- 503 companies (84%) in the STOXX Europe 600 and 225 (64%) of the FTSE 350 disclosed data to CDP on their responses to climate change.
- Extreme weather caused by climate change could cost firms US$ 575 billion, according to Europe’s biggest companies.
- But financial benefits of shifting to a net-zero economy could top US$ 2 trillion.
November 2, 2022 (London): New data released today by CDP, the non-profit which runs the global environmental disclosure system, reveals how European companies are pricing in the huge financial implications from climate change.
The data comes from companies listed on the FTSE 350 and STOXX Europe 600 stock market indices which responded to CDP’s 2021 climate change questionnaire.
Disclosing companies included high impact companies such as Shell, Vodafone, Adidas, Deutsche Bank, and ArcelorMittal.
503 companies (84%) on the STOXX Europe 600 responded to CDP, covering US$11 trillion in market capitalization. In contrast, 225 (64%) of the FTSE 350 provided data, covering US$2.5 trillion.
CDP’s analysis looked at how they are aligned with key recommendations from the Taskforce on Climate-related Financial Disclosures (TCFD). These recommendations include topics such as: setting emissions targets, identifying risks and opportunities, financial planning, and levels of governance.
A startling result from the research was the cost to companies from frequent extreme weather events and long-term shifts in climate patterns. The total financial impact from both acute and chronic physical risks reached $US 575 billion across both indices.
The financial sector accounted for 80% of this total, which suggests the real economy may be underestimating the impact of climate change. If this is the case, regulators and investors should be asking as to who is actually managing these risks.
CDP’s Joint Global Director of Capital Markets, Claire Elsdon, said:
“Extreme weather has the potential to punch a multibillion-dollar hole in company balance sheets. CDP’s latest analysis shows some businesses understand this, while others could be denying reality.
“Progress is also being made on setting targets on the climate transition, but there is little follow through on plans and strategies to get there. There is precious little time for companies to get their act together. The message from this report is clear: there is more work to do, and it needs to start now.”
Disclosing companies covered vast areas of the economy, ranging from financial services and transport to manufacturing, agriculture, and pharmaceuticals.
346 companies on the STOXX and 137 on the FTSE 350 provided data on the potential financial value of opportunities relating to the climate transition. This figure aggregates to US$1.9 trillion for the STOXX Europe 600 and US $519 billion for the FTSE 350.
Companies saw the biggest financial opportunities in products and services, followed by opening up new markets in the transition to a net-zero economy.
The results also show European companies are making progress on climate awareness: over 90% of all reporting companies on both indices provided data on at least 80% of the TCFD-aligned questions.
However, only 32 (14%) companies on the FTSE 350 and 81 (16%) on STOXX Europe 600 were 100% aligned by providing information on all areas needed to tackle the crisis. Half of the FTSE 350 also claimed to have developed a climate transition plan, but only nine companies provided data on all the key indicators.
“This unique data provides an insight into how companies are weighing up the reality of the climate crisis,” said Amir Sokolowski, CDP’s Global Director, Climate Change
“Businesses are more aware of climate impacts, but they are taking baby steps between what they see and what they need to do. Disclosing on the TCFD’s recommendations is one way to bridge the gap between oversight and action. And we need much more detail on company strategies and plans to reach net-zero.”
The need for companies to align with the recommendations of the TCFD is of paramount importance. In April 2022, the UK Government mandated TCFD climate disclosure for the country’s largest companies and financial institutions. The European Union has similarly introduced proposals to require corporate sustainability reporting using the TCFD framework.
For more information, or interviews, please contact:
- Adam Wentworth, CDP, email : [email protected];
- Mona Monzer, CDP Europe, email : [email protected].
Notes:
1. The FTSE 350 analysis can be read here. The Euro Stoxx 600 analysis here.
About CDP
CDP is a global non-profit that runs the world’s environmental disclosure system for companies, cities, states and regions. Founded in 2000 and working with more than 680 financial institutions with over $130 trillion in assets, CDP pioneered using capital markets and corporate procurement to motivate companies to disclose their environmental impacts, and to reduce greenhouse gas emissions, safeguard water resources and protect forests. Nearly 20,000 organizations around the world disclosed data through CDP in 2022, including more than 18,700 companies worth half of global market capitalization, and over 1,100 cities, states and regions. Fully TCFD aligned, CDP holds the largest environmental database in the world, and CDP scores are widely used to drive investment and procurement decisions towards a zero carbon, sustainable and resilient economy. CDP is a founding member of the Science Based Targets initiative, We Mean Business Coalition, The Investor Agenda and the Net Zero Asset Managers initiative. Visit cdp.net or follow us @CDP to find out more.