Tuesday 27th September 2016                 Change text size:

CDP: greener S&P 500 corporations are more profitable



Photo: Martin Nikolaj Bech via Flickr

S&P 500 companies that are leading climate change action are raking in superior profitability and benefiting from lower volatility of earnings, according to a new report from CDP.

CDP, an international organisation that encourages companies to disclose how they are managing environmental risks, says the finding proves that addressing climate change is a win-win situation for corporations. 

The analysis from the not-for-profit, formerly known as the Carbon Disclosure Project, considers the financial performance of leading firms on the US stock market index over the past three years.

It reveals that corporations that are managing and preparing for climate change secure an 18% higher return on investment (ROI) than their competitors and 67% higher than companies that have failed to disclose data on their environmental impact to CDP.

These greener corporations – among the most profitable corporations in the world – are taking action by setting ambitious emission reduction targets and enforcing internal carbon prices, as well as by sharing information with CDP.

The report suggests that while such actions are not directly linked to profitability, they are evidence of a firm integrating a responsible long-term view, a trademark of a well-run company that appeals to investors.

Crucially, these climate leaders also ensure better stability, with 50% lower volatility of earnings over the past decade than their peers, and show dividends to shareholders 21% stronger than those of lower-ranked corporations.

“With this comprehensive analysis of S&P 500 companies, the market has new, compelling evidence of the link between industry leadership on climate change and corporate profitability,” said CDP CEO Paul Simpson.

“There is only upside for corporations acting in a prudent way to address the challenges of climate change – for which disclosure through CDP lays the foundation.”

Around 70% of the S&P 500 responded to CDP’s requests for disclosure and the report reveals that their environmental performance is improving. This year, almost half of respondents were ranked in CDP’s high performance bands, scoring at least a B. Only 30% of firms matched that feat in 2011’s report.

Household names such as Apple, Google, Bank of America and Hewlett-Pacard are among those leading the way. 

As world leaders prepare for crucial negotiations over a binding pact to cut emissions, CDP suggest these firms have a major role to play in compelling governments to act.

“With the prospect of a global climate deal coming from the United Nations process, governments, cities, the private sector and civil society have a great opportunity to take bold actions and build momentum in the run up to the Paris 2015 meeting,” Simpson added.

“The decisions we make today can lead us to a profitable and secure future.”

Photo: Martin Nikolaj Bech via Flickr

Further reading:

Big corporations already preparing for carbon pricing agreement, study reveals

S&P 500 companies experiencing increasing climate change risks

CDP: investors urge companies to improve sustainability

CDP: climate change measures of FTSE 350 companies ‘insufficient’

10% of companies responsible for over 70% of greenhouse gas emissions


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