Carbon Disclosure Project 2010 Europe 300

Carbon Disclosure Project 2010 Europe 300 On behalf of 534 investors with assets of US$64 trillion Report written for the Carbon Disclosure Project ...
Author: Edmund Oliver
2 downloads 0 Views 5MB Size
Carbon Disclosure Project 2010 Europe 300

On behalf of 534 investors with assets of US$64 trillion

Report written for the Carbon Disclosure Project by:

Report sponsored by:

Carbon Disclosure Project [email protected] +44 (0) 20 7970 5660 www.cdproject.net

Carbon Disclosure Project

Carbon Disclosure Project 2010 This report and all of the public responses from corporations are available to download free of charge from www.cdproject.net.

2

ABRAPP - Associação Brasileira das Entidades Fechadas de Previdência Complementar Aegon N.V. Akbank T.A. . Allianz Global Investors AG ATP Group Aviva Investors AXA Group Banco Bradesco S.A. Bank of America Merrill Lynch BBVA BlackRock BP Investment Management Limited California Public Employees’ Retirement System California State Teachers’ Retirement System Calvert Group Catholic Super CCLA Investment Management Ltd Co-operative Asset Management Essex Investment Management, LLC Ethos Foundation Generation Investment Management HSBC Holdings plc ING

KLP Insurance Legg Mason, Inc. The London Pensions Fund Authority Mergence Africa Investments (Pty) Limited Mitsubishi UFJ Financial Group (MUFG) Morgan Stanley National Australia Bank Limited Neuberger Berman Newton Investment Management Limited Nordea Investment Management Northwest and Ethical Investments LP PFA Pension Raiffeisen Schweiz RBS Group Robeco Rockefeller & Co. SRI Group Russell Investments Schroders Second Swedish National Pension Fund (AP2) Sompo Japan Insurance Inc. Standard Chartered PLC Sun Life Financial Inc. TD Asset Management Inc. TDAM USA Inc. The Wellcome Trust Zurich Cantonal Bank

CDP Signatories 2010

Carbon Disclosure Project 2010 534 financial institutions with assets of over US$64 trillion were signatories to the CDP 2010 information request dated February 1st, 2010, including: Aberdeen Asset Managers Aberdeen Immobilien KAG Active Earth Investment Management Acuity Investment Management Addenda Capital Inc. Advanced Investment Partners Advantage Asset Managers (Pty) Ltd ´´ Zrt. AEGON Magyarország Befektetési Alapkezelo Aegon N.V. AEGON-INDUSTRIAL Fund Management Co., Ltd Aeneas Capital Advisors AGF Management Limited AIG Asset Management Akbank T.A.S. Alberta Investment Management Corporation (AIMCo) Alberta Teachers Retirement Fund Alcyone Finance Allianz Global Investors AG Allianz Group Altshuler Shaham AMP Capital Investors AmpegaGerling Investment GmbH Amundi Asset Management ANBIMA - Brazilian Financial and Capital Markets Association APG Asset Management Aprionis ARIA (Australian Reward Investment Alliance) Arma Portföy Yönetimi A.S. ASB Community Trust ASM Administradora de Recursos S.A. ASN Bank Assicurazioni Generali Spa ATP Group Australia and New Zealand Banking Group Limited Australian Central Credit Union incorporating Savings & Loans Credit Union Australian Ethical Investment Limited AustralianSuper AVANA Invest GmbH Aviva Investors Aviva plc AvivaSA Emeklilik ve Hayat A.S. AXA Group Baillie Gifford & Co. Bakers Investment Group Banco Bradesco S.A. Banco de Crédito del Perú BCP Banco de Galicia y Buenos Aires S.A. Banco do Brazil Banco Santander Banco Santander (Brasil) Banesprev Fundo Banespa de Seguridade Social Banesto (Banco Español de Crédito S.A.) Bank of America Merrill Lynch Bank Sarasin & Co, Ltd

Bank Vontobel Bankhaus Schelhammer & Schattera Kapitalanlagegesellschaft m.b.H. BANKINTER S.A. BankInvest Banque Degroof Barclays Group BBC Pension Trust Ltd BBVA Bedfordshire Pension Fund Beutel Goodman and Co. Ltd BioFinance Administração de Recursos de Terceiros Ltda BlackRock Blue Marble Capital Management Limited Blue Shield of California Group Blumenthal Foundation BMO Financial Group BNP Paribas Investment Partners BNY Mellon Boston Common Asset Management, LLC BP Investment Management Limited Brasilprev Seguros e Previdência S/A. British Columbia Investment Management Corporation (bcIMC) BT Investment Management The Bullitt Foundation Busan Bank CAAT Pension Plan Cadiz Holdings Limited Caisse de dépôt et placement du Québec Caisse des Dépôts Caixa de Previdência dos Funcionários do Banco do Nordeste do Brasil (CAPEF) Caixa Econômica Federal Caixa Geral de Depósitos Caja de Ahorros de Valencia, Castellón y Valencia, BANCAJA Caja Navarra California Public Employees’ Retirement System California State Teachers’ Retirement System California State Treasurer Calvert Group Canada Pension Plan Investment Board Canadian Friends Service Committee (Quakers) CAPESESP Capital Innovations, LLC CARE Super Pty Ltd Carlson Investment Management Carmignac Gestion Catherine Donnelly Foundation Catholic Super Cbus Superannuation Fund CCLA Investment Management Ltd Celeste Funds Management Limited The Central Church Fund of Finland Central Finance Board of the Methodist Church Ceres, Inc. Cheyne Capital Management (UK) LLP Christian Super Christopher Reynolds Foundation CI Mutual Funds’ Signature Advisors CIBC Clean Yield Group, Inc. ClearBridge Advisors

Climate Change Capital Group Ltd Close Brothers Group plc The Collins Foundation Colonial First State Global Asset Management Comite syndical national de retraite Bâtirente Commerzbank AG CommInsure Companhia de Seguros Aliança do Brasil Compton Foundation, Inc. Connecticut Retirement Plans and Trust Funds Co-operative Asset Management Co-operative Financial Services (CFS) The Co-operators Group Ltd Corston-Smith Asset Management Sdn. Bhd. Crédit Agricole S.A. Credit Suisse Daegu Bank Daiwa Securities Group Inc. The Daly Foundation de Pury Pictet Turrettini & Cie S.A. DekaBank Deutsche Girozentrale Deutsche Asset Management Deutsche Bank AG Deutsche Postbank Vermögensmanagement S.A., Luxemburg Development Bank of Japan Inc. Development Bank of the Philippines (DBP) Dexia Asset Management DnB NOR ASA Domini Social Investments LLC Dongbu Insurance Co., Ltd. DWS Investment GmbH Earth Capital Partners LLP East Sussex Pension Fund Ecclesiastical Investment Management Economus Instituto de Seguridade Social The Edward W. Hazen Foundation EEA Group Ltd Element Investment Managers ELETRA - Fundação Celg de Seguros e Previdência Environment Agency Active Pension Fund Epworth Investment Management Ltd Equilibrium Capital Group Erste Group Bank AG Essex Investment Management, LLC Ethos Foundation Eureko B.V. Eurizon Capital SGR Evangelical Lutheran Church in Canada Pension Plan for Clergy and Lay Workers Evli Bank Plc F&C Management Ltd FAELCE - Fundação Coelce de Seguridade Social FASERN Fundação Cosern de Previdência Complementar Fédéris Gestion d’Actifs FIDURA Capital Consult GmbH FIM Asset Management Ltd Financière de Champlain FIRA. - Banco de Mexico First Affirmative Financial Network First Swedish National Pension Fund (AP1) FirstRand Ltd.

3

Carbon Disclosure Project

Five Oceans Asset Management Florida State Board of Administration (SBA) Folketrygdfondet Folksam Fondaction CSN Fondation de Luxembourg Fonds de Réserve pour les Retraites – FRR Forward Management, LLC Fourth Swedish National Pension Fund, (AP4) Frankfurter Service Kapitalanlage-Gesellschaft mbH FRANKFURT-TRUST Investment Gesellschaft mbH Friends Provident Holdings (UK) Limited Front Street Capital Fukoku Capital Management, Inc. Fundação AMPLA de Seguridade Social Brasiletros Fundação Atlântico de Seguridade Social Fundação Banrisul de Seguridade Social Fundação Codesc de Seguridade Social FUSESC Fundação de Assistência e Previdência Social do BNDES - FAPES Fundação Forluminas de Seguridade Social Fundação Itaúsa Industrial Fundação Promon de Previdência Social Fundação São Francisco de Seguridade Social Fundação Vale do Rio Doce de Seguridade Social - VALIA FUNDIÁGUA - Fundação de Previdência da Companhia de Saneamento e Ambiental do Distrito Federal Futuregrowth Asset Management Gartmore Investment Management Limited Generali Deutschland Holding AG Generation Investment Management Genus Capital Management Gjensidige Forsikring GLG Partners LP GLS Gemeinschaftsbank eG, Germany Goldman Sachs & Co. GOOD GROWTH INSTITUT für globale Vermögensentwicklung mbH Governance for Owners LLP Government Employees Pension Fund (“GEPF”), Republic of South Africa Green Cay Asset Management Green Century Funds Groupe Investissement Responsable Inc. GROUPE OFI AM Grupo Banco Popular Gruppo Monte Paschi Guardian Ethical Management Inc Guardians of New Zealand Superannuation Guosen Securities Co., LTD. Hang Seng Bank HANSAINVEST Hanseatische Investment GmbH Harbourmaster Capital Harrington Investments, Inc The Hartford Financial Services Group, Inc. Hastings Funds Management Limited Hazel Capital LLP HDFC Bank Ltd Health Super Fund Henderson Global Investors

4

Hermes Fund Managers HESTA Super Hospitals of Ontario Pension Plan (HOOPP) HSBC Global Asset Management (Deutschland) GmbH HSBC Holdings plc HSBC INKA Internationale Kapitalanlagegesellschaft mbH Hyundai Marine & Fire Insurance IDBI Bank Limited Illinois State Treasurer Ilmarinen Mutual Pension Insurance Company Impax Asset Management Ltd Industrial Bank Industrial Bank of Korea Industry Funds Management Infrastructure Development Finance Company Ltd. (IDFC) ING Insight Investment Management (Global) Ltd Instituto de Seguridade Social dos Correios e Telégrafos - Postalis Instituto Infraero de Seguridade Social INFRAPREV Insurance Australia Group Investec Asset Management Irish Life Investment Managers Itaú Unibanco Banco Múltiplo S.A. J.P. Morgan Asset Management Janus Capital Group Inc. The Japan Research Institute, Limited Jarislowsky Fraser Limited The Joseph Rowntree Charitable Trust Jubitz Family Foundation Jupiter Asset Management K&H Investment Fund Management / K&H Befektetési Alapkezelo Zrt KB Asset Management KB Financial Group KB Kookmin Bank ´´ NV KBC Asset Management KCPS and Company KDB Asset Management Co., Ltd. Kennedy Associates Real Estate Counsel, LP KEPLER-FONDS Kapitalanlagegesellschaft m.b.H. KfW Bankengruppe KLP Insurance Korea Investment & Trust Management Korea Technology Finance Corporation KPA Pension Kyobo AXA Investment Managers La Banque Postale Asset Management La Financière Responsable Landsorganisationen i Sverige LBBW - Landesbank Baden-Württemberg LBBW Asset Management Investmentgesellschaft mbH LD Lønmodtagernes Dyrtidsfond Legal & General Group plc Legg Mason, Inc. Lend Lease Investment Management Light Green Advisors, LLC Living Planet Fund Management Company S.A. Local Authority Pension Fund Forum The Local Government Pensions Institution

Local Government Super Lombard Odier Darier Hentsch & Cie The London Pensions Fund Authority Lothian Pension Fund Macif Gestion Macquarie Group Limited Magnolia Charitable Trust Maine State Treasurer Man Group plc Maple-Brown Abbott Limited Marc J. Lane Investment Management, Inc. Maryland State Treasurer Matrix Asset Management McLean Budden MEAG Munich Ergo Asset Management GmbH Meeschaert Gestion Privée Meiji Yasuda Life Insurance Company Merck Family Fund Mergence Africa Investments (Pty) Limited Meritas Mutual Funds MetallRente GmbH Metzler Investment GmbH MFS Investment Management Midas International Asset Management Miller/Howard Investments Mirae Asset Global Investments Co. Ltd. Mistra, The Swedish Foundation for Strategic Environmental Research Mitsubishi UFJ Financial Group (MUFG) Mitsui Sumitomo Insurance Co.,Ltd Mizuho Financial Group, Inc. Mn Services Monega Kapitalanlagegesellschaft mbH Morgan Stanley Motor Trades Association of Australia Superannuation Fund Pty Ltd Mutual Insurance Company Pension-Fennia Natcan Investment Management The Nathan Cummings Foundation National Australia Bank Limited National Bank of Canada National Bank of Kuwait National Grid Electricity Group of the Electricity Supply Pension Scheme National Grid UK Pension Scheme National Pensions Reserve Fund of Ireland National Union of Public and General Employees (NUPGE) Natixis Nedbank Limited Needmor Fund Nelson Capital Management, LLC Nest Sammelstiftung Neuberger Berman New Amsterdam Partners LLC New Jersey Division of Investment New Mexico State Treasurer New York City Employees Retirement System New York City Teachers Retirement System New York State Common Retirement Fund (NYSCRF) Newton Investment Management Limited NFU Mutual Insurance Society NGS Super NH-CA Asset Management

CDP Signatories 2010

Nikko Asset Management Co., Ltd. Nissay Asset Management Corporation NORD/LB Kapitalanlagegesellschaft AG Nordea Investment Management Norfolk Pension Fund Norges Bank Investment Management (NBIM) Norinchukin Zenkyouren Asset Management Co., Ltd North Carolina State Treasurer Northern Ireland Local Government Officers’ Superannuation Committee (NILGOSC) Northern Trust Northwest and Ethical Investments LP Oddo & Cie Old Mutual plc OMERS Administration Corporation Ontario Teachers’ Pension Plan OP Fund Management Company Ltd Oppenheim Fonds Trust GmbH Opplysningsvesenets fond (The Norwegian Church Endowment) OPSEU Pension Trust Oregon State Treasurer Orion Asset Management LLC OTP Fund Management Plc. Pax World Funds Pensioenfonds Vervoer Pension Fund for Danish Lawyers and Economists The Pension Plan For Employees of the Public Service Alliance of Canada Pension Protection Fund Pensionsmyndigheten PETROS - The Fundação Petrobras de Seguridade Social PFA Pension PGGM Phillips, Hager & North Investment Management Ltd. PhiTrust Active Investors Pictet Asset Management SA The Pinch Group Pioneer Alapkezelo´´ Zrt. PKA Pluris Sustainable Investments SA Pohjola Asset Management Ltd Portfolio 21 Investments Portfolio Partners Porto Seguro S.A. PRECE Previdência Complementar The Presbyterian Church in Canada PREVI Caixa de Previdência dos Funcionários do Banco do Brasil PREVIG Sociedade de Previdência Complementar Principle Capital Partners Psagot Investment House Ltd PSP Investments Q Capital Partners Co. Ltd QBE Insurance Group Limited Rabobank Raiffeisen Schweiz Railpen Investments Rathbones / Rathbone Greenbank Investments RBS Group Real Grandeza Fundação de Previdência e Assistência Social

