Innovest Strategic Value Advisors, Inc.

Carbon Disclosure Project


Courtesy of Innovest Strategic Value Advisors, Inc.

Risks and Opportunities
The primary risks posed by climate change can be grouped into four categories:
  • Physical risks such as asset damage and project delays resulting from the increasing number of extreme weather events;
  •  Regulatory risks resulting from tightening national and international regulations designed to curtail greenhouse gas (GHG) emissions;
  • Competitive risks generated by a possible decline in consumer demand for energy-intensive products and a rise in costs for energy intensive processes;
  • Reputational risks from perceived “inaction” on climate change.  In addition to these risks, climate change is creating substantial commercial opportunities that are increasingly being sought by investors. Recent and rapid technological innovation is stimulating growth in new and existing industries, and helping to send clearer signals to the market concerning the long-term growth potential of “low carbon” products and services. In 2005, global wind and solar markets reached $11.8 billion and $11.2 billion – up 47% and 55% respectively from a year earlier. The market for biofuels hit $15.7 billion globally, up more than 15% from the previous year. 3 This year’s key findings from the CDP4 FT500 responses are as follows:

Disclosure Trends

  • CDP4 generates highest-ever response rate. 72% (360) of the FT500 answered the CDP questionnaire, compared to 71% in CDP3, 59% in CDP2 and 47% in CDP1.
  • High-impact sectors lead the way.
    Responses were considerably in excess of the average 72%.4 The highest response rate was 94% in the Electric Utilities – International sector.
  • Europe continues to have highest regional response rate. 86% of European-based firms answered the CDP4 questionnaire, compared to 66% of North American based firms. However, prominent U.S. FT500 companies American Express, Boeing, Home Depot and Wal-Mart responded to the CDP for the first time this year.
  • Quality and comparability of responses are improving. The average quality and sophistication of responses to the CDP continues to improve year on year thereby enhancing the data available to investors. A growing proportion of FT500 companies are using the GHG Protocol to report their emissions.
  • Awareness of issue is not only driven by regulation. 87% of responding companies indicated climate change represented “commercial risks and/or opportunities,” but only 35% agreed that regulatory responses to climate change represented a possible financial risk.

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