CDP Data Helps Investors and Companies Manage Climate Risk

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Steven Tebbe, CDP, 2016
Steven Tebbe
Executive and Managing Director
CDP Europe
CDP
An investor lead initiative
Climate Leadership Council
February 17th, 2016
Helsinki, Finland

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Agenda
{ What is CDP and what we do
{ What we don’t do
{ Why we do it
{ How we do it
{ Results and next steps
{ Questions and Answers

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What we do
We are in the
information business.

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What we do
We rate and
score
companies.

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… in order to create a level playing field

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for carbon,
water and
forestry reporting.
… and a credible, common standard
The “Gold Standard”

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What gets
measured,
gets managed.
Why this is important

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“Not everything that can be
counted counts,
and not everything that counts
can be counted.“
Be selective

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Measurement criteria
Governance &
Strategy
Targets &
Performance
Risks &
Opportunities
GHG
Emissions

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”A prosperous global economic system that
operates within sustainable environmental
boundaries and prevents dangerous climate change”
“To leverage the power of organizations and
information to drive urgent action at scale by
business, investors and regulators”
Vision & Mission statements

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Information is
the lifeblood of
financial
markets.
The key

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We harness the
power of investors.
Our leverage

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> 800 institutional investors
with US$ 100 trillion in assets
> 50% of world’s invested capital
&
75 corporate buyers covering US$ 2 tn
procurement spend & >7800 suppliers
5.500 companies from > 80 countries
reporting to CDP
= 60% of global market cap
&
>300 major cities
AUTHORITYDECISION CRITERIA
Investors give us the mandate
INFORMATION
AUTHORITY
AUTHORITY

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Forests
180
Reported in 2015
Water
571
Reported in 2015
Climate change
5,500
Reported in 2015
0
10
20
30
40
50
60
70
80
90
100
0
100
200
300
400
500
600
700
800
900
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Assets (US$ Trillion)
Number of Signatories
Climate Change Signatories Water Signatories Carbon AcCon Signatories
Forests Signatories Climate Change Signatory Assets Water Signatory Assets
Carbon AcCon Signatory Assets Forests Signatory Assets
Over half of the world’s invested capital wants environmental data

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58 Nordic investors
Including:

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Not a niche anymore

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{ 149 for investors, e.g. H&M, Nordea, KONE, Nokia, SSAB, Novo Nordisk, Statoil
{  39 for customers (supply chain, e.g. Lantmännen, Lego, Tetrapak
{  17 more e.g. Vattenfall
CDP in the Nordic region (Sweden, Finland, Denmark, Norway)
85%
of Nordic
market cap
205 Nordic corporations disclosed
in 2015

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Disclosure
(100-0)
Performance
(A-D)
Measuring transparency and performance

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What gets
measured,
gets managed.
Why this is important

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www.cdp.net | @CDP Page 9
Measurement turns into action …

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{  Board-level responsibility for climate change
{  Staff incentives
{  Integration with business strategy
{  Integrated communication
{  Risk assessment and management
{  Implementation of GHG emissions reduction
project
{  Setting Science based GHG emissions
reduction targets
{  Emissions intensity reduction
{  Data verification
115
companies
on the global
A list
… actions turn into leadership …

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… leadership turns into financial outperformance …

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CPL Index outperforms
DJSW Index by 19,6% &
Bloomberg World Index
by 9,6%
over past 10 years
(CDP Climate Performance Leadership Index)

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Company Score Examples of emission reductions for A listers
100 A 12 Emission reduction activities implemented in the reporting year leading to
74210 estimated annual CO2e savings in metric tonnes CO2e à 7% CO2 total
global decrease through proactive measures. Extensive engagement w value
chain, Scope 3 reductions namely through purchased goods and services:e.g.
increased energy efficiency by the data center service providers.
100 A 4,6% (6,600 tCO2e) reduction & avoided emissions (S1&2) through proactive
measures
target to reduce our operational carbon footprint by 3% annually relative to net
sales and to further reduce the energy consumption and thereby GHG emissions
of our solutions.
100 A Kesko’s Responsibility Programme and K-responsibility Concept provide
information, ideas and support to e.g. retailers to improve energy and material
efficiency and other activities to mitigate CC, and to customers on how to do
environmentally and climate friendly choices with their purchases - more than
1600 activities reported and 12,980 tonnes CO2 avoided emissions
99 A decrease of 11% (110,000 tonnes CO2) in overall emissions through proactive
measures
99 A 36% reductions in emissions/tonne of product (S1 & S2), namely through
investment in Skärblacka Mill, cutting the annual electricity requirement, RE:
Seven units have contracted deliveries with guarantees of origin with low carbon
emissions
Top Nordic companies to put on your watch list

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Nordic Climate Disclosure Leaders

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CDP
data
INVESTORS
DISCLOSING
COMPANIES
PROCURING
COMPANIES
POLICY
ACTORS
ACADEMICS
Need for data

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Financial markets

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SIGNATORY
INVESTORS
REQUESTING
SUPPLY CHAIN
MEMBER
INDICES
/finance
www.cdp.net
CDP
ANALYTICS
YOUR INVESTORS DISCLOSING COMPANIES YOUR CUSTOMERS GENERAL PUBLIC
OTHER PUBLICATIONS
PUBLIC RESPONSES
CDP REPORTS
SUSTAINABILITY
RATINGS
NON PUBLIC RESPONSES
AGGREGATE
DATA ONLY
SIGNATORY
INVESTORS
REQUESTING
SUPPLY CHAIN
MEMBER
Distribution channels

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Globale Sichtbarkeit Ihrer CDP Klimaschutzbewertung
Increasingly investment decisions include CDP data

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… and are available to all of us

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CDP data is available to professional investors …
Source: Bloomberg

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Compare a company against peers on “Eﬃciency”:
For example, GHG Emission per Sales.
… and used in analysis; e.g. peer analysis
Source: Bloomberg

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> 9 million downloads of CDP data points
from Bloomberg terminals in 2014.