Rei Super Resona Bank, Limited Reynders McVeigh Capital Management Rhode Island General Treasurer RLAM Robeco Robert Brooke Zevin Associates, Inc Rockefeller & Co. SRI Group Rose Foundation for Communities and the Environment Royal Bank of Canada RREEF Investment GmbH The Russell Family Foundation Russell Investments SAM Group Sampension KP Livsforsikring A/S Samsung Fire & Marine Insurance Samsung Life Insurance Sanlam Investment Management Santa Fé Portfolios Ltda Sauren Finanzdienstleistungen GmbH & Co. KG Schroders Scotiabank Scottish Widows Investment Partnership SEB SEB Asset Management AG Second Swedish National Pension Fund (AP2) Seligson & Co Fund Management Plc Sentinel Investments SERPROS Fundo Multipatrocinado Service Employees International Union Benefit Funds Seventh Swedish National Pension Fund (AP7) The Shiga Bank, Ltd. Shinhan Bank Shinhan BNP Paribas Investment Trust Management Co., Ltd Shinkin Asset Management Co., Ltd Siemens Kapitalanlagegesellschaft mbH Signet Capital Management Ltd SIRA Asset Management SMBC Friend Securities Co., LTD Smith Pierce, LLC SNS Asset Management Social(k) Sociedade Ibgeana de Assistência e Seguridade (SIAS) Solaris Investment Management Limited Sompo Japan Insurance Inc. Sopher Investment Management SPF Beheer bv Sprucegrove Investment Management Ltd Standard Bank Group Standard Chartered PLC Standard Life Investments State Street Corporation Storebrand ASA Strathclyde Pension Fund Stratus Group Sumitomo Mitsui Banking Corporation Sumitomo Mitsui Card Company, Limited Sumitomo Mitsui Finance & Leasing Co., Ltd Sumitomo Mitsui Financial Group Sumitomo Trust & Banking

Sun Life Financial Inc. Superfund Asset Management GmbH Sustainable Capital Svenska Kyrkan, Church of Sweden Swedbank Ab (publ) Swiss Reinsurance Company Swisscanto Holding AG Syntrus Achmea Asset Management TD Asset Management Inc. TDAM USA Inc. Teachers Insurance and Annuity Association – College Retirement Equities Fund (TIAA-CREF) Tempis Capital Management Co., Ltd. Terra Forvaltning AS TfL Pension Fund The University of Edinburgh Endowment Fund Third Swedish National Pension Fund (AP3) Threadneedle Asset Management Tokio Marine & Nichido Fire Insurance Co., Ltd. Toronto Atmospheric Fund The Travelers Companies, Inc. Trillium Asset Management Corporation TRIODOS BANK TrygVesta UBS AG Unibanco Asset Management UniCredit Group Union Asset Management Holding AG Unipension UNISON staff pension scheme UniSuper Unitarian Universalist Association The United Church of Canada - General Council United Methodist Church General Board of Pension and Health Benefits United Nations Foundation Universities Superannuation Scheme (USS) Vancity Group of Companies Veritas Investment Trust GmbH Vermont State Treasurer VicSuper Pty Ltd Victorian Funds Management Corporation VietNam Holding Ltd. Visão Prev Sociedade de Previdência Complementar Waikato Community Trust Inc Walden Asset Management, a division of Boston Trust and Investment Management Company WARBURG - HENDERSON Kapitalanlagegesellschaft für Immobilien mbH WARBURG INVEST KAPITALANLAGEGESELLSCHAFT MBH The Wellcome Trust Wells Fargo West Yorkshire Pension Fund WestLB Mellon Asset Management Kapitalanlagegesellschaft mbH (WMAM) The Westpac Group Winslow Management Company Woori Bank YES BANK Limited York University Pension Fund Youville Provident Fund Inc. Zegora Investment Management Zurich Cantonal Bank

5

Foreword Connie Hedegaard, European Commissioner for Climate Action Climate change constitutes a massive threat, as the extreme weather events of mid-2010 have tragically reminded us. But it also offers a huge opportunity for those businesses which act to succeed in mainstreaming low-carbon solutions to avert dangerous global warming.

These measures promise ‘greener’ economic growth, new jobs and greater energy security. It is perhaps little surprise that a high proportion of European companies – almost nine out of ten, according to this report see business opportunities in the fight against climate change.

The Carbon Disclosure Project is helping provide the transparency that investors and other stakeholders require to evaluate how companies are positioned to cope with these risks and opportunities. It also encourages companies to take steps towards managing their carbon emissions. The project thus provides an important complement to the EU Emissions Trading System, since more than 60% of European companies participating in CDP are not covered by the EU ETS.

But Europe cannot afford to rest on its laurels – on the contrary. The US, China, Korea and other major economies are investing heavily in lowcarbon technologies and infrastructure to counter the economic crisis.

This year’s Europe 300 report shows that European companies continue to lead the world in carbon disclosure and climate change strategy. Compared to other regions, more than twice as many European firms had their emissions data independently verified. These encouraging trends are, I firmly believe, due in large part to the proactive policy approach that the European Union has taken to tackling climate change. The climate and energy goals the EU is implementing for the medium term have given us a head start on the road to building a low-carbon economy. We will cut our greenhouse gas emissions to 20% below 1990 levels by 2020, and are ready to scale up the reduction to 30% provided the conditions are right. A decade from now, 20% of the EU’s energy will come from renewable sources. We also aim to reduce energy consumption by 20% of projected levels.

6

Ensuring Europe maintains its leadership position and reaps the full economic benefits of the low-carbon revolution requires a continued strong push from the policy side. This is one reason the European Commission has put decarbonising the economy at the heart of our vision for Europe’s development up to 2020 and beyond. The EU’s long-term goal is to cut emissions by 80-95% by 2050. This process will eventually impact on companies big and small across all sectors. Joining the Carbon Disclosure Project is a way for businesses to prepare themselves for this transition and maximise their chances of profiting from it.

Insurers and investors at a strategic crossroad Henri de Castries, Chairman and CEO, AXA Climate change, growing energy demand, resources depletion and population growth are straining global economies and ecosystems. Although the 2009 Copenhagen Summit failed to provide clear guidelines for businesses, there is a general consensus that the cost of inaction outweighs the cost of action, and that a pro-active approach to environmental issues is sound risk management for governments and businesses alike. In particular, climate instability can have a significant impact on the insurance business through growing risks and liabilities, evolving investment trends and changing customer lifestyles, hence coverage needs. Indeed, insurers and investors such as AXA stand at a strategic crossroads and are key actors in a position to provide both “adaptation” and “mitigation” solutions to society. They are in the only economic sector that has the data and modelling expertise necessary to help analyse the risks, across all economic sectors and regions. They have a critical role in influencing individual choices through insurance and can also make innovation possible.

Last but not least, insurers support the entire economy through their broad investment portfolios. Large “universal owners” such as AXA in effect own a slice of the world economy - with both upsides and downsides linked to long term societal transformations. Investment strategies can impact these transformations, as well as reduce exposure to certain risks. AXA is committed to making a difference in these areas. This is not just “being good”, it is good management, reflecting an in-depth analysis of the situation and rising expectations from employees, investors, customers and civil society. Tangible proofs of this commitment include a range of initiatives such as “green” insurance products, responsible investment funds, actions to reduce our own environmental footprint, the funding and sharing of research (notably via the AXA Research Fund), and contributing to collaborative initiatives such as the UNEP FI or the CDP. AXA has been a CDP partner since 2006, and we have supported the publication and presentation of the French (2006-2008) and European (2009) survey results. This year again, AXA is proud to support the Europe 300 report, highlighting where risks and opportunities lie to help investors to better navigate the path towards a low-carbon economy.

7

CA Cheuvreux and the Carbon Disclosure Project Jean-Claude Bassien, Chairman and CEO, Crédit Agricole Cheuvreux Writing the CDP Europe 300 report for the second year in a row means several things to CA Cheuvreux. Firstly, it means we must not allow ourselves to be distracted by the loss of momentum on climate change policies and by reduced media coverage over the past year. It also means that the Carbon Disclosure Project (CDP) initiative now has an even greater role to play, in order to partly make up for the lack of regulatory pressure. It means we must cast an even stronger light on companies’ responses to climate change, so that investors can assess and reward their performance at a time when the media is less focussed on this issue, and the excitement leading up to the Copenhagen Summit has faded. Last but not least, it means the lack of visibility and the increasing uncertainty surrounding climate change policies heighten the risks and opportunities involved in investing in European companies. The CDP is no ordinary initiative. In our view, it is equally important as the International Panel on Climate Change (IPCC) and the Stern Review on the Economics of Climate Change as it represents the business sector’s response to both scientific knowledge about climate change, and the resulting threat to the economy. It paves the way for a low-carbon economy and gives investors and other stakeholders the tools to assess whether or not we are on track to meet this challenge.

8

Nor is CA Cheuvreux an ordinary brokerage and research house. It is the most “European” in its nature and outlook, with presence in all major European financial centres and a coverage of 700 listed European companies. CA Cheuvreux was the first broker worldwide (and is still the only one to date) to become a signatory to the UN-backed Principles for Responsible Investment, in 2008. Climate change is an integral part of our research and investment services, as we have recognised that financial indicators should be supplemented with carbon-related equivalents (and of course other environmental, social and governance criteria) in order to capture the complexity of market risk and opportunities. We therefore take it as our responsibility to work alongside the initiatives with the greatest legitimacy, such as the Carbon Disclosure Project, in order to raise the standards and improve the accuracy and pertinence of climate change-related information provided by companies. I hope this report will benefit the investment community, as well as the 300 companies under review, as they pursue their strategies to achieve share performance in a low-carbon economy.

Executive Summary

Introduction 2009 marked a trough in the economic crisis in Europe. Uncertainties persist both on the economic recovery and the future of climate change policies, as the Copenhagen Summit failed to provide certainty on any post-Kyoto international framework for regulating greenhouse gas emissions. Despite this, European companies continue to respond to investor requests (through the CDP questionnaire) with increased disclosure on climate change-related risks and opportunities. The response rate for the Europe 300 report is at its highest: 84%. It is interesting to analyse the evolution of the Europe 300 index, which represents the 300 largest European companies by market capitalisation. The market capitalisation of wind and solar companies has not proved any more resilient than other companies in traditional sectors. As a result the wind turbines manufacturer Gamesa and solar energy companies Q-Cells and REC have left the Europe 300 sample in 2010.

However, renewable energies remain well presented in the sample: •

EDP Renováveis and Iberdrola Renovables – the renewable energy subsidiaries of electricity utilities companies EDP and Iberdrola – have entered the ranks of the largest 300 European companies by capitalisation.



In addition, large industrial companies, such as Siemens, Alstom or Saint-Gobain, also have developed renewable energy technologies in their product portfolios. Siemens indicates that the revenues of its Renewable Energy Division grew by 39% in 2009.

This is an important indicator that some of the largest European companies have built significant capacities in low-carbon technologies and have been seizing opportunities to participate in the transition to a lowcarbon economy.

2010 Highlights There are several positive highlights from this year’s report:

• The Europe 300 index maintained

its place as the leader in terms of disclosure, with 84% of companies responding to the CDP questionnaire (versus 70% for the US S&P 500 and 41% for the Japan 500). This is up 2% from 2009 and even reaches 86% after restating the sample from companies acquired during the year (e.g. the Cadbury take-over by Kraft Foods).

• Disclosure of Scope 1 and Scope

2 emissions improved respectively to 92% and 91% of companies. Around 50% of companies independently verify more than 80% of their Scope 1 and Scope 2 emissions data. The Europe 300 index also demonstrates by far the highest assurance level compared to other geographies. This should help investors to use emissions data with increased confidence, although there is still room for improvement.

• Direct carbon emissions fell sharply

in 2009 (by 7%), largely as a result of the economic crisis. By way of comparison, EU-27 GHG emissions dropped by 17.3% in 2009. It is certainly interesting to note that most of the largest emitters managed to improve their carbonintensity (relative to production volumes) in this tough economic environment (see the Materials and Utilities sector specific analysis).

9

Executive Summary

• Apart from the Health Care sector,

at least 83% of companies in every sector see regulatory opportunities emerging from climate change policies. This rate hits 100% for the IT, Telecommunication Services and Utilities sectors. This positive outlook is often correlated to market opportunities for companies selling products and services that help clients to reduce their own emissions (71% of companies).

• For instance, new generations of

products developed by capital goods companies are 12% to 50% more energy-efficient, and have applications in the transportation, building, power and industry markets.

However, there remain areas of concern that need to be addressed: Reduction targets and investments fall short • 79% of responding companies have set an emission reduction target, but the majority will expire by 2012.

• Companies reported just €31bn

in anticipated investments for alternative energy and energy efficiency projects. This figure is significantly lower than the equivalent in 2009 of ca. €100bn. This investment gap is largely attributable to companies which no longer disclose, or to companies which are no longer in the Europe 300 index, rather than to lower ambitions.

• Overall, the aggregation of all

reported targets show that the Europe 300 companies could deliver an average emissions reduction of just 1.5% per annum if they achieve their targets.

10

• It is not possible to achieve a true

comparison between targets set by the Europe 300 companies and EU-wide GHG reduction targets because the Europe 300 index does not fully capture many areas of the economy, which are considerable sources of GHG emissions, such as buildings, transportation and agriculture.

• The scope of direct emissions of

the Europe 300 index is closer in scope to the EU Emissions Trading System (EU ETS) because of its constituents. Disclosed carbon reduction commitments within the Europe 300 companies appear too low to reach the EU ETS cap set for 2020. The targets of Europe 300 utilities, materials and energy companies aggregated at sector level will deliver an average annual cut in emission intensity of 2.1%, 0.8% and 0.4% respectively. These cuts fall short of the planned decrease in the absolute emission cap under the EU ETS: 1.9% each year on average over 2013-2020, and up to 4.1% if the EU should decide to embrace the 30% EUwide GHG reduction target.

Scope 3 emissions remain the weakest part of the picture • Although 74% of respondents disclose at least one source of Scope 3 emissions, these are not always the most material from a risk perspective. For instance, ca. 70% disclose carbon emissions due to business travel while only 20% (11% less than last year) provide an estimate of the emissions related to the use of their products and services at the use or disposal phase. •

Financials still disclose widely on business travel but fail to provide quantitative information on the carbon risks lying in their clients’ portfolios, which can certainly be of higher interest for investors.



