Trucost News / 13 Nov 2012

Regulation to drive opportunities and risks

Companies in Asia reveal expectations that regulations that could lead to rising costs for reporting and reducing GHG emissions will also be the main sources of climate-related business opportunities, according to the Carbon Disclosure Project (CDP) Asia ex-Japan Climate Change 2012 co-authored and analyzed by Trucost.

Companies in Asia reveal expectations that regulations that could lead to rising costs for reporting and reducing GHG emissions will also be the main sources of climate-related business opportunities, according to the Carbon Disclosure Project (CDP) Asia ex-Japan Climate Change 2012 report released today at an event in Hong Kong. Although 57% of responding companies raised concerns about exposure to regulatory risks, 51% foresee related opportunities.

The CDP report, co-authored and analysed by natural capital research company Trucost Plc, on behalf of 655 institutional investors representing $78 trillion in assets, provides an annual update on greenhouse  gas emissions data and climate change strategies at the region’s largest public companies. This year 32% of companies from Asia ex-Japan responded to CDP – an almost 20% increase from 27% in 2011.

Governments and stock exchanges in Asia ex-Japan are using mandatory and voluntary guidance to encourage greater disclosure of non-financial information.

“By integrating climate change into their mainstream business Asia ex-Japan’s Disclosure Leaders are ideally placed to meet future reporting requirements,” says Antigone Theodorou, Business Development Manager, Asia ex-JICK of the Carbon Disclosure Project, “We envisage that, as regulation around emissions reporting materializes in the region, companies will reach higher levels of performance on climate change in future years”

The Asia Pacific region is the fastest-growing source of greenhouse gas emissions and the impact of climate change on Asian economies is tangible; in the last year alone droughts and floods have caused major disruption and volatility. The region also uses three times more resources than the rest of the world to create one unit of GDP. Resource-intensive growth has made Asia Pacific more vulnerable to resource price volatility and the largest companies are recognizing this.

Companies are responding by implementing management systems and identifying new opportunities for green growth. 51% of reporting companies foresee opportunities linked to regulatory frameworks to address climate change, including the potential to generate carbon credits for sale to companies covered by carbon trading schemes, and revenue growth from low-carbon products and services. 28% of companies said that they are already capitalizing on low-carbon opportunities.

Chaoni Huang, head of business development at Trucost in Asia said, “Companies that lead the way in optimizing their operations and supply chains in line with resource constraints and environmental costs will achieve advantage from security of supply and reduced costs. They will also be better placed to attract customers and investors.”

PwC Hong Kong has reviewed and analysed company responses and scored them for the quality of disclosure on actions taken to mitigate climate change.

The average disclosure score for all Asia ex Japan companies was 62 in 2012. 64% of the scored companies either increased their score or achieved the same as in 2011, indicating that the general quality and completeness of company responses has improved this year.

In 2012, 20 companies are recognized as leaders on disclosure, with Industrials the most represented sector (five companies).

Geographically South Korea is strongly over-represented among Asia ex Japan disclosure leaders relative to the overall number of South Korean companies in the Asia ex Japan sample (12 South Korean companies are among the top scoring companies on disclosure, relative to 30 in the sample), followed by Hong Kong with five companies.

In 2012, three companies from South Korea achieved performance leadership status among the Asia ex Japan companies. The success in South Korea may follow the implementation in 2011 of the Greenhouse Gas (GHG) Energy Target Management System, a mandatory government- driven emissions reporting and management system.  This shows that  regulation around emissions reporting helps drive company action on climate change.

Emissions data on all Asia ex Japan companies responding to CDP can be found in the appendix of the report.


CDP Asia exJapan Climate Change Report 2012 (full report)

Individual public company responses to CDP

*This does not take into account company responses from all Chinese companies, which were not all scored as part of the Investor CDP program in 2012

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