Institutional investors call for energy cost-cutting
GLOBAL - The Carbon Disclosure Project (CDP), on behalf of 92 pension funds, asset managers, insurers and banks, has sent letters to chief executives of 415 of the world's largest public companies calling for cost-effective management and reductions of their carbon emissions.
Denmark's PKA and Sampension, Finland's Ilmarinen Mutual Pension Insurance Company and Local Government Pensions Institution KEVA, the London Pensions Fund Authority, Norfolk Pension Fund and Strathclyde Pension Fund in the UK, as well as Pensioenfonds Vervoer, fiduciary managers MN and APG Group in the Netherlands were among the institutions joining the call.
Claudia Kruse, head of sustainability and corporate governance at APG, said: "Companies stand to benefit from improving operational energy efficiency as well as from capturing the market opportunity for energy efficiency-related products and services.
"The potential upside to their short-term performance and long-term competitiveness can be material. Hence, investors need greater visibility of how management drives improvements and seizes strategic opportunities."
The letters were sent as part of CDP's Carbon Action initiative in parallel to its annual request for disclosure of greenhouse gas emissions, climate change strategies and water use.
They include requests to:
• Make year-on-year emissions reductions
• Invest in emission-reduction activities with a positive return on investment
• Set and publicly disclose an emissions reduction target that covers the principal sources of emissions in their business if they have not already done so
• Demonstrate management and steps towards reduction of emissions across supply chains
As with the annual CDP disclosure request, companies have until 31 May to report their emissions and emissions-reducing activities to CDP.
Data from responses to the Carbon Action letters will be collected through the same questionnaire and then synthesised in a public summary report and a detailed investor analysis for the signatories, which will be delivered this autumn.
Carbon Action signatories can then use the information in individual interactions with company management or collaboratively through the UN PRI.
Institutional investor support for Carbon Action is driven by a range of factors, such as concern about climate change and extreme weather events; reducing exposure to potential increases in the price of carbon traded on the EU emissions trading scheme for companies in the EU; and the growing understanding that emissions-reduction activities can be cost-effective.
Other factors include protecting the financial sustainability of loans on the part of banks and investments on the part of asset managers and pension funds; increasing the use of environmental, social and corporate governance data in decision-making; regulatory risk; and long-term corporate strategic preparedness.
The largest new signatories include Spain's Banco Santander, Banesto and BBVA from the banking sector, fund manager Henderson and APG.
There is also a significant number of new signatories in Australia, which passed its Clean Energy Act in November last year, taking the group's combined assets to more than $10trn (€7.5trn).