The lack of a harmonised methodology for calculating Scope 3 emissions also continues to hamper intra sector comparisons, such as in the Oil & Gas sector, for instance.

Conclusion From a market opportunity perspective, businesses generally call for a clear and stable regulatory framework providing long-term visibility, which policymakers failed to deliver at Copenhagen. More than ever, at a time when budget constraints challenge the ambitions of EU Member States to support the development of low-carbon technologies and services, further collaboration and understanding between economic players and policymakers is absolutely essential if the right signals are to be sent to allow more investments in low-carbon technologies.

Scoring Highlights Scores are generally higher than last year (average disclosure score is 68 versus 60 in 2009). This is partly due to changes in the scoring methodology, but some companies have made impressive improvements. Deutsche Post, Nestlé and Telefonica have increased their score by more than 30 points compared to last year’s results and are ranked in the Carbon Disclosure Leadership Index (CDLI) of the Europe 300.

• A performance score, which

This ranges from the final decision expected on CO2 efficiency benchmarks, which will set the carbon allocations post-2012 in the EU carbon market, to the implementation of additional supporting policies to foster investments in costly lowcarbon technologies (e.g. a floor price for carbon, a harmonised regulatory framework for Carbon Capture and Storage, higher visibility on post-2020 EU climate ambitions).

• Siemens achieved the highest

disclosure score of the index (98) and took the CDLI crown from Bayer. Siemens notably stands out by having defined an Environmental Portfolio since 2008, which now comprises 30% of Siemens’ entire portfolio (25% in 2008) and whose products and solutions installed in 2009 are cutting customers’ annual CO2 emissions by some 50mt CO2 emissions (+47% versus 2008).1

• The Utilities sector continues to

outperform on average in terms of disclosure, whereas the Financials sector underperforms both in disclosure and in performance aspects. Every sector is represented in the CDLI.

recognises and rewards the integration of climate change issues into the business strategy and the evidence of forward action, complements disclosure scores this year. Most of the time, disclosure leaders are also performance leaders, with a few exceptions (Saint-Gobain, UPM Kymmene, SCA, Rio Tinto, Centrica, EDP) where perhaps the ambition to integrate policy has not quite matched the actual evidence of forward action.

Table 1: Companies with the highest CDLI and CPLI scores Sector

CDLI (Score)

CPLI (Band A)

Consumer Discretionary

Philips Electronics (94),

Philips Electronics, Renault, BMW,

Renault (93)

Kingfisher

Reckitt Benckiser (93),

Reckitt Benckiser, Tesco, Nestlé

Consumer Staples

Tesco (92), Nestlé (92) Energy

Royal Dutch Shell (89)

Royal Dutch Shell, Eni, Repsol YPF

Financials

Royal Bank of Scotland (93),

Royal Bank of Scotland, HSBC,

HSBC (92)

Barclays, Munich Re, Swiss Re, UBS

Health Care

Novo Nordisk (89)

Novo Nordisk

Industrials

Siemens (98), Deutsche Post (97),

Siemens, Deutsche Post,

Ferrovial (89),

Ferrovial, Rolls-Royce

Saint-Gobain (89) Information Technology

Nokia (91)

Nokia

Materials

BASF (96), Bayer (95),

BASF, Bayer, Lafarge

Lafarge (94), UPM-Kymmene (90), SCA (90), Rio Tinto (89) Telecommunication Services

Utilities

Telefonica (89)

Telefonica, BT Group, Deutsche

BT Group (89)

Telekom, Royal KPN

Centrica (92)

Scottish & Southern Energy, E.ON,

Scottish & Southern Energy (90)

Iberdrola, National Grid

EDP (90)

1

Please note that, for the purposes of this report, mtCO2e = 1 000 000 metric tonnes CO2. Emissions figures have been rounded. For unrounded figures please see company responses at www.cdproject.net.

11

Executive Summary

Figure 1: Disclosure level Europe 300 sample Responding companies

253

84%

Disclosing Scope 2 emissions

230

77%

Disclosing any Scope 3 emissions

187

62%

12

51

17%

100%

Disclosing Scope 1 emissions

233

78%

Having emissions reduction target

200

67%

172

57%

Any portion of Scope 1 emissions independently verified

Disclosing Scope 3 related to use/disposal of products

300

Contents

CDP Signatories

2

Foreword: Connie Hedegaard, European Commissioner for Climate Action

6

Commentary: Henri de Castries, Chairman and CEO, AXA

7

Commentary: Jean-Claude Bassien, Chairman and CEO, CA Cheuvreux

8

Executive summary

9

1.

Overview of CDP

14

2.

Overview of the Europe 300

16

3.

Political Context

18

4.

The 2010 Carbon Disclosure Scores

25

5.

The 2010 Carbon Performance Scores

29

6.

Analysis by Sector

33

7.

Sector Specific Analysis

39

Consumer Discretionary

39

Consumer Staples

41

Energy

43

Financials

47

Health Care

49

Industrials

50

Information Technology

52

Materials

53

Telecommunication Services

57

Utilities

59

Appendix 1: Table of emissions, scores and sector information by company

62

Appendix 2: Composition of GICS sectors at three different segmentation levels

69

13

1 The Carbon Disclosure Project (CDP) is an independent not-forprofit organisation holding the largest database of primary corporate climate change information in the world. CDP was launched in 2000 to accelerate solutions to climate change by putting relevant information at the heart of business, policy and investment decisions. CDP furthers this mission by harnessing the collective power of corporations, investors and political leaders to accelerate unified action on climate change. In 2009, 2,500 organisations in some 60 countries around the world measured and disclosed their greenhouse gas emissions and climate change strategies through CDP, in order to set reduction targets and make performance improvements. In 2010, even more companies than ever before are reporting through CDP and managing their emissions. This data is made available for use by a wide audience including institutional investors, corporations, policymakers and their advisors, public sector organisations, government bodies, academics and the public. Climate change is not a problem that exists within national boundaries. This is why CDP harmonises climate change data from organisations around the world and develops international carbon reporting standards. CDP operates the only global climate change reporting system on behalf of 534 institutional investors (holding US$64 trillion in assets under management) and some 60 purchasing organisations, such as Dell, EADS, PepsiCo and Walmart.

Overview of CDP

Message from Paul Dickinson, Executive Chairman, CDP Carbon management continues to rise as a strategic priority for many businesses. This is fuelled by opportunities to reduce energy costs; secure energy supply; protect the business from climate change risk and damaged reputation; as well as generating revenue and remaining competitive. Companies globally are seizing commercial carbon opportunities, often acting ahead of any policy requirements. The demand for primary corporate climate change data is growing – it is now accessed through Bloomberg and Google Finance. It is also used by an increasing number of investment research providers and sell-side brokers to generate new insights into the impacts of climate change on the global industry and to highlight the associated opportunities. CDP has also launched two index products based on CDP data – the FTSE CDP Carbon Strategy Index series and the Markit Carbon Disclosure Leadership Index. These products give investors exposure to companies better positioned in the transition to a low carbon economy. Key focus areas CDP has set three key focus areas for the immediate future. One is to work with companies and the users of its data to continue improving quality and comparability. Data that supports action is central to fulfilling CDP’s mission. As part of this process, CDP is launching a new package, Reporter Services, exclusively for responding companies, to help them develop their carbon management strategies through increased data quality, deeper analysis and the sharing of best practice. Never forget that climate change is a global problem and requires a global solution. That is why CDP’s second

14

key focus is on globalising all programs in the major economies in the coming years. Beyond CDP’s Investor program, which sits at the heart of the initiative, CDP intends to grow its Supply Chain and Public Procurement programs, as well as CDP Water Disclosure, in order to maximise the fulfilment of CDP’s mission. The third key focus is mitigation and emissions reduction. The number of companies within the Global 500 index (FTSE Global Equity Series) reporting reduction targets has already increased fourfold since CDP’s first reporting year. But this is just the first step. CDP remains committed to help advance emissions reductions and works with investors and industry to achieve this. Looking ahead It is through partnerships that we can achieve the largest impact. CDP is delighted to be working with the Europe 300 report sponsor AXA; the Europe 300 report writer CA Cheuvreux; its global advisor PricewaterhouseCoopers; its global sponsor Bank of America; its local partners; as well as Accenture, Microsoft and SAP to accelerate its mission and highlight the huge opportunities for business to capitalise on the transition to a low carbon economy. These are exciting times for business, with significant changes coming to the way we produce and consume energy. New power from low or zero emissions sources is an urgent priority for climate change policy that simultaneously helps deliver energy security. New technologies, such as smart grids, electric vehicles, alternative fuel sources and advanced telepresence videoconferencing are showing a clear case for business growth with reduced emissions. The opportunities for business are enormous. It is through the intelligent investment of capital into the right solutions, identified by the business community that we will achieve the low carbon future we need.

Table 2: Global Key Trends Summary – 2010

Sample: geography / number of companies

% of sample answering CDP 20103

% of responders with Board or other executive level responsibility for climate change

% of responders with management incentives

% of responders with emissions reduction targets

% of responders taking actions to reduce emissions

% of responders indicating that their products and services help third parties to avoid GHG emissions

% of responders seeing regulatory risks

% of responders seeing regulatory opportunities

% of responders engaging policymakers on climate issues to encourage mitigation or adaptation

% of responders reporting the company’s response to climate change in mainstream annual filings / CSR reports

% of responders independently verifying any portion of Scope 1 emissions data

% of responders independently verifying any portion of Scope 2 emissions data

This table outlines some of the key findings from CDP 2010 by geography or industry data-set.

Asia ex-JICK 1354

32

80

46

56

73

41

65

70

60

80

48

40

Australia 200

47

83

46

40

73

55

69

76

73

88

43

43

US Bonds 180

82

78

62

70

87

55

60

71

88

91

54

46

Brazil 80

72

68

29

23

57

55

61

78

66

74

28

28

Canada 200

46

72

41

32

63

47

51

65

64

73

28

21

Central & Eastern Europe 100

12

85

57

57

71

43

71

100

85

57

57

57

China 100

11

57

57

57

57

43

71

71

57

86

43

29

Emerging Markets 800

29

77

50

47

74

49

70

84

68

78

39

37

Europe 300

84

94

62

79

87

71

74

87

77

97

68

60

FTSE All-World 800

74

83

61

70

77

65

69

78

85

92

57

49

France 250

30

89

48

69

79

60

72

86

62

93

57

46

Germany 200

61

70

33

47

50

57

43

68

42

66

35

23

Global 500

82

84

63

70

87

66

66

77

80

93

59

52

Global Electric Utilities 250

48

86

47

60

72

75

85

90

88

92

58

31

Global Transport 100

25

88

60

89

72

52

88

72

64

84

44

36

India 200

21

88

33

33

69

39

39

90

63

64

25

19

Ireland 40

50

80

26

60

80

33

66

53

46

80

33

33

Italy 60

35

66

57

76

85

71

76

80

66

90

62

62

Japan 500

41

89

61

91

84

73

81

81

60

94

28

28

Korea 200

42

60

52

46

61

44

70

73

50

56

29

29

Latin America 50

54

72

25

15

50

53

68

84

40

78

31

32

Netherlands 50

66

93

63

70

76

71

66

86

70

97

61

65

New Zealand 50

46

78

21

39

39

16

60

43

60

52

22

22

Nordic 200

65

88

44

69

77

67

68

79

62

93

45

37

Portugal 40

30

83

41

41

83

83

91

91

58

91

67

67

Russia 50

8

50

0

100

50

50

50

50

0

50

0

0

South Africa 100

74

95

50

42

82

42

77

85

80

92

39

41

Spain 85

40

87

53

71

84

72

81

84

62

97

69

63

Switzerland 100

58

77

26

52

59

56

38

63

42

82

40

35

Turkey 50

24

75

87

37

62

0

88

72

37

50

25

25

UK FTSE 600

51

96

49

61

73

48

68

74

59

87

41

39

US S&P 500

70

67

48

53

77

53

50

61

63

80

35

29

1 2 3 4

The key trends table provides a snapshot of response trends based on headline data. The numbers in this table are based on the online responses submitted to CDP as of 14 July 2010. They may therefore differ from numbers in the rest of the report which are based on the number of companies which responded by the applicable local deadline (e.g. 30 June 2010). For some samples, the number of companies included in a table may be lower than the original sample size due to takeovers, mergers and acquisitions. Includes offline responses to the CDP 2010 questionnaire and indirect answers submitted by parent companies. All other key trend indicators are based on direct and online company responses only. Asia excluding Japan, India, China and Korea (ex-JICK).

15

2

Overview of the Europe 300

Figure 2: Country origin of companies in the Europe 300 47

Figure 3: Breakdown of the Europe 300 index by GICS sector 15

60

8

15

72

17

11 14

24

15

54 29

19 22 24

34

United Kingdom 60 France 54 Germany 34 Switzerland 24 Spain 22 Italy 19 Sweden 15 Netherlands 14 Belgium 11 Other* 47 *Austria, Norway, Portugal, Greece, Denmark, Finland, Ireland, Luxembourg, other non-European

16

The Europe 300 sample is based on the FTSEurofirst 300 index, which contains the 300 largest publicly listed companies by market capitalisation in Europe.

49

31 40 Financials Industrials Consumer Discretionary Materials Consumer Staples Utilities Telecommunication Services Energy Health Care IT

72 49 40 31 29 24 17 15 15 8

The 233 companies in the Europe 300 sample who disclosed their direct onsite emissions (Scope 1) report 1.96bn tonnes of CO2 equivalent (tCO2-e) of greenhouse gas (GHG) emissions. This is equivalent to ca. 40% of the GHG emissions of the 27 European Member States (EU-27) in 2008. However, many European companies have worldwide operations and emit GHG emissions beyond the borders of Europe. Only 50% of the sample’s direct emissions are clearly reported in European countries. European companies emit almost 300 mtCO2-eq on the American Continent. Beyond on-site direct emissions, companies report on their indirect emissions related to the purchase of secondary energy (Scope 2, such as electricity and heat) and to external boundaries (Scope 3 categories, such as employee travel, carbon content of goods purchased and emissions related to the use of products/ services).The total direct and indirect emissions reported by the companies in the Europe 300 sample amounts to 7.7bn tCO2-eq or ca. 15% of global GHG emissions. There is naturally some double counting in this figure since the indirect emissions reported by one company (e.g. related to the purchase of electricity) can be the direct emissions of another company (e.g. a utility company).

