CDP was set up eighteen years ago with the vision to transform capital markets and build a sustainable economy that works for people and planet. We believed then, and we believe now, that transparency is the foundation for environmental action. You can’t manage what you don’t measure.
The first step was disclosure, but we faced a fundamental question: how to get companies to disclose?
The answer:using investor influence. We decided to use the collective power of asset owners, asset managers, insurers and banks to push for environmental disclosure from companies, on a scale that they would not be able to achieve in isolation.
This engagement on an industrial scale has worked for us, for companies and for investors, and support has grown significantly.
In 2002, we worked with just 35 investors on our very first climate change questionnaire, and that year, 245 companies responded. Now, over 650 investors with assets of US$87 trillion support our disclosure request - not just on climate change, but on water and forests too. And it isn’t just investors that are pushing for more and better disclosure from companies - nearly 100 of the world’s largest companies request information from their suppliers through CDP too. Last year, over 6,300 companies disclosed to us.
Disclosure, insight, action
But while disclosure is the starting point, it cannot end here. To truly build a sustainable economy, we need companies to use the vital insights gathered in the reporting process to take lasting action.
We’ve already seen significant progress over the last eighteen years but we still have a long way to go. We must move faster and keep raising our ambition.
That is why we have been working with investors for the last few years to accelerate company action on climate change, water security and deforestation, through our Investor Action request (formerly Carbon Action).
The criteria set out in the request gives investors the means in which to engage with companies on measurable aspects of their business operations and track progress over time.
Last year, we worked with 354 investors to approach around 1,300 high environmental impact companies requesting that they:
1) integrate climate change into their business strategy,
2) engage in emissions reductions initiatives and
3) sign up to the We Mean Business coalition’s priority initiatives, such as Science Based Targets.
816 of these companies responded, giving us a 63% response rate.
More alignment needed
Reassuringly, our 2017 Investor Action request data showed that nearly all of these 1301 companies (98%) said they were integrating climate change into their business strategies. However, mainstream climate initiatives - such as scenario analysis, the Taskforce on Climate-related Financial Disclosures (TCFD) and the Paris Agreement - were barely mentioned in company responses.
While there was an uptick in mentions since 2016, especially for the Paris Agreement, we would like to see more alignment with these large-scale initiatives going forward, as companies start to formalize and standardize climate change integration in their strategies. CDP’s new TCFD-aligned questionnaire should support this process.
It is also positive that the number and quality of targets increased among the companies. Targets set by the consumer staples and discretionary, energy, industrials and utilities sectors all increased since 2016 and 88% of all companies in the high impact sample set at least one target in 2017. Moreover, while only 8% of the absolute emissions reduction targets set by companies covered scope 1, 2 and 3 emissions in 2016, this increased to 40% in 2017.
That said, only
195 companies set targets that they claim to be science-based and only 70 of
these had their target approved by the Science Based Targets initiative. It is
encouraging that 236 more companies said that they anticipated setting a
science-based target in the next two years, but this intent must convert to
When it comes to emissions, there was a slight decrease in scope 1 and 2 emissions from 2016 to 2017. However, this was countered by an increase in scope 3 emissions i.e. indirect emissions across the value chain.
We appreciate that accounting for scope 3 emissions is still a work in progress, but fundamentally emissions are not decreasing quickly enough and investors need to push for more progress here.
Get on board
The race is on to meet the goal of limiting global temperature rises to well below 2°C above pre-industrial levels. Investors are uniquely equipped to help mitigate these risks and harness the benefits and opportunities of a low-carbon world. We ask investors to support our 2018 Investor Action request to push for urgent action from these high impact companies and play their part in the transition.
To sign up to this year’s Investor Action request, please contact your CDP account manager or email us at [email protected] where you can also request the full dataset. Sign up closes at the end of May 2018.