- Capital Goods and Consumer Electronics companies failing to innovate on cooling technology with on average 2.2% sales spent on cooling R&D.
- Trane Technologies (US), LG Electronics (S.Korea) and Mitsubishi Electric (Japan) lead cooling sector on climate-related financial metrics with Hisense (China) and Blue Star (India) lagging.
- Only 22% of cooling sector companies have 2050 emissions targets (Hitachi, Mitsubishi Electric, Daikin Industries and Electrolux).
- Significant energy efficiency gap of up to 50% between best available popular AC products and those offered reveals gap for regulators to target.
London; June 2, 2020: Refrigeration, air-conditioning and chillers are crucial for providing comfort and safety in homes, enabling the delivery of essential goods and medicines, and protecting vaccines from heat. The cooling market is valued at c.US$300 billion and growing fast with the number of global unit sales a year rising by close to 40% by 2030 compared to 2019. Rapidly rising emissions from the sector are attracting attention from policymakers, with a call for action for industry-wide zero emissions commitments ahead of the COP26 climate negotiations. COVID-19 is also raising the importance of global health issues, and cooling is vital in keeping vaccines cool and protecting against heat stress health issues linked to climate change.
However, new research from global non-profit CDP finds the major consumer electronic and capital goods firms that dominate the sector are failing to innovate or make the latest technology widely available.
CDP assessed 18 high-impact publicly listed companies that dominate the cooling sector (combined market cap of over US$550 billion) on product efficiency, emissions disclosure and low-carbon innovation.CDP’s in-depth analysis of product portfolios in the major markets for air conditioners in the United States, Japan, China and India found companies are not deploying their most efficient products, resulting in a significant gap between what is technically possible and minimum efficiency standards.
Trane Technologies (US), Mitsubishi Electric (Japan) and LG Electronics (S. Korea) were found to lead the sector on climate-related financial metrics with Blue Star (India) Hisense (China) and Chigo (China) lagging.
Carbon emissions from space cooling have tripled since 1990 and are continuing to surge, with space cooling set to become the strongest driver of growth from buildings electricity over the next 30 years1. Cooling technologies also contribute to emissions through the leakage of fluorocarbons such as HFCs.
Deep transformation of the sector is needed to accelerate the pathway to a healthy, resilient, zero emissions future, but CDP’s research points to a lack of innovation with spending on R&D at 2.2% of net sales significantly lagging the Capital Goods average of 3.5%.Most companies’ sustainable innovations are only delivering incremental efficiency gains based on a 100-year-old compressor technology and only 5% are involved in transformational demand management solutions needed such as smart grids and renewable sources. This is reinforced by patent filings, with 60% in compressor technologies.
Only 22% (four out of the 18) of the companies assessed have set targets to reduce emissions throughout the value chain by 2050: Hitachi and Mitsubishi Electric are targeting an 80% reduction, while Daikin Industries and Electrolux aim to achieve net-zero emission.
CDP’s research points to a huge opportunity for cooling businesses to innovate, compete and position the sector at the forefront of climate action. A radical step-change in efficiency standards, innovation and R&D is needed for the sector to make the emissions cuts needed to be aligned with Paris goals to achieve net zero emissions by 2050.
Carole Ferguson, Head of Investor Research at CDP said: “It is striking to see how many companies scored poorly on climate-related opportunity metrics, showing that as a group there is little or no meaningful innovation.This is backed up by financial metrics such as their R&D spend, patent filings and capex/sales ratios.”
Jess Brown, Executive Director at Kigali Cooling Efficiency Program (K-CEP) commented: “Cooling companies know they need to phase out and down super-polluting F-gases to comply with the Kigali Amendment.Simultaneously improving the energy efficiency of cooling technology presents an even bigger emissions reduction opportunity.
This report shines a light on the business leadership already underway but also shows that much more can be done by the world’s largest cooling companies if they are to make an appropriate, and much needed, contribution to tackling the climate crisis.”
Nigel Topping, COP26 High Level Climate Action Champion said: “In response to the economy wide call to action for net zero commitments for COP26, cooling companies have a huge opportunity to build on their climate performance to date, as assessed in this important CDP report, and through transformational change in cooling technology, to position the sector at the forefront of climate action.”
CDP’s League Table of companies in the cooling sector:
|League Table rank||Company||Country||Market Cap US$bn (as of March 2020)||Weighted rank||Transition risks rank||Transition opportunities rank||Climate governance & strategy rank|
|2||LG Electronics||South Korea||8||6.50||2||4||5|
|4||Samsung Electronics||South Korea||243||7.17||4||6||6|
|12||Mitsubishi Heavy Industries||Japan||9||9.84||11||14||11|
|17||Blue Star LTD||India||0.6||14.54||18||11||15|
(i) Weighted ranks are calculated for each area. We display non-weighted ranks in this summary for simplicity only.
(ii) Blue Star, Chigo, Gree, Haier, and Hisense were not requested to respond to CDP’s 2019 climate change questionnaire.
(iii) Carrier Market Cap as of June 2020. As of May 15 2020, Chigo has been suspended from trading on the HKSE.
Notes to Editors
- The full report is exclusively available for purchase by CDP investor signatories. To become a CDP signatory and gain access to this and other full sector reports and tools, including CDP company disclosure data, please contact [email protected] .
- Space cooling refers to all air conditioning systems used in buildings.
For more information, or exclusive interviews, please contact:
- Julia Chapman, CDP
Tel: +44 (0) 2038 183 973 | Email: [email protected]
- Caroline Barraclough, ESG Communications
Tel: +44 (0)7503 771694 | Email: [email protected]
CDP is an international non-profit that drives companies and governments to reduce their greenhouse gas emissions, safeguard water resources and protect forests. Voted number one climate research provider by investors and working with institutional investors with assets of US$106 trillion, we leverage investor and buyer power to motivate companies to disclose and manage their environmental impacts. Over 8,400 companies with over 50% of global market capitalization disclosed environmental data through CDP in 2019. This is in addition to the over 920 cities, states and regions who disclosed, making CDP’s platform one of the richest sources of information globally on how companies and governments are driving environmental change. CDP is a founding member of the We Mean Business Coalition. Visit cdp.net or follow us @CDP to find out more.