Figure 4: Location of direct emissions of the Europe 300 EU-27 (+Switzerland and Norway)

North America

Latin America

Africa

Southern & Eastern Europe

Asia

Oceania

Middle East

Not identified

0

200

400

600

800

1000

GHG Emissions (mtCO2e)

17

3 EU Targets The economic downturn in 2009 has led to substantial reductions in GHG emissions in Europe, which will clearly help the European Union meet its international commitment under the Kyoto Protocol, as well as its 2020 climate ambitions. Indeed, EU-27 GHG emissions in 2009 are estimated by the European Environment Agency to be 17.3% below 1990 levels, while the EU has committed to reducing emissions by 8% over 2008-2012 under the Kyoto Protocol and by at least 20% by 2020 (unilateral commitment). Based on these figures, the EU looks on track to meet its targets, which are no longer seen as posing a challenge. In this context, and despite the disappointing outcome of the international talks on climate change at Copenhagen, the European Commission continues to push the idea of Europe possibly revising its carbon emissions reduction commitment from 20% to 30% by 2020. A draft discussion document was published in 2010 to debate this opportunity. This draft notably contains the estimate that a switch to a 30% reduction target would raise costs by €33 billion per annum. However, the initial cost of cutting emissions by 20% has also been revised down to €47 billion after factoring in the economic crisis. This is compared to the previous figure of over €70 billion p.a. in 2020. An assessment indicates that if the EU switches to a 30% target, the risk to production volumes is highest in chemicals activities, but remains generally less than 1%. One idea is to implement an EU-harmonised carbon tax based on the carbon content of fossil fuels in order to create a carbon price signal for sectors not included under the EU Emissions Trading System (i.e. higher prices of fossil fuels). 18

Political Context

Implications from the economic crisis In these economic times, Member States are having to deal with budget constraints and seem to be adopting a more cautious stance with regards to the costs associated with policies supporting carbon reduction commitments and the development of renewable energies. The discussion over a potential switch to 30% has been postponed until after the UN international climate meeting in Cancun in December 2010. Spain, Germany and France have all reviewed their supporting policies for solar energy by lowering guaranteed feed-in tariffs and applying annual caps to the development of solar capacities. The economic crisis also had the effect of reducing electricity consumption. This automatically reduces the forecasts of additional renewable energy capacities needed to comply with EU targets, as the latter are defined as a percentage of total energy consumption. EU Carbon Market With regard to the EU carbon market, the carbon price has remained fairly stable since the 2009 edition of the CDP Europe 300 report, trading in a range of €12 to €16/tCO2. The stability of the carbon price is mainly due to the sharp drop in production volumes in sectors regulated under the carbon market, which has left millions of surpluses of emission rights in the hands of cement and steel producers.

The European Commission has also made progress on the new rules applying to the EU ETS over 20132020. The official list of sectors deemed significantly exposed to the risk of carbon leakage, due to extra CO2 costs arising from the EU ETS, was published in late 2009. Most of the industries (apart from brick production) are in this list and are therefore eligible to receive 100% free CO2 rights until 2020, up to a sector carbon efficiency benchmark. The calculation is based on the 10% most efficient installations of a sector. The Working Groups in charge of designing these sector benchmarks have made progress in 2009/2010, although discussions are still ongoing and nothing has been officially set so far. The final decisions on these benchmarks are expected by December 2010. Another challenge of the post-2012 carbon market is the creation of a primary market for emission rights through the organisation of auctions. One of the fears raised by some CDP respondents regarding these auctions is that non-regulated players could play the system by manipulating the price of carbon.

The European Commission believes that a higher carbon price of around €30/t would be necessary to incentivise further investments in low-carbon technologies. In order to safeguard the price of carbon, the European Commission has notably been firm in its position not to yield to the claims of several Eastern European countries to obtain extra free CO2 rights for their industries. http://eur-lex.europa.eu/LexUriServ/LexUriServ. do?uri=COM:2010:0265:FIN:FR:PDF

Comparison with indices from other global geographies At a time when one of the EU’s ambitions is to lead the way in terms of a low-carbon economy, it is encouraging that European companies, as a whole, appear to be at the forefront of carbon disclosure and climate change strategy design, when compared to other key global geographies. As highlighted in the chart below, the Europe 300 index ranks first in many aspects of the questionnaire. Disclosure and reporting The response rate to CDP in the Europe 300 is at its highest. It has increased to 84% in the Europe 300 index (versus 82% last year). The Europe 300 index has also maintained its place as leader in terms of disclosure, compared with other geographies, with the US (S&P 500 index) and Brazil (top 80 companies by market capitalisation) following with 69% and 72% response rates, respectively. Disclosure rates in China, India and Eastern Europe remain low ( direct on-site emissions)

Auto

- EU emissions standards for cars seen achievable at the price of significant R&D efforts - Need to increase the type of models produced in small numbers to fit with market specific requirements

- Development of electric vehicles

Shipping

- “Uncertainty as to how GHG emissions from shipping will be regulated. The inability to reach an agreement at COP 15 means that local or regional regulation of GHG emissions from shipping now seem more likely”. (Maersk)

- “Anticipate that the shipowners that can offer the most energy efficient or “low-carbon” fleet will have a competitive advantage in the future” (Maersk)

24

4 The carbon disclosure scores assess companies on the quality and completeness of their disclosures and consider factors including: • Clear consideration of businessspecific risks and potential opportunities related to climate change; and • Good internal data management practices for understanding GHG emissions, including energy use. It is important to note that the carbon disclosure score is not a metric of a company’s performance in relation to climate change management, because the score does not make any judgment about mitigation actions. A company’s disclosure score is based solely on the information disclosed in the company’s CDP response.

The 2010 Carbon Disclosure Scores

What does a CDP carbon disclosure score represent? The carbon disclosure score is normalised to a 100-point scale. Generally, companies scoring within a particular range suggest levels of commitment to, and experience of, carbon disclosure. Indicative descriptions of these levels are provided below for guidance only; investors should read individual company responses to understand the context for each business. High (>70) A higher score typically indicates one or more of the following: • Strong understanding and management of company-specific exposure to climate-related risks and opportunities • Strategic focus and commitment to understanding the business issues related to climate change, emanating from the top of the organisation • Ability to measure and manage the company’s carbon footprint • Regular and relevant disclosure to key corporate stakeholders Midrange (50–70) A midrange score typically indicates one or more of the following: • Growing maturity in understanding and managing company-specific risks and potential opportunities related to climate change • Good evidence of ability to measure and manage carbon footprint across global operations • Commitment to the importance of transparency Low (70), which reflects a high level of understanding of climate change issues associated with a high level of reporting.

These two leading sectors have something else in common - the scores obtained by companies within these sectors show some of the lowest dispersion of scores (standard deviations) against the sector average (14.8 for Utilities, 13.1 for Telecommunication Services). This is an indication that companies in these sectors do report better as a group. In other words, the sector performance cannot be (fully) attributed to a few companies with extremely high scores. The Consumer Discretionary sector also scores above the Europe 300 average, but with a higher scattering of company scores within this sector (standard deviation: 18.8). This could be attributed to the higher diversity of industries represented in the sector. In terms of disaggregation in the Consumer Discretionary sector, it appears that the Automobiles & Components industry achieves an average score of 80, whereas companies within the Consumer Services industry have a much lower average score of 55.

80 Figure 12: Number of companies by score range

70

Low score (15%)

The Energy, Industrials and Financials sectors show more modest results in terms of disclosure with average disclosure scores below 65.

Midrange (40%)

Number of comp

High Score (45%)

60

50

40

30

20

10

0 11-20

21-30

31-40

Number of companies 26

41-50

51-60

61-70

71-80

81-90

91-100

2 The top-scoring 10% includes tied scores.

Results by section The CDP questionnaire is composed of distinct categories of questions that include different aspects, such as governance, strategy, targets and reporting of emissions data. The detail of the scores by section allows a deeper level of analysis and helps to better understand which aspects of climate change disclosure sectors differentiate. In general, it is clear that companies score better when they describe the corporate governance practices adopted in response to the climate change challenge than when they are asked to identify (and describe) business opportunities driven by climate change policies. The average disclosure score for governance is 89. However, the governance section is weighted at only 3% of the total disclosure score. The largest share of the points lie in the sections dealing with risks and opportunities, strategies and targets, and emissions reporting. The three leading sectors (Utilities, Telecommunication Services, and Materials) have been especially good at reporting identified risks and opportunities related to the climate change challenge, alongside their strategy and emissions reduction targets. This is also true for the section on emissions reporting and emissions verification statements, although other sectors with lower total scores, such as Consumer Discretionary and Consumer Staples have also performed well in this field.

Figure 13: Disclosure scores by sector Financials

65

Industrials

65

Energy

65

Consumer Staples

66

Health Care

66

Information Technology

67

Europe 300 average

68

Consumer Discretionary

69 70

Materials Telecommunication Services

72 75

Utilities

0

10

20

30

40

50

60

70

80

Average disclosure score

Figure 14: Disclosure scores by sector for key sections of the questionnaire 100

80

60

The bottom three sectors (Financials, Industrials and Energy) obtained below average or average scores in all sections of the questionnaire. 40 Utilities

Telecommunication Services

Materials

Consumer Discretionary

IT

Scope 1, 2, 3 emissions data Strategy & target Emissions: history, intensity, verification Risks Opportunities

Health Care

Consumer Staples

Energy

Industrials

Financials

Healthcare companies were relatively good at identifying risks and opportunities, but have belowaverage scores when it comes to reporting on emissions data, reduction strategies and targets. The Consumer Staples sector, on the other hand, is clearly weak in identifying risks and opportunities raised by climate change.

27

The 2010 Carbon Disclosure Scores

The Carbon Disclosure Leadership Index 2010 The 25 highest scoring companies in the Europe 300 index are in the Carbon Disclosure Leadership Index (CDLI). All sectors are represented this year, whereas in 2009, no companies in the Telecommunication Services sector were included. The Consumer Staples sector is also more strongly represented with Tesco and Nestlé joining Reckitt Benckiser in the index. Some sectors remain largely over- or under-represented in the CDLI. The Materials sector distinguishes itself clearly, with six companies included in the index. This sector is therefore more than twice as highly represented in the index with respect to the overall index of scored companies (making up 24% of the CDLI and only 11% of scored companies). On the contrary, the Financials sector is largely under-represented. This year, it represents only 8% of companies in the CDLI and 24% of scored companies. Siemens ranks first for this edition, and eleven companies entered the Europe 300 CDLI for the first time. The performance of Deutsche Post, Nestlé and Telefonica should be highlighted, as their scores have risen by more than 30 points compared to last year’s results. It should also be noted that Royal Dutch Shell has replaced Total in the Energy sector, and NovoNordisk has taken the place of GlaxoSmithKline, as the only company to represent the Healthcare sector.

28

Table 5: The Carbon Disclosure Leadership Index 2010 Sector

Company

Disclosure Score 2010

Score 2009

Consumer Discretionary  

Philips Electronics

94

73

Renault

93

80; CDLI

Consumer Staples    

Reckitt Benckiser

93

80; CDLI

Tesco

92

69

Nestlé

92

60

Energy

Royal Dutch Shell

89

75

Financials  

Royal Bank of Scotland

93

77; CDLI

HSBC Holdings

92

92; CDLI

Health Care

Novo Nordisk

89

73

Industrials      

Siemens AG

98

85; CDLI

Deutsche Post AG

97

63

FERROVIAL

89

68

Saint-Gobain

89

67

Information Technology

Nokia Group

91

78; CDLI

Materials          

BASF SE

96

94; CDLI

Bayer AG

95

95; CDLI

Lafarge

94

84; CDLI

UPM-Kymmene Corporation

90

72; CDLI

SCA

90

63; CDLI

Rio Tinto

89

87; CDLI

Telecommunication Services  

Telefonica

89

59

BT Group

89

65

Utilities    

Centrica

92

84; CDLI

Scottish & Southern Energy

90

78; CDLI

EDP - Energias de Portugal S.A.

90

75

5 In the 10 years that CDP has monitored disclosure practices, corporate activity has advanced to a stage where analysis of performance can aid investors who want to identify leading companies in carbon management. In 2009, CDP piloted a performance component in an effort to respond to investor requests for this analysis. This year, all companies with sufficient disclosure scores received a performance score; the qualifying threshold to receive a performance score was a minimum disclosure score of 50. Disclosure scores lower than 50 do not necessarily indicate poor performance. Rather, they indicate insufficient information to evaluate performance. For the Europe 300, the performance scores are published for the top 15% of the responses (33 companies). While performance scoring is an instructive exercise for all stakeholders, CDP recognises that this is a process that will evolve over time. CDP recommends that investors review individual company disclosures in addition to performance rankings in order to gain the most comprehensive understanding of company performance.

The 2010 Carbon Performance Scores

• Carbon performance ranking is based solely on information disclosed in a company’s CDP response. Any additional negative or positive actions that are not disclosed in a company’s CDP response are not considered in the application of the performance score methodology. • CDP performance results should be considered in conjunction with other carbon metrics to provide a more comprehensive picture of a company’s performance on mitigating climate change. • The relative weighting of performance indicators within the Rating Methodology does not take into consideration certain sectorspecific issues and challenges, such as customer expectations, regulatory requirements or cost of doing business.

It is important for investors to keep in mind that the CDP carbon performance score is not: • An assessment of the extent to which a company’s actions have reduced carbon intensity relative to other companies in its sector. • An assessment of how material a company’s actions are relative to the business or to climate mitigation; the score simply recognises evidence of forward action. • A comprehensive measure of how green or low carbon a company is but, rather, an indicator of the extent to which a company is taking action to manage its impacts on, and from, climate change. Carbon performance scores form the basis for determining the Carbon Performance Leadership Index (CPLI) —the companies with the highest performance scores. As with the CDLI, a company’s response must be publicly available to be eligible for the CPLI.

While clear indicators of good performance emerge from the results, there are several factors to consider when evaluating where a company is ranked in comparison to its peers.

29

The 2010 Carbon Performance Scores

The following descriptions explain the four performance bands that were used for categorising respondents. They provide an illustrative example of the potential profiles of the companies that may be included in each band. The key indicators that identify the characteristics of 2010’s performance leaders are outlined in Figure 15. Investors are also encouraged to read individual company responses in order to gain further context for a company’s carbon performance score. Care should be taken when comparing performance across companies. More information can be found at www.cdproject.net in the questionnaire, supporting methodology and guidance documents, as well as within individual company responses.

