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Trucost research for investors reveals increasing environmental disclosure by FTSE 100 companies with FTSE 250 companies lagging significantly
London 20th September 2006:The Carbon Disclosure Project (CDP) will be announced at the Museum of London today. The CDP commissioned research from Trucost that analyses, for the first time, the responses of the UK’s 350 largest, listed companies by market capitalization.
The launch will feature Lord Turner, James Murdoch, Simon Thomas (Chief Executive of Trucost) and Andy White from Innovest as speakers. This is the fourth year the CDP has reported.
The commissioned report reveals that the CDP is having a very positive cumulative effect on carbon disclosure levels: 83% of companies in the FTSE 100, many of whom have been targeted before, responded. This compares with a much lower response rate from members of the FTSE 250.
As disclosure increases however, the report also examines the adequacy and usefulness of the information provided and highlights that investors need more information of better quality if they are to factor carbon issues into mainstream investment management and decision-making.
The key findings in the report are as follows:
Response rates for the FTSE 100 were very high , and the best of all the samples in CPP4. 83% answered the questionnaire and 55% provided quantified emissions data. 24% provided emissions data that satisfied Scope 1 of the GHG Protocol, as recommended by the CDP questionnaire. Only 36% of FTSE 250 companies answered the questionnaire . This is largely indicative of the fact that CDP4 is the first occasion that these companies have been surveyed. 16% provided quantified emissions data. 5% provided emissions data that satisfied Scope 1 of the GHG Protocol. 49% of FTSE 350 companies overall answered the CDP4 questionnaire . 27% provided quantified emissions data. 10% provided emissions data that satisfied Scope 1 of the GHG Protocol. FTSE 350 response rates were only slightly better than the average for all the 2100 companies included in the CDP4 (49% compared to around 47%). The expanded universe includes companies in emerging economies and in regions where regulatory controls on carbon emissions are very weak or non-existent. Companies that are in more carbon-intensive industries are not more likely to report than companies from less intensive sectors. However, they are more likely to provide quantitative emissions data. Larger companies are significantly more likely to report. There was a strong correlation between the size of the company, as measured by market capitalisation, and whether they answered the questionnaire. More companies responded confidentially than permitted publication. O f the FTSE 350 companies that responded to the CDP4 more explicitly asked for the information to be kept confidential (48) than explicitly authorised its publication (45) Simon Thomas, Chief Executive of Trucost said:
“The CDP FTSE 350 report shows that many companies devote considerable resources to reporting carbon emissions and the strategies they use to reduce impacts but there is insufficient quantification and where disclosures are quantified, the data is seldom standardized. But the fact that the CDP has 155 institutional investor signatories with more than $31 trillion under management is very encouraging; it shows that investors are taking the issue of climate change increasingly seriously.”
Ian Pearson, MP for Climate Change and the Environment said:
“I would like to congratulate CDP on their fourth iteration of the project. I’d also like to congratulate those investors who are supporting the CDP and engaging with companies on how they are managing their climate change performance.
I have always believed that investors are in a powerful position when it comes to driving behaviour change in business. Climate change is now more than just a material issue for UK business – it is a crucial one - and to effectively invest their clients’ money, institutional investors need to understand and respond to climate change, in the same manner in which they must respond to any risk to their portfolios.
Trucost’s analysis of the FTSE350 responses will help us all respond to this challenge. It will help identify where the financial risks of climate change now exist in the UK. And it will help show us where there is more work to be done to encourage companies, who are not presently reporting, to communicate this information to investors in the future.
The Government has supported the CDP’s work since its launch by the Prime Minister on the 4 th December 2000. That support has continued with this report, extending the information request to FTSE 250 – the first year companies in FTSE 250 have been asked to respond to the CDP’s information request.“
The CDP is a global initiative aimed at informing investors of the risks and opportunities presented by climate change, and to inform company management of the views of their shareholders regarding climate change. The institutions signed up to the Project now represent over $31 trillion of assets under management. In previous years the CDP has sent a climate change questionnaire to the FT500 companies, which asked 10 questions and requested that companies report their emissions data according to the Greenhouse Gas (GHG) Protocol. This year (CDP4) the CDP expanded the number of companies surveyed to more than 2100.
About Trucost ( www.trucost.com)
Trucost Plc is an environmental research business which helps companies and investors understand the environmental impacts of business activities in financial terms. Trucost offers expert advice and research to major corporations, both public and private, institutional investors and to Government departments and associated agencies. Trucost wrote the environmental reporting guidelines for UK business with the UK government, released in January 2006.
Over the past six years Trucost has built up a database of the environmental impacts and disclosures of over 3000 major companies worldwide. Trucost’s database of climate change disclosures is the world’s largest. Trucost has developed unparalleled experience and expertise in the area of environmental performance, analysis and reporting, working with leading multinational companies in a range of business sectors including Avis, Bloomsbury, Christian Salvesen, Prudential, LogicaCMG, Legal & General and Land Securities Plc.
Institutional investors use Trucost’s research to support due diligence and active engagement, incorporating environmental performance measurement into their investment decisions. Clients include Hermes, Standard Life, Henderson Global Investors, Fortis Investments and Merrill Lynch Investment Managers. Institutional investors also use the information to assess the environmental footprint of their portfolios, and therefore better understanding their environmental risk.