Invest

CDP: investors urge companies to improve sustainability

Published

11 years ago

January 16, 2014

Blue & Green Tomorrow

CDP has said it has seen an “exponential increase” in the number of investors asking companies to improve their climate performance. Its number of carbon action signatories increased by 107% through the course of 2013.

The CDP, formerly the Carbon Disclosure Project, was backed by institutional investors with assets in excess of $87 trillion (£53 trillion) in 2013. It aims to give investors access to information that protect their investments in the long-term. This means reducing risks associated with the environment and resources, such as water usage, deforestation and greenhouse gas emissions.

According to its research, carbon reductions generate a positive return on investment of 33.6%, creating $15.1 billion (£9 billion) in value last year.

The report said, “We [argue] that corporate chief financial officers (CFOs) should be investing in projects that improve energy efficiency and reduce emissions irrespective of the environmental benefits, given the high incremental returns.”

As a result of companies understanding that sustainability can enhance their profits, companies were found to be allocating more capital to emission reduction activities. In 2013, $33 billion (£20 billion) was invested in 1,050 reported projects, compared to 860 projects in 2012.

However, CDP said the level of investment still falls short of what is required. The organisation targeted the world’s largest polluters: companies working in 17 industries that have high average emissions. These companies operate in the energy, utility, material, industrial and consumer discretionary sectors.

Just over half of these companies have emission reduction targets and unsurprisingly those that do not have a target invest less in the issue. The companies that had a goal invested an average of 1.3% of capital expenditure, compared to the 0.08% invested by those without a target. This compares to the benchmark of investment between 3-4% in emission reduction projects.

A previous CDP report showed that the UK’s largest companies are failing to address the global implications of climate change through long-term financial strategies. The report looked at greenhouse gas emission and climate change strategies of FTSE 350 companies.