Figure 15: What are the characteristics of carbon performance leadership in 2010? Strategy • • •

Integrate climate change risks and opportunities into overall company strategy Establish GHG emissions reduction target Engage with policy makers on climate policy

Governance • Identify formal accountability for oversight and management • Establish incentives for climate-change-related activities

Stakeholder Communications • Communicate in mainstream reporting or other regulatory filings • Verify emissions data through an external third party

Achievements • Implement energy or emissions reduction initiatives • Achieve significant emissions reduction • Capitalize on opportunities as sources of business value

30

The CDP 2010 carbon performance bands The carbon performance score is given as a banded score. Indicative descriptions of the bands follow and are for guidance only. The drivers of any individual company score may vary across a number of different indicators. As such, investors should read individual company responses to understand the context for each business. Band A (Leading): Companies with scores greater than 80 Companies in this band excel for overall performance — relative to those in other bands — indicating both higher degrees of maturity in their climate change initiatives and achievement of their objectives. Companies in this band demonstrate the following characteristics. Strategy: With the highest number of significant risks and opportunities identified, companies in this group were the most likely to demonstrate integration of their climate-related priorities into their overall business strategy. They frequently disclose targets aligned with those ambitions and emission reduction initiatives. Governance: These companies demonstrate the most structured and most defined climate change management mechanisms by frequently reporting formalized accountability, incentives and oversight from the board or executive level. Stakeholder communications: These companies also recognize the importance of providing transparent and quality disclosure for their stakeholders by taking steps to verify data and report climate-related information in their external communications. Achievements: In support of their commitment to reduce emissions, these companies disclose the highest number of actions taken to reduce their emissions, and most report success in achieving emissions reductions. Band B (Fast following): Companies with scores of 51 to 80 Companies in band B also recognize the importance of climate change and are quickly following in the footsteps of the leading companies. While the majority of companies in band B note climate change as a priority, their responses indicate that actions and initiatives may not be as established or as well integrated into the companies’ overall structures and strategies compared with those in band A. However, there may be a broad spectrum of performance maturity within this tier, because some seemingly higher-performing companies in this band may have provided limited information for certain key performance areas, thereby constraining the ability to fully evaluate them. Band C (On the journey): Companies with scores of 21 to 50 Companies in band C indicate some activity on climate change. Most companies in this group identify at least one risk from climate change and accordingly exercise some degree of oversight to monitor the progress of their climate change initiatives. The levels of integration and maturity of those initiatives tend to vary according to disclosure of emissions reduction targets, implementation of emissions reduction activities, employee incentives and verification of emissions information. This group represents a variety of companies, including those that are new to taking action on climate change, those that do not have climate change objectives as strategic actions for the organisation, and those that do not believe the agenda to be a shorter-term priority. Band D (Just starting): Companies with scores of 20 or below Companies in this band recognize the importance of participating in CDP, and they have therefore achieved reasonable levels of disclosure (i.e., a disclosure score >50). However, they have disclosed limited evidence of actions taken on mitigation or adaptation. Companies in this band may include (1) those that believe that issues regarding climate change are not relevant to them and (2) those that are beginning to take action on climate change. As such, no further assertions can be made about their performance.

31

The 2010 Carbon Performance Scores

Summary – Results of 2010 Scoring Overall, 217 companies received a sufficient disclosure score to get a CPLI score. The breakdown by band (figure 16) shows that more than two thirds of companies got a grade A or B and only very few (8 companies) scored in the D band. The Telecommunication Services, Energy and Utilities sectors are overrepresented in the Band A Score range. Energy companies represent only 4% of companies with a performance score, and constitute 9% of the companies in Band A. This sector is a particularly interesting case, as it illustrates the disconnect between disclosure and performance scores (the average disclosure score of this sector is below average). However, a large majority of companies in the CDLI did receive high performance bands (19 A bands, 6 B bands).

Figure 16: Number of companies by performance band 120

Table 6: The list of companies with a band A performance scores by sector

The proportion of Financials companies is higher in the CPLI than in the CDLI, but the weight of the sector in these two indices is still below their weight in the Europe 300 index. This indicates that the Financials sector underperforms other sectors on a relative basis in terms of disclosure and performance with regard to climate change issues (according to CDP scoring methodologies). CPLI Table – Band A Table 6 presents the list of companies with a Band A performance scores by sector. Every sector is represented in the CPLI, in some cases with the same companies as in the CDLI (e.g. Consumer Staples, Healthcare, IT). In some cases, there are minor changes; for example, Rolls Royce appears instead of Saint-Gobain in this ranking.

Sector

Companies in Performance Band A

Consumer Discretionary

BMW, Kingfisher, Philips Electronics, Renault

Consumer Staples

Nestlé, Reckitt Benckiser, Tesco

Energy

Eni, Repsol YPF, Royal Dutch Shell

Financials

Barclays, HSBC, Munich Re, Royal Bank of Scotland, Swiss Re, UBS

Health Care

Novo Nordisk

Industrials

Deutsche Post, Ferrovial, Rolls-Royce, Siemens

Information Technology

Nokia Group

Materials

BASF, Bayer, Lafarge

Telecommunication Services

BT Group, Deutsche Telekom, Royal KPN, Telefonica

Utilities

E.ON, Iberdrola, National Grid, Scottish & Southern Energy

Figure 17: Weight of sectors in band categories 35 Number of companies

Sectors over represented in band A

30

100

25 80

20 60 15 40 10

20 5

0

0 Telecommincation Services

Energy

Utilities

IT

Consumer Disc.

32

Consumer Staples

Band A Band C All bands

Health Care

D

Materials

C

Financials

B

Industrials

A

6 Introduction 253 (84%) companies in the Europe 300 index responded to the CDP 2010 information request. Key highlights are:

• With regard to emissions data,

92% of responding companies provide Scope 1 emissions and 91% provide Scope 2 emissions figures. More than half of respondents3 have more than 80% of emissions data externally verified. Three quarters provide at least one figure for their Scope 3 emissions.

• With regard to identification of

risks and opportunities, European companies are more concerned by climate change policies than by the physical impact of climate change, where timing is often uncertain. While energy-intensive sectors focus on risks related to carbon regulation, the perception of business opportunities (shared by 87% of respondents) is widespread among sectors. However, a smaller proportion of respondents (71%) consider that their products and services can help third parties to reduce their emissions.

• With regard to managerial aspects,

79% of companies have an emissions reduction target and 62% apply management incentives linked to objectives, including climate change issues.

Analysis by Sector

Levels of disclosure across different sectors The Telecommunication Services, Utilities and Industrials sectors have the highest response rates to the CDP questionnaire this year. Despite a relatively low response rate, the Consumer Discretionary sector distinguishes itself by a high disclosure rate for Scope 3 emissions and a relatively high level of emissions data verification (50% of companies have more than 80% of their Scopes 1 and 2 emissions verified by independent third parties). The perception of a significant regulatory risk linked to climate change policies is widely spread among energy-intensive sectors (Utilities, Materials, Energy). However, while they perceive themselves as at risk, the Energy and Materials sectors have fewer internal emissions reduction targets at the corporate level than average. However, the practice of incentive schemes for the management to achieve emission reductions is well spread among Energy companies. More than 4 out of 5 Telecommunication Services companies also consider that carbon regulation poses risks. This follows the European Commission’s recommendation in October 2009 on mobilising Information and Communications Technologies to facilitate the transition to an energyefficient, low-carbon economy. On the other hand, the Information Technology and Telecommunication Services sectors are optimistic about opportunities related to climate policies, as 100% of them identify opportunities and believe they have products or services that can help their clients reduce emissions.

3 This excludes the Utility sector for which scope 2 (related to power consumption) is not relevant as the sector produces electricity, and emissions related to the purchases of electricity for resale fall in scope 3.

33

Analysis by Sector

% of sample answering CDP 20103

% of sample veryfing >80% of Scope 1 AND Scope 2 emissions

% of sample disclosing Scope 3 emissions

% of responders with emissions reduction targets

% of responders with management incentives

% of responders indicating that their products and services help third parties to avoid GHG emissions

% of responders seeing regulatory risks

% of responders seeing regulatory opportunities

% of responders seeing physical risks

% of responders seeing physical opportunities

Table 7: Levels of disclosure across different sectors

Consumer Discretionary

73

57

87

73

57

53

70

83

73

50

Consumer Staples

89

48

70

87

74

52

74

87

70

65

Energy

80

50

58

58

83

67

100

92

83

33

Financials

83

48

87

77

52

60

77

85

75

68

Health Care

73

55

82

64

64

45

55

55

36

9

Industrials

90

50

50

86

55

77

55

84

45

50

Information Technology

88

43

100

86

86

100

43

100

57

57

Materials

84

48

67

78

67

85

89

93

70

70

Telecommunication Services

94

50

88

88

63

100

81

100

88

81

Utilities

92

N/A

73

82

77

95

95

100

82

86

Grand Total

84

50

74

79

62

71

74

87

68

61

Risks and opportunities perception among sectors Most regulatory risks identified by responding companies are short-term risks (within a 5-year timeframe). Nearly three quarters (74%) of companies claim that they will be exposed to at least one regulatory risk over the next five years. The most exposed sectors are: Utilities (64%), Energy (60%), Materials and Telecommunication Services (58%). Most commonly identified risks within this 5-year timeframe are associated to cap and trade schemes; regulation and tax; product labelling; and energy efficiency standards. The sector breakdown of the most important risks (cap and trade schemes; regulation and tax) shows the same result as the timescale breakdown, except for product labelling and energy efficiency, where Consumer Discretionary is the most exposed sector.

Table 8: Risk perception of sectors by type of risks Cap and trade schemes

Materials (risk quoted by 42% of companies); Energy (40%)

Regulation and tax

Utilities (64%), Telecommunication Services (50%), Energy (40%)

Product labelling and energy efficiency

Consumer Discretionary (43%), Telecommunication Services (42%)

Figure 18: Percentage of responding companies in each sector seeing risks due to products regulations and standards (efficiency, labelling) Consumer staples

11% 17%

Industrial

20%

Financials

25%

Utiliities Consumer Discretionary

26% 33%

Materials Telecommunication Services

63% 0

10

% of responding companies

34

20

30

40

50

60

70

Turning regulations into opportunities Similar to regulatory risks, most regulatory opportunities identified by the sample are short-term: 64% of respondents identified at least one regulatory opportunity within the next five years. Materials and Telecommunication Services (75%), Utilities (67%) and Energy (60%) sectors are seeing business opportunities coming from climate change regulation. The most commonly identified opportunity is linked to product regulations and standards, followed by regulation and taxes, as well as cap and trade schemes. The perception of business opportunities in Telecommunication Services is related to products or services which could help clients to reduce emissions: “Stricter regulations in energy and fuels could drive companies to use our solutions (teleservices) to reduce energy and fuel cost.” SWISSCOM Most companies in the Materials sector expect that an international postKyoto agreement could create new markets and boost existing markets for energy efficient products. They also consider that potential future cap and trade mechanisms in the US, Canada and other developed countries could represent opportunities for them to benefit from early emissions reductions and innovative products and solutions.

Changes in frequency of extreme weather events

Changes in precipitation patterns

Induced changes in supply chain and/or customers

Induced changes in natural resources

Table 9: Risks associated with the physical impacts of climate change

Uncertain

27 %

21%

31%

32%

Current

27%

29%

14%

10%

0–5

19%

16%

21%

19%

6 – 10

3%

5%

7%

6%

11 – 20

7%

13%

7%

10%

21 – 50

3%

2%

0%

3%

> 50

14%

14%

19%

19%

Risks associated with the physical impacts of climate change Companies consider that they are mainly exposed to changes in frequency of extreme weather events (one-third of respondents) and precipitation patterns. They also identified that the changes in supply chain and/or customers (17% of physical risk identified) and natural resources (12% of answers) occurring as a consequence of extreme weather events could represent significant risks. These risks are supposed to occur in the short-term (the next five years), except the potential impacts on natural resources, which are considered as uncertain by most of responding companies. Companies across sectors identify extreme weather events as risks, whereas water scarcity as a result of a potential change in precipitation patterns is more of a concern for water-intensive sectors, such as Utilities (52% of companies); Consumer Staples (33%, which includes the Food, Beverage and Tobacco industry); and Materials (32%).

“Some Nestlé sites are being affected by lack of precipitation.” Nestlé The Consumer Discretionary, Consumer Staples and Financials sectors appear relatively more exposed to changes in supply chain and/ or customers that may result from weather-related natural hazards. In the Consumer Staples sector, all the companies concerned are in the Food, Beverage and Tobacco industry, as they fear shortages of agricultural raw materials, due to drought, water scarcity, etc. In the Financial sector, the Banks and Insurance industry groups identify the risk that changes in weather patterns and natural catastrophes can impact their clients’ solvency and ability to operate, especially in sectors, particularly vulnerable to climate change (fisheries, forestry, tourism, agriculture, etc).

Figure 19: Perception of a risk of change in supply chain and/or customers induced by weather events within sectors Information technology

% of responding companies

0%

in %

8%

Healthcare

12%

Materials

17%

Utilities

Industrials

19%

Telecommunication services

19% 25%

Energy Consumer discretionary

38% 39%

Financials Consumer staples

46% 0

10

20

30

40

35

50

Analysis by Sector

Key themes from the Europe 300 company responses by industry sector Climate change poses specific challenges to every sector. The key climate change issues faced by each of the 10 sectors of the GICS classification are summarised in table 10. Table 10: Key themes from the Europe 300 company responses by industry sector Sector

Key themes highlighted by Europe 300 companies

Consumer Discretionary

- Improving the CO2-efficiency of products to meet consumption trends and comply with regulation - Engaging regulators to ensure sustainable incentives and framework to stimulate demand for new technologies, e.g. electric vehicles - Awareness campaigns to clients to act on emissions at product use phase (e.g. eco-driving training)

Consumer Staples

- Improving the carbon efficiency of stores to cut energy costs and anticipate higher fossil fuel prices (retailers) - Switching to HFC-free refrigeration systems (food retailers) - Improving the CO2-efficiency of products and packaging to meet changes in consumer demand and mitigate the impact of potential regulations (carbon labelling, CO2 tax) - Securing sustainable supply of agricultural raw materials as increasing adverse weather events may affect crops and price stability

Energy

- Carbon-efficiency of processes to mitigate impact of CO2 cap and trade schemes and flaring down regulations - Lowering the carbon-intensity of the product portfolio and sustainable sourcing of biofuels to comply with biofuel blending mandates and Low Carbon Fuel Standards - Taking opportunities and positioning on alternative energy technologies (renewables, carbon capture and storage, hydrogen)

Financials

- Exposure of banks and insurers to clients with credit profile sensitive to the increase of CO2 costs - Opportunities in the development of green products and services (e.g. financing, leasing, insurance of renewable energy systems, low emissions vehicles, low consumption homes; carbon finance, eco loans) - Identifying risks and taking opportunities in insurance and reinsurance of weather-related natural catastrophe risks

Health Care

- Mixed views on business opportunities linked with disease spread and intensification due to climate change - Potential difficulties on carrying product labelling due to the abundance of substances and products

Industrials

- Risk of carbon/energy efficiency regulations for air and marine carriers. Commercial opportunities with “low carbon” offers (Transportation) - R&D on CO2-efficient products and creation of business units to capture opportunities in growing markets for energy efficient engines, motors, buildings, mobility, and renewable energies

Information Technology

- Product innovation to meet carbon reduction needs of customers (e.g. smart metering solutions for electricity suppliers) - Energy-efficiency of products in anticipation of potential EU regulation by 2015

Materials

- Lowering carbon-intensity of production processes is key to avoid significant costs under cap & trade schemes - Engaging regulators on global sectoral schemes to avoid risks of carbon leakage regionally and distortion of competition - Seizing market opportunities with the development of eco-efficient products helping emissions cuts in other sectors (e.g. insulation products)

Telecommunication Services

- Risk of rise in the price of equipments, in the event suppliers would have to comply with energy efficiency standards on their products - Eco-design of products - Commercialisation of new products/services to help consumers reduce emissions (e.g. videoconferencing)

Utilities

- Diversifying the energy mix towards low-carbon energies to reduce financial exposure to CO2 costs under the EU ETS over 2013-2020 - Compliance with national renewable and energy efficiency mandates applying to electricity/gas suppliers in some EU Member States - Seizing opportunities in the development of renewable energies and of energy efficiency services, to compensate risks of displacement of non renewable power generation and reduced demand for electricity

36

Contrasting outlooks within sectors Two companies within a sector can have radically different views, positioning, practices or standards regarding an identical and specific challenge posed by climate change. Table 11 gathers diverging or contrasting answers given by companies to a common sector issue. Table 11: Contrasting outlooks with sectors Issue

Outlook 1

Outlook 2

Consumer Discretionary

Regulatory Risk: Emissions standards on passenger cars

FIAT: “...the EU regulation introduces financial penalties for car manufacturers not compliant with their specific targets starting from 2012 (the penalty amounts a maximum of €95/g for each exceeding gram). Fiat has in place a process in order to constantly monitor the achievement of its target. No risk of penalties is being identified.”

