERS GENERAL PUBLIC OTHER PUBLICATIONS
PUBLIC RESPONSES
CDP REPORTS
SUSTAINABILITY RATINGS
NON PUBLIC RESPONSES
AGGREGATE DATA ONLY
SIGNATORY INVESTORS
REQUESTING SUPPLY CHAIN
MEMBER
Distribution channels
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Globale Sichtbarkeit Ihrer CDP Klimaschutzbewertung
Increasingly investment decisions include CDP data
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… and are available to all of us
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CDP data is available to professional investors …
Source: Bloomberg
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Compareacompanyagainstpeerson“Efficiency”:Forexample,GHGEmissionperSales.
… and used in analysis; e.g. peer analysis
Source: Bloomberg
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> 9 million downloads of CDP data points from Bloomberg terminals in 2014.
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How investors will use your data
Investors will • Rank, score and compare companies
• Manage risks
• Use indices to optimize returns
• Carbon footprinting of portfolios
• Company engagement
• Exclusion and divestment criteria
• Construct ESG metrics
• Build their own data models
• Access CDP’s data via Bloomberg,
Google Finance, and other sustainability
rankings
Investors will NOT use CSR reports to
• Read them end-to-end
• Pull out individual data points
35StevenTebbe,CDP,2016
CDP data
INVESTORS
DISCLOSING COMPANIES
PROCURING COMPANIES
POLICY ACTORS
ACADEMICS
Need for data
36StevenTebbe,CDP,2016
1. Engage with multiple stakeholders 2. Manage through measurement
{ Better risk management leads to reduced cost of capital
{ Better understand your business
{ Realize opportunities for competitive advantage
{ Identify inefficiencies
{ Take advantage of opportunities for cost savings
{ Benchmark performance
Benefits of responding
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Simple benchmarking
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Simple benchmarking
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CDP data
INVESTORS
DISCLOSING COMPANIES
PROCURING COMPANIES
POLICY ACTORS
ACADEMICS
Need for data
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75 supply chain members = US$ 2 trillion combined purchasing spend and over 7.800 suppliers
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Respondents Non-Respondents
49% Of 7,879 total
suppliers contacted,
49% did not submit any data
… but we are still missing half the story
42StevenTebbe,CDP,2016
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Report Scope 1/2 emissions
Identified regulatory risks
Emissions reduction targets
Engage with suppliers
3-plus years reporting 2 years reporting First year reporting
Percent of suppliers taking specific action by number of years reporting to CDP
Non-responders likely resemble first-time participants - which performed significantly worse than repeat reporters
…and the missing half is likely to perform badly
43StevenTebbe,CDP,2016
Purchasers can drive change by:
- Leveraging their purchasing power by asking suppliers to provide information
- Engaging their procurement teams - Setting targets to articulate ambition
Improvement takes time
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Emissions reduction targets
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Actual emission reductions initiatives
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Climate risk management
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CDP data
INVESTORS
DISCLOSING COMPANIES
PROCURING COMPANIES
POLICY ACTORS
ACADEMICS
Need for data
48StevenTebbe,CDP,2016
Capturing information from Cities
49StevenTebbe,CDP,2016
Show us the …
50StevenTebbe,CDP,2016
Preference for financials
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Financials are based on past performance
52StevenTebbe,CDP,2016
How do we know?
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Most ratings are largely based on CDP data
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NorwegianGovernmentPensionFundGlobal(AuM>EUR350billion):
“…the management of the assets in the
Fund shall be based on the goal of achieving the highest possible return.... A good return
in the long term is dependent on sustainable development in economic, environmental
and social terms, as well as well-functioning, legitimate and effective markets.”
Public investor
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“Investors are increasingly viewing CO2 emissions as a material issue and expecting companies to report accordingly. Companies who don't disclose this information themselves risk having their emissions estimated by a third party, and this number may in turn be used by data providers to develop ESG ratings that investors around the world use to evaluate and engage with companies. So if companies want to be sure of the quality of the emissions data that finds its way to the market, they need to report themselves“
Melanie Brooks, Senior Responsible Investment Analyst, Folketrygdfondet
“During my years in the financial industry I have come to the conclusion that companies who report emissions to CDP are more aware of their overall sustainability risk and opportunities. Therefore I always encourage companies to report to CDP”.
