Accelerating Corporate Climate Action:
The Role of Policy
This policy brief examines the impact of climate-related policy on a sample of 366 of the world’s biggest companies, worth $28 trillion in market cap, as disclosed through the CDP platform.
Key messages, derived from qualitative analysis of this sample, are:
Policy, both current and anticipated, is a major driver of actions taken by companies to manage climate change impacts;
The costs of managing policy-related risks are lower than the potential financial impacts for the majority of industries;
Policy can create financial opportunities, by driving demand for products & services and revealing cost savings;
Policy uncertainty is a risk, but the anticipation of policy is a powerful opportunity driver;
Policymakers and business are taking action, but to achieve the goals of the Paris Agreement a step change is needed.
Key recommendations to policymakers are:
Submit enhanced Nationally Determined Contributions (NDCs) by 2020, that are in line with the Paris Agreement’s goals, and are consistent with long term strategies and national policies. Over 50% of companies analyzed disclose that policy could present an opportunity to their business. 25% of the companies analyzed view uncertainty around policy as a financial or strategic risk driver. NDCs can provide clarity for business, by setting a clear direction of travel towards low-carbon economies, particularly when consistent with long term strategies and other national policies.
Ensure a conducive policy environment for globally standardized climate-related disclosure, mandating, where appropriate, the adoption of the recommendations of the Taskforce for Climate-related Finance Disclosure (TCFD). By disclosing through CDP, the 366 companies analyzed, along with all companies who disclose to CDP, are already providing high quality, consistent, comparable, TCFD-aligned data at scale. Disclosure requirements that embed the TCFD Recommendations within national jurisdictions would create multiple economic benefits, help to accelerate the low-carbon and climate-resilient transition9 , and ensure management of risks is embedded within the real economy.
Set a price on carbon that is consistent with achieving the Paris Agreement’s goals, as per the work of the High-Level Commission on Carbon Prices. Carbon pricing is the most commonly reported driver of policy-related opportunities within the 366 companies analyzed. And whilst carbon pricing is also the most commonly disclosed policy-related transition risk, companies are highly likely to report they are taking steps to manage that risk by taking action to reduce emissions. Recognizing the benefits of a carbon price and anticipating future regulation, a third of the 366 companies analyzed have already set an internal carbon price, with a further 20% planning to do so in the next two years. To achieve the global temperature target of the Paris Agreement, the High-Level Commission recommends carbon prices of at least US$40–80/tCO2 by 2020 and US$50–100/tCO2 by 203011 within the global economy.
Frequently reported climate risks
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