Porsche: “Through intensive research and development efforts, Porsche is in a position to comply with the prescribed mandatory national emission limits for all its vehicle models in order to, on the one hand, contribute towards climate protection and, on the other, to avoid the payment of penalties. If the limit values prescribed in regulations cannot be achieved within the prescribed period, despite every effort and by means of appropriate improvements within development, there is a threat of severe penalties.”

Consumer Staples

Physical Risk: Availability and quality of water resources

SAB Miller: “Physical availability and quality of water resources to our operations in a number of locations have the potential to pose a risk to business continuity. Given the importance of both quality and quantity of this resource to our products this is considered to be an extremely import risk and forms part of our 3 global focus areas.”

Carlsberg: “For the moment, we don’t envisage any concrete direct physical risks to our production sites due to extreme weather conditions such as hurricanes and floods.”

Energy

Regulatory opportunity: development of alternative fuels and technologies

Statoil: “Statoil is a pioneer within CCS, and is engaged in 3 of 4 worlds biggest CCS projects, as an operator at Sleipner and Snøhvit fields in Norway and as partner in In-Salah, Algeria. Statoil was the first company to store CO2 in a geological formation offshore... Statoil is developing business opportunities as operator of geological storage of CO2.”

ENI: “Regarding the geological storage of carbon dioxide, eni is focused on backing both the Italian and European regulators in implementing a support framework to remove obstacles to the full development of CCS technology. In 2008, eni signed a strategic cooperation agreement with Enel for the joint development of CCS technologies aimed at accelerating the implementation of the entire technology package required for the capture, transfer and confinement of carbon dioxide. A joint pilot project is on-going.”

Financials

Indirect regulatory risk: credit risk of client base due to carbon regulations

Barclays: “We have not yet faced any material financial impact as a result of current or forthcoming climate change regulation on our client base. Deep industry expertise combined with strong risk management means that visible regulatory risks from climate change are assessed as part of the broader industry and macroenvironment when assessing lending and investment decisions. For instance, we model carbon price scenarios during the credit analysis process for energy intensive clients in relevant jurisdictions.”

BCP: “BCP is planning to internalize the environmental risk of all customers on credit risk analysis. But for a correct identification of risks and how these should be incorporated into risk analysis is now collecting information and providing training to employees.”

Health Care

Physical opportunity: increase of diseases as an effect of climate change

GlaxoSmithKline: “Below is a list of events associated with climate change that have the potential to create opportunities for GSK in the form of a greater requirement from society to GSK for preventative action as well as the supply of effective medicines. Changes in precipitation patterns are likely to influence patients’ needs as water-borne diseases increase their spread with increasing global temperatures. The increase in frequency of extreme weather events may exacerbate the spread of respiratory, diarrhoeal and water-borne diseases. Changes in crop yields induced by climate change would increase malnutrition related diseases.”

Novo Nordisk: “Looking at the direct impacts of climate change on human health, climate change is likely to create increased demand for treatment of vector-borne and respiratory diseases. As our core business is chronic diseases such as diabetes and haemophilia we do not see significant opportunities in terms of selling more drugs as a consequence of climate change.”

37

Analysis by Sector

Industrials

Regulatory opportunity: commercialisation of energy-efficient product, renewable energies

ABB: “45% of ABB’s revenues are generated from the demand for energy efficiency. As energy prices rise, energy efficiency will become an even more important purchase criterion. ... In 2008 alone, the worldwide installed base of ABB drives is estimated to have saved around 140 million metric tons of carbon dioxide.”

Sandvik: “Sandvik has not identified any significant climate change opportunities that have occurred due to regulations. The emission trading scheme could be seen as an opportunity when the emission rights are not used fully, but they are not significant.”

Information Technology

Regulatory risk: requirements related to energyefficiency

Capgemini: “Capgemini is anticipating changes in the regulatory environment by taking a proactive stance towards these rising issues and increasing our focus towards building Green data centres, implementing Green IT and energy efficient technologies as well as focusing on reducing our business travel. We continue to work with our suppliers to minimize our environmental impact in our supply chain ...”

Ericsson: “We do not consider our company to be exposed to regulatory risks.[...] we are leading in our sector in terms of energy efficiency, and thus we are well positioned to comply with any regulatory requirements related to energy efficiency if/when such emerge. We believe this readiness will result in a competitive advantage in the marketplace.”

Materials

Regulatory opportunity:

Yara: “The regulatory requirements will strengthen the need for efficient agriculture, and thereby for the tailor-made fertilizers and best practice fertilizing tools developed by Yara. Stricter GHG regulations on production will strengthen the position of Yara’s catalyst technology on N2O abatement in nitric acid plants.”

K + S: Do current and/or anticipated regulatory requirements related to climate change present significant opportunities for your company? “No”

Telecommunication Services

Regulatory risk: requirements related to energyefficiency

Telefonica: “The specific ICT regulation for lowering emissions will impact also our suppliers from the ICT sector as they will also be requested to improve their energy efficiency in their products and services. This would probably increase our costs. For example, costs of energy efficient equipment for telecommunications in networks.”

Swisscom: “No modification of current legislation or regulation expected in near future. Voluntary target agreement for energy efficiency and CO2-emissions between Swisscom and Swiss federal government in force until 2012 liberates Swisscom from local and states requirements.”

Utilities

Regulatory risk: Demand-side energy efficiency mandates

GDF Suez: “Energy regulations may affect our energy sales and will increase the need of energy saving certificates acquisitions. However it will also provide new opportunities for our Energy Services branch.”

EDF: “EDF has chosen to implement a program of several energy efficiency actions in all its markets with the goal of allowing EDF to comply with all of its legal and regulatory obligations, in particular regarding energy efficiency certificates (EEC). However, EDF cannot guarantee that the actions taken by the Group in favour of controlling energy demand will be sufficient to achieve the goals set by the public authorities.”

38

7 Consumer Discretionary The Consumer Discretionary sector is very diversified, consisting of five different industries: Automobiles & Components (8); Consumer Durables & Apparel (8); Consumer Services (5); Media (11); and Retailing (9). Disclosure highlights Companies in CDLI: Philips Electronics (94); Renault (93) Companies with an A performance band: BMW; Kingfisher; Philips Electronics; Renault Largest non-respondents by market capitalisation: Swatch Group; Christian Dior; PPR; Hermes International; Luxottica Group; Michelin (among 11 non respondents) Total GHG emissions Scope 1: 17.0 mtCO2e Total GHG emissions Scope 2: 19.1 mtCO2e Total GHG emissions Scope 3: 420.4 mtCO2e

Sector Specific Analysis

Emission profile Most of the carbon footprint in the Consumer Discretionary sector comes from the product use phase. Indeed, Automobile Manufacturers and Consumer Electronics sub-industries’ Scope 3 emissions represent more than 90% of the total absolute CO2 emissions for the entire Consumer Discretionary sector. For instance, Philips Electronics (301 mtCO2e Scope 3 emissions) evaluated its direct emissions at “less than 1% compared to the impact of the usage of [its] products”. Apart from auto manufacturers, Philips is the only company which has clearly set an emissions reduction target for its products. The group is committed to improving the energy efficiency of its “products with 50% by 2015 compared to 2009”. Apart from product energy-efficiency, improving packaging, transportation, distribution lifetime reliability, reducing hazardous substances, facilitating disposal and recycling are the other key actions implemented by the sector to reduce its carbon footprint.

Risks and opportunities Automobiles & Components is the only industry to unanimously see a significant risk due to carbon regulations. The main risk lies in regulations forcing them to meet fuel economy standards for their vehicles sold (e.g. EU Directive, US CAFEstandards and US-Tier-standard) rather than incurring significant fines or to having their products barred from a market. However, most of the automobile manufacturers believe that they are on track to meet existing regulations. They all believe that they are part of the solution to climate change, as they unconditionally believe they are developing products and services that help their clients reduce emissions. This view is shared by Philips Electronics and Electrolux in the Consumer Durables & Apparel industry. The latter stresses that “within consumer durables, the products with the best environmental performance accounted for 21% of [their] total sold units in 2009 and 30% of gross profit. Also, tax credit permit to encourage energy-smart product purchase…This underscores that efficient products deliver higher profit margins.”

39

Sector Specific Analysis

Industry focus: Automobiles & Components In this industry, the most interesting Key Performance Indicator (KPI) is the sales-weighted CO2 emissions (Scope 3) by region (at least EU, US, Japan and other) and by segment. This KPI allows for tracking reduction efforts in the average fuel economy of vehicles sold and for assessing efforts remaining to reach emission standards. However, reporting on this KPI remains relatively poor with uneven consistency between auto manufacturers. While auto manufacturers have made important efforts to answer comprehensively the questionnaire, this important KPI is still not available in a comparable way. Fiat reports the lowest corporate average fuel economy for vehicles sold in Europe as shown in table 12.

sustainable mobility for all. Since 2005, KDC has provided more than 50,000 hours of training, bringing about a real change in attitude in the daily driving practices of 10,000 drivers, both business users and consumers.

In this 2010 edition of the Europe 300 report, auto manufacturers report on new initiatives launched to develop alternative mobility. For example, PSA is working on new mobility services, such as Mu by Peugeot, a renting service or new monthly fee concepts for electric vehicles. Indeed the two electric vehicles that are going to be launched at the end of the year will be offered with monthly leasing fees4. In 2009, Renault Environnement joined forces with the Belgian company Key Driving Competences (KDC) to deploy innovative eco-driving training projects and the services associated with

In the race to maximise vehicle efficiency, auto manufacturers have to dedicate significant amounts of R&D and investments to develop new technologies.

More recently, companies have been engaging with governments to enhance the development of electric mobility, as it is crucial that states support the development of electric vehicles, hybrids and plug-in hybrids with incentives to stimulate emerging demand for these vehicles. For these new markets to reach maturity, PSA insisted that it is vitally important that these incentives be highly visible and stable over time.

For instance, with PSA’s objective to sell one million e-HDi-equipped vehicles by 2013 (Stop & Start system that combines a reversible starter-alternator and a diesel engine), the company spent €300 million of investment to implement this technology and mobilised 500 engineers and technicians during 36 months.

BMW Group has made available its MINI E and Hydrogen 7 vehicles to a large number of global political decision makers (in the US, the UK and in Berlin) in order to demonstrate in practical use, the potentials of Electromobility and the hydrogen technology and to illustrate the political need for action concerning long term infrastructure issues.

The Renault-Nissan Alliance is investing €4 billion in projects related to zero-emission mobility.

From Tennessee to Israel and Japan, the Renault/ Nissan Alliance signed partnerships with over 40 public and private entities by end 2009.

As a point of comparison, the Euro 5 standard has required approximately €1.5 billion of capital expenditure on nearly 4 years, according to PSA. Due to its important footprint on the economy and employment, the sector has a long tradition of interacting with governments and lobbying to influence regulation, tax policy, as well as town and country planning.

Interestingly, PSA Peugeot Citroën also defends the position that test cycles and procedures should be harmonised worldwide. This is an increasingly important issue to be able to better measure fuel economy of the vehicles, in particular with the emergence of hybrids and electric vehicles.

Table 12: Corporate average fuel economy for vehicles sold in Europe Of which petrol (in Western Europe)

Of which diesel (in Western Europe)

2009

2007

2008

2009

2007

2008

2009

BMW

156*

178

163

158

167

150

148

- 25% less CO2-emissions in our newly sold fleet worldwide from 2008 until 2020

Fiat

131

142

137

129

141

137

129**

 

 

 

 

 

   

Target

 

Porsche

ND

 

 

PSA Peugeot Citroen

135.8

ND

ND

Renault

138.9***

156.6

152

-1.7% per year sell one million vehicles emitting less than 120g/km of CO2 in Europe each year as from 2012

147.5

139.1

136.9

129.6

130gCO2/km by 2012 in average for internal combustion vehicles

* Germany only; ** This figure does not seem consistent; *** Communicated by the company but not in the CDP 4 Reference: In French newspaper La Tribune, 7 September 2010, “PSA lance la première voiture électrique de série”.

40

Consumer Staples The Consumer Staples sector is composed of three industries: Food & Staples Retailing (9 companies); Food, Beverage & Tobacco (14); Household & Personal Products (4). Disclosure highlights Companies in CDLI: Reckitt Benckiser (93); Tesco (92); Nestlé (92) Companies with an A performance band: Reckitt Benckiser; Tesco; Nestlé Largest non-respondents by market capitalisation: Casino; Colruyt Total GHG emissions Scope 1: 21.6 mtCO2e Total GHG emissions Scope 2: 20.2 mtCO2e Emission profile and carbon mitigation actions Within the sector, the Household & Personal Products industry has the lowest carbon footprint. Direct on-site emissions are slightly higher than those related to the purchase of power and heat in the Food, Beverage & Tobacco industry. This is the opposite pattern for retailing companies for which electricity and heat dominates the energy mix, due to lighting and refrigeration requirements in stores. However, overall these emissions sources are dwarfed by the GHG Life Cycle Assessments performed by a few companies, which shows that most of the carbon footprint of the sector actually lies in the emissions related to the use of the products by customers and the purchase of (agricultural and chemical) raw materials. Indeed,

86% of total emissions reported in the sector are Scope 3 emissions (e.g. Unilever: 150 mtCO2-e, Nestlé: 51 mtCO2-e; Reckitt Benckiser: 25mtCO2-e). Unilever therefore believes that awareness campaigns directed at customers is a key component for its carbon mitigation action.

