CDP S&P 500 Report 2011 – Strategic Advantage Through Climate Change Action


In July 2011, the Australian government announced a comprehensive plan that includes putting a price on carbon emissions, promoting innovation and investment in renewable energy, improving energy efficiency, and creating opportunities in the land sector to cut pollution. Under the plan, Australia estimates that it can cut 159 million tons a year of carbon pollution by 2020.4


Some Australian companies


are also mandated to undergo energy efficiency assessments and report publicly on opportunities that exist for projects with a financial payback of up to four years.5


New


Zealand recently passed new regulations for emissions trading and India is expected to soon follow suit.


• North America. In the US, the Securities and Exchange Commission issued interpretative guidance in early 2010 highlighting climate change disclosures that should be considered by registrants. Several federal and local programs already require the reporting of GHG emissions information, including the Environmental Protection Agency’s mandatory GHG reporting rule for large emitters. In addition, California’s Global Warming Solutions Act of 2006 will require certain facilities in California to reduce GHG emissions to 1990 levels by 2020. In the Northeast, the Regional Greenhouse Gas Initiative also requires reductions among utilities.


Physical risks Businesses face growing risks from the physical impacts of climate change, including the increased intensity and frequency of severe weather events such as prolonged droughts, floods, storms and sea level rise. According to the National Oceanic and Atmospheric Administration (NOAA), the year 2011


11


already represents the highest damage cost-to-date (US$32 billion) in the US since 1980, the year NOAA began tracking disasters. The April tornadoes in the Midwest alone were responsible for approximately half of the losses and over 500 deaths.6


In general, industrial companies — especially in the Utilities and Energy sectors (see Figure 6) — were most concerned with regulatory and weather- related risks.


“Climate change may increase either the frequency or intensity of hurricanes, which could affect our operations. The Gulf of Mexico is of particular importance to our industry because two thirds of imported oil enters the country through this region and it houses many of the oil and gas pipelines that move domestic resources from the Outer Continental Shelf to the rest of the country. Chevron has developed a number of risk management mechanisms that are applied to siting and construction of new facilities as well as the operation of existing ones. These mechanisms help reduce our vulnerability to sea level rise, tropical cyclones, water shortages, and other environmental factors.” Chevron


“As a food producing company, Sara Lee is heavily dependent on globally sourced agricultural production process inputs. Therefore, Sara Lee is exposed to climate change, on a global scale, to impacts and physical risks that vary from region to region.” Sara Lee


Within the services sectors, property and casualty insurers were concerned that climate change could have a profound global impact on insured losses and potentially lead to insurer solvency problems.


“Allstate is engaged in an ongoing evaluation of climate change and natural catastrophes as it relates to Allstate’s future risk exposure and America’s ability to prepare for and manage these catastrophe related risks moving forward. Allstate monitors all significant enterprise risks and opportunities, including those related to climate change on a regular basis, with fluid risk identification processes to reflect a continuously shifting external and internal risk environment.” Allstate


Market risk and the risk of inaction Respondents, led by both the Utilities and Consumer Staples sectors, expressed growing concern over reputational risk, value chain risk, and changing patterns in consumer behavior and expectations. Respondents believe failure to craft and execute a credible climate change strategy could create a risk of inaction and turn the sentiments of stakeholders (including investors, civil society groups, customers and employees) against the company (see Figure 6).


Many companies are beginning to take a proactive approach to addressing these concerns. Procter & Gamble and Wal- Mart Stores recently announced plans to reduce GHG emissions in their global supply chains. In July 2010, the General Services Administration announced plans to give greater preference to vendors that track and reduce GHG emissions. Similarly, an increasing number of questionnaires and requests for proposal now require potential vendors to provide GHG emissions information, as well as plans for reduction.


4. www.cleanenergyfuture.gov.au/government-launches- ‘clean-energy-package’/


5. www.ret.gov.au/energy/efficiency/eeo/about/summary/ 6. www.ncdc.noaa.gov/oa/reports/billionz.html


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