Anette Andersson, Fund Manager, SEB
Public investor
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„We undertake climate foot-printing of our portfolios using data provided via CDP.” Nordea
Private investor
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Climate disclosure as a “first step” indicator of environmental risk management
“In our meetings with companies with a weak ESG profile one of our key recommendations is that they answer the CDP questionnaire because it leads companies through many of the key environmental issues they should be considering.”
Climate performance as an indicator of efficient operations
“In most mature markets stakeholder demands for carbon management are higher, and thus carbon reporting is more prevalent. For our Swedish Stars portfolio, we look not only at whether a company reports, but also, for example, how the company performs and data verification as indicators of efficient operations.” Katarina Hammar, ESG Analyst at Nordea Asset Management
Private investor
58StevenTebbe,CDP,2016
„We will vote against the report and accounts at the AGM.” Aviva
“The CDP data helps us to determine the quality of an individual company’s management response and is a factor in our overall buy, sell and hold decisions. When necessary we make specific recommendations for change. At Aviva Investors we take this very seriously as the average length of time we hold a stock is for six years, which is longer than most companies long term strategy. At one extreme, if such a company had not even bothered to respond to the CDP, then we tell them that unless this changes, we may vote against the report and accounts at the company’s next AGM. This is proving quite a successful sanction.”
“Measurement allows management. It provides a framework to consider options, shows investor transparency and benchmarking; all in turn impacting energy efficiency, costs and reputation.”
Private investor
59StevenTebbe,CDP,2016
Withtheslogan“SustainableSwissPrivateBankingsince1841”theSarasinBankfocusesoninvesCngaccordingtoESG
principles:
“In addition to traditional financial analysis, by taking into account environmental and social aspects you can reduce a number of commercially relevant risks and
exploit opportunities.
The majority of scientific studies to date point to a positive correlation between sustainability and the financial value development of companies.”*
*Source: Sarasin study "Sustainability and equity performance" in cooperation with the European Centre for European Research and the CCRS (Center for Corporate Responsibility and Sustainability) of the University of Zurich, November 2008. See also: S. Hörter, W. Mader, B. Menzinger (2010): „ESG Risk Factors in a Portfolio Context. An Innovative Study for Institutional Investors.“
Private investor
60StevenTebbe,CDP,2016
TheJohannesburgStockExchangenowrequiresalllistedcompaniestoadopt
integratedreporCngthroughacomply-or-explainbasisenforcedbytheKingCodeon
Governance(KingIII).
“The JSE enforces the King III, not merely because it’s a good idea, but because it
makes sound business sense”.
Market
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EnelesCmatesthatSociallyResponsibleInvestment(SRI)fundsaccountforabout19%ofitsfree-float(roughly
5.5%ofitsmarketcap).
Corporate
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Thecorporatenewsservices,BloombergandThomsonReuters,bothaddedsocialandenvironmentaldata
feedstotheirstandardcorporatemetricsandintelligenceplaeorms.
Brokers,raCngagencies,investmentconsultants,buy-
sideteams,indexanddataprovidersaredevelopingESGanalysisservices,whichismainstreamingitamongthe
financialcommunity.
Service providers
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The Result
Investors drive company values
and can help save the planet.
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The Impact
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The Impact
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CDP Nordic office contact: Salla Sulasuo
Project Officer, CDP Nordic Tel: +358 (0)40 650 1988 Email: [email protected]
Resources available at www.cdp.net
{ Questionnaire guidance
{ Drafting document
{ CDP scoring methodology
{ Reporting roadmap
{ Technical guidance
{ FAQs
{ Live & recorded webinars
Next steps
Join CDP spring workshop in Helsinki 4.4.2016 kindly hosted by Imarinen