“Consumer use and disposal of products may reach between 30 and 60 times as much as our own emissions, depending on the assumptions made about how consumers use our products.

HFC gases (high global warming potential greenhouse gases) are also a specific issue for the sector, especially for retailers, since leakages of refrigerant gases account for up to 61% (in the case of Delhaize) of their direct emissions. Most companies aim to reduce refrigerant losses and are gradually switching to other environmentally friendly refrigerants (e.g. CO2-based refrigeration systems in all new Tesco’s stores in the UK in 2010/11), as the Montreal Protocol requires a global phase-out of the production and use of such refrigerants by 2030 (at the latest). Nestlé warns of potential difficulties to implement natural refrigerant in a number of countries though.

… The Cleaner Planet Plan, which is being rolled out across our Omo, Persil and Surf brands, is a behaviour change programme that educates consumers on how to do their washing in a resource-efficient fashion.”

Along with efficient lighting, insulation and energy recovery measures, retailers plan to decrease their carbonintensity per square meter of sales area by 1.6% to 4.7 % annually (chart 20 for comparative assessment).

Unilever

Figure 20: Comparison of carbon-intensities of retailers 600

Food & Staples Retailing

Multiline Retail

* The methodology may vary across companies. For Tesco, group’s total carbon emissions are accounted for while other companies limit the scope to carbon emissions at stores.

500

400

300

200

100

0 Marks & Spencer

Metro

Tesco**

Carrefour

Delhaize Group (CR)

Koninklijke Ahold

J Sainsbury Plc

kgCO2/m2 sales area 2009

41

Sector Specific Analysis

Danone sees “Major opportunity to gain market share thanks to a better performance on CO2 (mainly CO2 claim, milk/methane claim, packaging claims…)” and highlight for example “The bio packaging on the dairy brand has an extra cost of €25/tonne, €5m/year cost increased on the brand European Scope (1.5% volume growth needed to pay back). The business return of these investments has been for the first time confirmed this year in consumer tests with very promising consumer results in a test run in France, the UK, Belgium and Germany on renewable packaging (50% CO2 reduction claim). This will need to be confirmed in real life.” “In 2009, the company used 8.5% less water per hectolitre of production than in 2008, and has decreased water use per hectolitre of production 14.5% since 2007.” AB Inbev

Risks and opportunities Compared to other industries in the sector; Food, Beverage & Tobacco companies consider themselves much more at risk both of climate change regulations (100%) and of the physical impact of climate change (92%). Regulatory risks commonly mentioned are:

• Cap & trade risk: 10 companies

have sites regulated under the EU ETS and raise the risk of higher carbon costs post-2012. Financial implications are limited, notably as activities concerned can be eligible for free CO2 rights by 2020 (e.g. sugar manufacturing) and as the amounts of emissions at stake are fairly low (maximum 1mtCO2e reported by Associated British Foods).

• Higher energy prices or carbon

taxes could significantly raise logistics and packaging costs. SAB Miller, for instance, sees a potential risk in the indirect impact from packaging related CO2 taxes, such as those in place in The Netherlands.

“In order to assure the continuous supply of its main commodities, one of the initiatives Nestlé has in place is working with suppliers, providing training and technical assistance… Cocoa supply is becoming increasingly critical. With farmer training, Nestlé is helping farmers increase yields, reduce disease and produce a better quality crop which attracts higher prices.” Nestlé

42

• The development of agrofuels

could adversely impact on the availability of lands for other agricultural raw materials. This could lead to supply pressure and potential price increases.

• Changes in consumer demand

towards greener products further driven by product labelling obligations also pose a risk. Danone is confident that the extra cost of bio packaging on its dairy brand can be recovered thanks to gains in market share.

In terms of the physical risks from climate change, all companies in the industry, except Carlsberg are also concerned that a change in precipitation patterns, leading to floods or droughts, could alter the availability of clean water (a key element for beers, soft drinks, etc) and increase the price of raw materials (due to reduction in yields) and agricultural raw material shortages. To mitigate such risks, companies are working on increasing the water efficiency of their process, diversifying or securing a continuous supply of key raw materials (e.g. coffee for Nestlé, barley for AB InBev) through specific programmes.

Energy The Energy sector contains 15 companies, which belong to two industries: Oil, Gas & Consumable Fuels (11); and Energy Equipment & Services (4). Disclosure highlights Companies in CDLI: Royal Dutch Shell Companies with an A performance band: Royal Dutch Shell; ENI; Repsol YPF Largest non-respondents by market capitalisation: Tenaris; Galp Energia; Technip Emissions profile There is a clear lack of transparency on carbon issues in the Energy Equipment & Services industry, as companies have either not responded to the CDP questionnaire or have asked for their answer not to be made publicly available. Predominance of Scope 3 emissions The bulk of the sector carbon footprint lies in CO2 emissions from the use of products (5 to 11 times higher than direct emissions). These estimates are based on different methodologies though (e.g. production vs. sales of petroleum products or different sources of emission factors used), which does not allow for direct comparison between companies. Statoil is the only integrated Oil & Gas company that does not disclose an estimate for such emissions. Pending a harmonised methodology in this field, the upstream mix of natural gas and crude oil production is the best indicator, providing a view on the carbonintensity of the products sold. RD Shell states that “by around 2012 [they] will be producing more gas than oil”.

A patchwork of metrics in carbonintensity reporting When reporting on carbon-intensity indicators, companies use widely different metrics (e.g. tonnes of throughput versus output, barrel of oil equivalent versus tonne), as well as different boundaries (total group, by division, distinction of oil and gas extraction activities, and so forth). This prevents any direct consistent comparison between companies.

Gas flaring ENI remains a large flarer in 2009 (ca.13mtCO2e), but the company delivers well on its target to cut gas flaring by 70% over 2007-2012 (ca. half of the reduction effort was achieved at end 2009).

Generally, companies have not set emissions reduction targets based on carbon-intensity indicators, but rather seek absolute emissions reductions or improvements in energy efficiency. Although BP has no official CO2 reduction target, it tracks emission reductions through efficiency projects (7.9mtCO2e since 2002). On the other hand, Statoil states that it has achieved its emissions reduction target, but does not disclose any figure or timescale. Emissions reduction targets are relatively low, requiring emissions cuts of 0.3% (RD Shell) to 1.6% (BG) p.a. In years to come, most emission reductions in the sector should come from ENI and Total’s flaring down plans.

Risks and Opportunities All companies consider that several types of climate change regulations create significant risks for their business. All energy companies have ended 2009 with surpluses of emission rights (except Statoil and BP), but direct carbon compliance costs are expected to increase under the EU ETS. Total estimates that the benchmark allocation method starting in 2013 may hand out “only 70 to 80% of required allocations” to installations in the sector. ENI prepares for turning to a shortage of CO2 emissions rights as soon as 2011.

Figure 21: Upstream energy mix of oil & gas companies in 2009 100

Gas Conventional Other

80

60

40

20

0 Tullow Oil

BG Group

Cairn Energy

OMV

Total

ENI

43

Sector Specific Analysis

“In Europe, according to preliminary estimates, our concerned exposed sectors may received only 70 to 80% of their required allocations for the third period of the EU ETS, beyond 2012; this may represent an additional charge, according to market price, from €1bn to €1.6bn by taking into account a cost of €25 per tonne of CO2 for the 2013-2020 period.” Total SA

All else being equal, based on EU ETS data disclosed by companies and assuming a 30% shortage of emission rights over 2013-2020 and a CO2 price of €25/tCO2, estimates of annual CO2 compliance costs in Europe, starting in 2013, range from €24m (BG) to €181m (Total SA), with OMV the most financially exposed with 1.8% of its EBITDA 2009 appearing at risk (see figure 22 below). Other commonly cited regulatory risks are: • Reduced demand for their products as carbon caps apply to their clients (e.g. airlines, international shipping), •

Increased costs to comply with renewable fuel mandates; low carbon fuel standards; and energy saving certificates applying to their portfolio of products and services; and

Opportunities: Products helping to reduce emissions Within the Oil, Gas & Consumables industry, all companies but Tullow Oil and Cairn Energy consider that their products can reduce emissions of their users in: The Transportation sector: The blending of biofuels; the commercialisation of Compressed Natural Gas and LPG as transport fuels; and the use of fuel economy petroleum fuels and lubricants can reduce the carbon footprint of vehicles. Industries: Providing access to natural gas or renewable energies can replace the use of higher carbon fuels. Buildings: The use of monomers and polymers produced by petrochemical plants as insulation materials can reduce energy consumption, hence carbon emissions of buildings.

• Tightening control on flaring and venting in emerging countries.

The estimates of absolute emissions cuts achieved thanks to the use of such products remain relatively low. For instance, “In 2009, Repsol YPF sold 68,625 metric tonnes of [LPG] fuel, which implies a 35,706 metric tonnes of CO2 emission reduction compared to the emissions, which would have been caused by the equivalent diesel use”.

Figure 22: Estimates of potential CO2 costs in 2013 under the EU ETS BG

BP

OMV

Repsol YPF

Royal Dutch Shell

Total 0.0

-0.5

-100

-1.0

-150

-1.5

-200

-2.0

44

as a % of EBITDA 2009

-50

Estimated EU ETS costs for 2013

0

Regarding investments made in alternative energies, BP seems to invested the most, with US$4 billion spent at end 2009 and has made investments in all main alternative energy areas. Other companies are more selective and concentrate on technologies selected for their strategic fit and/or economic opportunities.

In general, financial contributions to alternative energy projects compared to company results are insignificant. For instance, renewable energies made a €20.7 million financial contribution to Repsol YPF group EBITDA in 2008 (i.e. 0.3%).

OMV “supports the use of compressed natural gas as a transport fuel due to its significant advantages: up to 15% fewer CO2 emissions.”

Table 13: Involvement in alternative energies and technologies by European oil majors Biofuel (production)

Solar

Wind

BP

$45-million investment in a JV which plans to construct lignocellulosic bioethanol production facility

Unit sales of 203MW

Portfolio Focus on large focused in the scale projects US. Additional capacity in 2009

Total

Explores new avenues for the future, particularly based on agricultural waste and ligno-cellulosic sources

Develops positions particularly in PV solar, emphasising technology and know-how, without unduly compromising economic requirements.

RD Shell

Signed a nonbinding MoU with Cosan in Brazil to form a JV to produce ethanol from sugar cane, the lowest-CO2 biofuel

Statoil

Repsol YPF

CCS

Hydrogen

Investments

2 hydrogen > $4 billion in power Alternative Energy projects since 2005, in line with commitment to invest $8 billion by 2015.

Project in Lacq now in full course

Focus on offshore wind: building a 315 MW offshore wind farm in a $1.7 billion joint venture

LoI signed by Alberta and Canadian governmnet to provide funding of CA $865 million to a project to store over 1 mtCO2 a year

Natural gas will be central to a lowcarbon energy future.

First company to store CO2 in a geological formation offshore (1996). Engaged in 3 of 4 worlds biggest CCS projects

Investing around NOK 400 million in the pilot floating offshore wind turbine (construction & R&D)

Continued evaluating the feasibility of CCS technologies in its refineries, as well as the associated costs.

45

Sector Specific Analysis

“...because they could deliver substantial reductions in CO2 and because of their close fit with our fuels business, transport biofuels will increasingly be the priority area for our renewable energy spending. We are serious about trying to build a substantial business in biofuels. This involves both building capacity in sustainable current generation biofuels and investing in technologies…” RD Shell

46

Disclosure of exposure to extreme climate events All Oil & Gas producers, except BP, consider that the physical impacts of climate change can create a risk for their business. Companies were invited to disclose the value of net asset exposure to extreme weather events by country in a specific sector questionnaire. Only ENI, Repsol YPF and Cairn Energy provided information. For instance, Cairn has US$250 million of assets in Bangladesh and Repsol ca.€460m of assets in Trinidad & Tobago. “Eni’s production in [sensitive] areas represents 8% of the total production of the company in 2009”, but the company states that “in case of offshore floating production units, the risks of extreme weather events are reduced via quickly releasable Floating Production, Storage and Offloading (FPSO) vessels”. Total considers that they “don’t have any key assets in countries exposed to major weather events.”

Financials The Financials sector is made up of 72 companies in three industries: Banks (35 companies); Diversified Financials (13); and Insurance (24). Disclosure highlights Companies in CDLI: RBS (93); HSBC (92) Companies with an A performance band: Barclays; HSBC; Munich Re; RBS; Swiss Re; UBS Largest non-respondents by market capitalisation: Groupe Bruxelles Lambert; Sampo Group Emission profile The main source of carbon emissions in this sector is from the purchase of electricity, heat and cooling. This remains a single digit figure (8mtCO2e). The sector has been good at reporting Scope 3 emissions (87% of respondents), but the figures provided are low (2mtCO2e reported) and correspond mostly to business travel. The main carbon emission reduction efforts are energy-efficiency measures, the use of zero-carbon electricity, the reduction of business travel and offsetting. Targets are often defined in tCO2e/employee. The exposure of investment banks to carbon risks through their investment portfolios is certainly a higher concern for investors. Although risks, such as default risk for loans or equity valuation are clearly identified by most and are seen as bearing materiality. Banks and Insurers’ specific exposure to carbon sensitive sectors remains poorly detailed. To mitigate such risks, carbon risk assessments are carried out during the credit/investment analysis process, especially for counterparts in energyintensive industries. Dexia remains the only company to have set a target on the carbon-intensity of its portfolio of power generation projects: “In 2009, the carbon intensity of the portfolio of projects for producing electricity and heat of Dexia was 0.330tCO2/MWh. We aim to reach 0.316tCO2/ MWh by 2013”.

Risks and opportunities Green products: 60% of respondents estimate that they propose products or services which help clients avoid or reduce GHG emissions, usually through modified behaviours. Singling out the Banks industry, the result is much higher (77%). Among the services described, we find: financing or leasing of renewable energies and energy efficiency projects; participation in carbon funds or monetisation of carbon credits; bookrunning on share offerings; carbon finance; leasing and promoting green cars; thematic equity funds with an environmental filter; “eco” loans (sometimes at discounted rates); and “eco” bonds. Insurers also provide specific insurance products for green cars; homes and buildings; carbon credits; and renewable energies, as well as Life & Savings products integrating environmental, social and governance (ESG) screening strategies and risk prevention services. These activities tend to support the development of new environmental technologies, reduce certain types of risk exposures and generate premiums (e.g. €17.6m generated by Mapfre in 2009 for wind farms and solar photovoltaic panels insurance). Generali warns that “the application of discounts to incentivise eco-friendly choices implies lower margins in some cases” but sees more long-term benefit (such as customer loyalty, green brand value). The contribution of these services remains fairly limited at company level. Direct equity investments in companies active in renewable energies and carbon offsetting services are among other activities mentioned. Insurance of weather hazards: The Financials sector considers itself relatively more exposed to the effects of climate change, both in terms of opportunities and risks. This is especially true for Insurance companies, as 90% of them see significant risks for their business due to the physical impact of climate change and 76% of them consider business opportunities. As a result, certain insurers have increased

AXA UK’s “Green Homeowner policy entitles customers to make environmental claims by upgrading the energy consumption profile of their electrical appliances in case of equipment loss. Green rebuilding even applies to large damage claims where the majority of the property is damaged by an insured event.” “Since 1998 RBS has financed over 8,800MW of installed wind generation capacity globally.” Royal Bank of Scotland

DnB NOR “offers loans at a discounted interest rate for new and second-hand cars which meet certain emission criteria. Volumes, however, are still insignificant but the product can be seen to make a notable contribution in the future.”

