€5trn investor group presses global top 500 companies on greenhouse gases

A group of 34 institutional investors with $7.6trn (€5.3trn) of assets are calling, via the Carbon Disclosure Project, on the top 500 companies in the FTSE Global Equity Index to implement cost-effective greenhouse gas emissions reduction plans.
The investors want companies to not just cut emissions but also to make investment in emissions reduction initiatives with a “satisfactory positive return on investment”. Companies that do not already have an emissions reduction target will be asked to set and publicly disclose one. They can disclose their actions through the established CDP reporting system.
Some of the institutions involved include: Aviva Investors, AXA Investment Managers, Boston Common Asset Management, Calvert, CCLA, Batirente, F&C, Insight Investment, KLP, PhiTrust, Rockefeller, SAM, Sarasin, Strathclyde Pension Fund and Scottish Widows Investment Partnership.
At least one investor, CCLA Investment Management – which specialises in fund management for charities, faith organisations and local authorities – is saying it may divest companies who fail to disclose targets.
The new investor initiative comes via the CDP’s new Carbon Action scheme. It not only reflects the growing importance of climate change to investors but marks a shift in emphasis for the CDP. Carbon Action is a response to investor requirements to protect investments and accelerate corporate carbon cuts. With it, the CDP is putting its weight – in total it represents more than 550 investment institutions with some $71trn of assets – behind an investor campaign on corporate climate change. Up till now the CDP has focused on promoting disclosure of emissions; it holdsa database of around 3,000 firms’ climate change and water information. And there’s clear evidence of the growing importance of climate change to institutional investors. Just last week, it emerged that an international group of investors with more than $500bn in assets had written to US political leaders backing the Environmental Protection Agency’s role in greenhouse gas regulation. And investors such as APG, PGGM, the Universities Superannuation Scheme and ATP have just joined a real estate sustainability benchmark.
“We believe that the external costs of greenhouse gas emissions will become internalised into company cash flows and profitability,” said Steve Waygood, head of sustainability, research and engagement at Carbon Action founding signatory Aviva Investors. “We encourage companies to consider what action that they can take now to reduce emissions.”
CCLA’s head of Ethical & Responsible Investment Helen Wildsmith said: “From 2013 CCLA’s charity clients intend to divest from developed-world Energy, Utility, Industrial and Materials companies in the Global 500 that have not yet disclosed reduction targets to the Carbon Disclosure Project.
“We believe that management of the carbon challenge is a key part of achieving sustainable and strong shareholder returns.”
Craig Mackenzie, head of sustainability at Scottish Widows Investment Partnership, said: “Efficient management of energy offers a huge win-win: lower carbon emissions, higher returns for shareholders.”
In a separate development, MPs are expected to discuss mandatory carbon reporting during a debate in the House of Commons today. CDP home page