47

Sector Specific Analysis

“Under capital allocation in respect of general insurance risk of claims from catastrophic events, such as windstorm or flooding, our total potential loss from our most concentrated exposure (northern European windstorm) is approximately £335 million for a one in ten year annual loss scenario, compared with a £620 million for a one in hundred year annual loss scenario.” Aviva Swiss Re “anticipates growing demand for catastrophe covers as a result of changes in the climate and increased climate variability. The financial opportunity in this context is related to potential premium growth from traditional and new products designed to help in the management of climate risk.”

their research expertise (e.g. the €100 million “AXA Research Fund” supporting academic research), as well as signing up to collaborative initiatives, such as the UNEP FI Insurance Working Group or the Geneva Association’s “Kyoto Statement”, which commits insurers to enhance research and develop adapted products and services. Risks: Banks stress potential risks to their loan books, in the case of climate risks damaging the creditworthiness of their clients, especially in sectors sensitive to climate change, or damage the value of the collateralised assets. Insurers obviously consider a direct exposure through their property and casualty (P&C) re-insurance business. Weather-related events accounted for 85% (€22bn) of the total loss incurred by the global insurance industry and climate change is seen as a catalyst for increased frequency of extreme weather events. Munich Re, among others, considers that the impact can go beyond the P&C business line and also sees indirect impact on life and health business lines (through premature deaths). The Solvency II regulatory framework - an updated set of regulatory requirements for insurance firms that operate in the European Union is scheduled to come into effect on 31 December 2012. This will require insurers to account for climate exposure in a proper economic evaluation of risks and reinsurance needs. To mitigate such risks, companies are investing in research to better understand the potential consequence of climate change (risk of floods, for instance) in order to integrate changes in risks in their underwriting and to adapt their pricing and consequently their risk management frameworks. Some companies propose more

preventative solutions aiming to limit the amount of the claims (e.g. floodresilient repairs). Opportunities: The weather related insurance coverage was 55% and 6.7% respectively in developed and emerging countries (see figure 23). The higher frequency and severity of national catastrophe is seen as a trigger for increased demand for insurance coverage, although Swiss Re recognises that tapping into this market will require considerable resources. Products, such as natural catastrophe insurance and reinsurance, national catastrophe bonds, weather derivatives and weather index insurance could benefit from an increasing demand for flood and crop protection insurance. Swiss Re seems particularly well positioned with a 30% global market share in weather and weather contingent commodity structures.

Figure 23: Total and insured weather-related natural catastrophe losses in 2008 200

150

100

50

0 Developed countries

48

Emerging countries

Total weather related natural catastrophe losses Insured weather related natural catastrophe losses Source: Swiss Ré

Health Care The Health Care sector is composed of two industries: Pharmaceuticals, Biotechnology & Life Sciences (10); and Health Care Equipment & Services (5). There are a number of key companies that did not respond to the questionnaire in this sector; four companies equally divided in each industry. Disclosure highlights Companies in CDLI: Novo Nordisk (89) Companies with an A performance band: Novo Nordisk Largest non-respondents by market capitalisation: Synthes Inc.; Sonova Holding AG; UCB Cap; Smith & Nephew Total GHG emissions Scope 1: 3.1 mtCO2e Total GHG emissions Scope 2: 3.7 mtCO2e Emission profile and carbon mitigation actions GHG emissions are relatively low in this sector. But note worthily, GSK generates high Scope 3 emissions, due to the distribution of specific goods, such as asthma inhalers containing HFC, a propellant gas. Since the Montreal Protocol placed restrictions on such substances, the group developed dry powder inhalers to substitute this product. Emissions also come from the waste generated in operations.

Risks and opportunities Risk and opportunities are mostly identified by the Pharmaceuticals, Biotechnology & Life Sciences companies, whilst for the Health Care Equipment & Services industry, climate change is not a key issue that they are currently tackling. With production sites and activities in all major regions of the world, Novo Nordisk along with Merck and GSK dread the implementation of enlarged carbon cap and trade systems. Fuel/Energy taxes also represent a important issue for Novo Nordisk due to Transportation activities, which represent half of the company’s CO2 emissions in 2010 (car fleet, product distribution and business travel). If new national green taxes are set, “Novo Nordisk has estimated the effect of these changes will amount to an extra cost of 40 million DKK worst case annually corresponding to a 16% increase”.

Business opportunities are anticipated by Novartis “as a rise in global temperatures and changing climate patterns will influence the spread of tropical and other vector diseases”, for which more medical treatments will be needed. Change in consumer demand also pave the way to new chemical products, such as the applications developed by Merck for the Automotive & Components industry “to improve the performance of lithiumion batteries, thereby significantly increasing the range of electric vehicles” and on the Photovoltaic technology through significant efficiency reached on solar cells to become a mass product.

Pharmaceuticals, Biotechnology & Life Sciences companies point out uncertainties arising from climate change effects: “There is a great degree of uncertainty around the relationship between climate change, health and healthcare provision and it is therefore difficult to determine whether the net effect of climate change-related events result in risks or opportunities for GSK nor to what extent these risks or opportunities may be significant to GSK’s performance”. The group evaluated the value of new markets associated with climate change-related events at more than £100 million.

49

Sector Specific Analysis

“Buildings account for approximately 40 percent of the world’s energy consumption, and elevators and escalators can account for 2-10 percent of a building’s energy consumption.”

The Industrials sector contains 49 companies, which belong to one of the three different industry groups: Capital Goods (33 companies); Commercial & Professional Services (5); and Transportation (11). Disclosure highlights Companies in CDLI: Siemens (98); Deutsche Post (97); Ferrovial (89); Saint-Gobain (89)

Kone

Companies with an A performance band: Deutsche Post; Ferrovial; RollsRoyce; Siemens

“While motor-driven applications consume two-thirds of electricity in industry and onequarter of all the electricity used in the world, drives control fewer than 10 percent of the motors. Many small applications have no form of speed control at all.”

Largest non-respondents by market capitalisation: Autoroutes Paris Rhin Rhône; Safran; Ryanair

ABB “Our Environmental Portfolio has grown by 11% by comparison with fiscal 2008 and already accounts for about 30% of our total sales. Our goal is to generate €25 billion in revenue from products and solutions for environmental and climate protection by fiscal 2011”. Siemens

50

Industrials

Emissions profile The carbon footprints of the three industry groups in this sector are highly contrasted. The Commercial & Professional Services sector has a low carbon footprint (0.4mtCO2-e reported only). Direct emissions are predominantly in the Transportation industry group, mostly due to marine and air carriers, but reporting of Scope 3 emissions is extremely light (only TNT and Deutsche Post report emissions, due to subcontracted services), although one can suspect that this is a significant aspect of the industry’s carbon footprint. Indeed, VINCI states that: “the use of motorways is responsible for 96% to 99% of the life cycle of a motorway” and VINCI is the only company to provide an estimate of the emissions from its clients on the highways it operates. In the Capital Goods industry group, emissions due to power consumption prevail except for construction and engineering companies. Again, only three companies propose an estimate of the emissions due to the use of their products. Capital goods companies prefer to communicate on how many carbon emissions are saved thanks to their products. The installed base of Vestas’ wind turbines, ABB drives and Siemens’ diverse products and services are estimated to save respectively 163, 140 and 210 million tonnes of CO2-e annually.

Risks and Opportunities The Capital Goods companies consider climate change policies, such as efficiency standards for buildings and cars as an opportunity (87% of companies), rather than a threat (57%). These companies are perfectly aware of the role they can play in helping their clients to reduce their energy consumption, as 90% of them consider that their products or service help their clients to reduce their carbon emissions. Capital goods companies provide various equipments and services with applications in the most carbon-intensive economic sectors, such as buildings, transportation, power and industry (table 14). R&D in carbon saving technologies is seen as an important component to maintain competitiveness. In 2009, Siemens dedicated 1.3% of its revenues to R&D in eco-friendly technologies. Despite the economic downturn, ABB increased R&D spending by 5%. New generations of products are from 12% up to 50% more energy-efficient. While Vestas’ core business is the production of renewable equipments, Siemens is positioned to capture the opportunities coming from the demand of products with a low carbon footprint in all market segments thanks to a diversified portfolio of products and services. ABB also states that 45% of its revenues are generated from the demand for energy efficiency. Some companies build up their capacities to seize opportunities in identified low-carbon markets (e.g. Rolls Royce created a new business in 2008 to address the global market in civil nuclear).

Table 14: Product portfolio of capital good companies helping their clients or end-customers to reduce their own carbon emissions Markets Company

Power & Industry

Transportation

Building

Products and services helping clients to reduce their carbon emissions

EADS

 

X

 

A380 - aircraft the less fuel demanding of its category

Finmeccanica

X

X

 

Power: Ansaldo’s fuel cells for Carbon Capture & Storage. Highly efficient gas turbines.

Rolls-Royce

X

X

 

Airlines: Next Trent engine generation some 12% per cent more fuel efficient than previously. Marine: Hybrid electric drive system New business unit launched in 2008 to address the global market in civil nuclear power. Marine: improved propulsion efficiencies of around 10-15 per cent. Gas engine producing up to 20 per cent less CO2 than an equivalent diesel engine

Thales

 

X

X

Lighter cockpits for aircrafts (next A350) and work on optimisation of kerosene consumption. Innovative ticketing machines for public transport, less 70% electricity consumption

Geberit

 

X

Stand-by electricity consumption of the Geberit AquaClean has been reduced by more than half

Saint-Gobain

X

X

Holds 20% of the world’s market for photoelectric glass. Aim to generate € 2 billions between by 2015. Insulation products, mainly based on glass wool or rock wool; double or triple glazing

Acciona

X

X

One of the largest wind power developers. Road: biofuel production and search for alternatives to road freight. Energy solutions for sustainable buildings through the use of renewable technologies

ACS

X

 

Electricity production from renewable sources

Ferrovial

 

X

New departure procedure for A380s at airports subsidiary saves 300kg of fuel per flight. New product named “Green refitting” (Ferrovial Agroman)

Skanska

 

X

Buildings exceeding national building codes and voluntary certification schemes

Vinci

X

X

Wind farm infrastructure project. OKIGO car-sharing system: fleet emits an average of 111gCO2/km.New building: eco-label “Oxygen”. Old building: maintenance and energy performance services

Schneider Electric

X

X

Power monitoring, Industrial automation and control, low and medium-voltage distribution. Energy management solutions (Ecostruxure). Lighting systems. Solutions sales counted for 30% of revenues in 2008. Targets 2/3rd of products’ revenues achieved with Green Premium products in 2011

X

X

X

Vestas

X

 

Pure wind turbines producer

Alstom

X

X

 

World leader in hydro power plants, and also present on the wind and solar businesses. Efficient fossil power plants. Carbon Capture & Storage (10 pilot plants). Leading position worldwide in high-speed rail technology. Expertise in urban transport systems.

Orkla

X

X

 

Strategic investments in solar companies Elkem Solar and REC. Borregaard subsidiary: leading producer of wood based chemicals, including biofuels. Aluminium allows lighter vehicles

Siemens

X

X

X

Efficient fossil power generation. Renewable Energy Division (wind, solar thermal): €2.935bn of revenues. Smart-grid. Energy-saving motors, energy recovery, energy management (incl. data centres) Rail technologies: e.g. automation and electrification. Lighting (OSRAM subsidiary)

ThyssenKrupp

X

X

X

Wind turbines components. InCar project with automakers: potential to reduce CO2 emissions per km by up to 17.63g. Regenerative drives and motor efficiency controllers for elevators solutions.

ABB

X

X

Leading supplier of products and systems to onshore and offshore wind power. Three phase solar inverter technology launched in 2009. Power grid: HVDC (high voltage direct current) . Energy-efficient variable-speed drives controlling the speed of machinery, pumps, mixers, fans and compressors. Advanced industrial information technology for the control and optimisation of integrated systems

Atlas Copco

X

 

Oil-free air compressor with built in energy recovery. Intelligent control systems with energy savings of up to 25 %.New asphalt rollers, used in road construction projects, 24 % less fuel consuming compared to already fuel efficient predecessors

Kone

 

X

In 2009 KONE released a range of elevators which reduced energy consumption by 30 percent compared to previous volume models.

MAN

X

X

 

Diesel engines. Trucks engines and eco-driving training: up to 15% fuel savings. Marine: diesel engines

Sandvik

X

X

 

Efficient tubes for furnaces. Cemented-carbide components reduces fuel consumption in in automotive engines using fuel injection.

SKF

X

X

 

Exposure to the wind energy market. New family of bearings 30% more energy efficient compared with standard products. Energy services. New family of energy efficient bearings consuming 30% less energy than standard ISO products

Vallourec

X

X

 

High quality tubes for nuclear. Lighter tubes

X

51

Sector Specific Analysis

“Preliminary analysis indicates that SAP’s product use phase (data centres, servers, etc.) has 100 times more impact than SAP’s own operations and that the CO2 footprint of our customer base (power sector, oil & gas, chemicals, consumer products, etc.) is 10,000 greater than that of SAP, indicating that SAP has the ability to influence 1/6 of global CO2 emissions.” SAP “With our experience in telecom applications to create solutions aimed at the evolving smart grid and smart metering markets. We enable utilities to monitor real time usage, to inform and influence consumers to be more energy aware and to consume energy more efficiently. Our smart grid / smart metering applications enable utilities to launch flexible tariff patterns, providing a financial incentive to consumers to reduce their usage at periods when the cost of electricity production peaks.” Alcatel-Lucent 52

Information Technology The Information Technology sector contains 3 industries: Semiconductors & Semiconductor Equipment (2), Software & Services (3) and Technology Hardware & Equipment (3). Disclosure highlights Companies in CDLI: Nokia Group (91) Companies with an A performance band: Nokia Group Largest non-respondent by market capitalisation: ASML Holding Total GHG emissions Scope 1: 0.7 mtCO2e Total GHG emissions Scope 2: 2.2 mtCO2e Emission profile and carbon mitigation actions The IT sector has extremely low direct emissions (