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How investors will use your data
Investors will
•  Rank, score and compare companies
•  Manage risks
•  Use indices to optimize returns
•  Carbon footprinting of portfolios
•  Company engagement
•  Exclusion and divestment criteria
•  Construct ESG metrics
•  Build their own data models
•  Access CDP’s data via Bloomberg,
Google Finance, and other sustainability
rankings
Investors will NOT
use CSR reports to
•  Read them end-to-end
•  Pull out individual data points

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CDP
data
INVESTORS
DISCLOSING
COMPANIES
PROCURING
COMPANIES
POLICY
ACTORS
ACADEMICS
Need for data

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1. Engage with multiple stakeholders
2. Manage through measurement
{ Better risk management leads to reduced cost of capital
{ Better understand your business
{ Realize opportunities for competitive advantage
{ Identify inefficiencies
{ Take advantage of opportunities for cost savings
{ Benchmark performance
Benefits of responding

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Simple benchmarking

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Simple benchmarking

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CDP
data
INVESTORS
DISCLOSING
COMPANIES
PROCURING
COMPANIES
POLICY
ACTORS
ACADEMICS
Need for data

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75 supply chain members = US$ 2 trillion combined purchasing spend and over 7.800 suppliers

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Respondents Non-Respondents
49%
Of 7,879 total
suppliers
contacted,
49% did not
submit any data
… but we are still missing half the story

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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Report Scope
1/2 emissions
Identified
regulatory risks
Emissions
reduction targets
Engage with
suppliers
3-plus years reporting 2 years reporting First year reporting
Percent of suppliers taking specific action
by number of years reporting to CDP
Non-responders likely
resemble first-time
participants - which
performed
significantly worse
than repeat reporters
…and the missing half is likely to perform badly

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Purchasers can drive change by:
-  Leveraging their purchasing power by
asking suppliers to provide information
- Engaging their procurement teams
- Setting targets to articulate ambition
Improvement takes time

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Emissions reduction targets

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Actual emission reductions initiatives

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Climate risk management

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CDP
data
INVESTORS
DISCLOSING
COMPANIES
PROCURING
COMPANIES
POLICY
ACTORS
ACADEMICS
Need for data

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Capturing information from Cities

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Show us the …

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Preference for financials

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Financials are based on past performance

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How do we know?

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Most ratings are largely based on
CDP data

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Norwegian Government Pension Fund Global
(AuM > EUR 350 billion):

“…the management of the assets in the
Fund shall be based on the goal of achieving
the highest possible return.... A good return
in the long term is dependent on sustainable
development in economic, environmental
and social terms, as well as well-functioning,
legitimate and effective markets.”
Public investor

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“Investors are increasingly viewing CO2 emissions as a material issue and
expecting companies to report accordingly. Companies who don't disclose this
information themselves risk having their emissions estimated by a third party,
and this number may in turn be used by data providers to develop ESG ratings
that investors around the world use to evaluate and engage with companies.
So if companies want to be sure of the quality of the emissions data that finds
its way to the market, they need to report themselves“
Melanie Brooks, Senior Responsible Investment Analyst,
Folketrygdfondet
“During my years in the financial industry I have come to the conclusion that
companies who report emissions to CDP are more aware of their overall
sustainability risk and opportunities. Therefore I always encourage companies
to report to CDP”.
Anette Andersson, Fund Manager, SEB
Public investor

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„We undertake climate foot-
printing of our portfolios
using data provided via CDP.”
Nordea
Private investor

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Climate disclosure as a “first step” indicator of environmental risk
management
“In our meetings with companies with a weak ESG profile one of
our key recommendations is that they answer the CDP
questionnaire because it leads companies through many of the key
environmental issues they should be considering.”
Climate performance as an indicator of efficient operations
“In most mature markets stakeholder demands for carbon
management are higher, and thus carbon reporting is more
prevalent. For our Swedish Stars portfolio, we look not only at
whether a company reports, but also, for example, how the
company performs and data verification as indicators of efficient
operations.”
Katarina Hammar, ESG Analyst at Nordea Asset Management
Private investor

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„We will vote against the
report and accounts at the
AGM.”
Aviva
“The CDP data helps us to determine the quality of
an individual company’s management response and
is a factor in our overall buy, sell and hold
decisions. When necessary we make specific
recommendations for change. At Aviva Investors we
take this very seriously as the average length of
time we hold a stock is for six years, which is
longer than most companies long term strategy. At
one extreme, if such a company had not even
bothered to respond to the CDP, then we tell them
that unless this changes, we may vote against the
report and accounts at the company’s next AGM.
This is proving quite a successful sanction.”
“Measurement allows management. It provides a
framework to consider options, shows investor
transparency and benchmarking; all in turn
impacting energy efficiency, costs and reputation.”
Private investor

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With the slogan “Sustainable Swiss Private Banking since
1841” the Sarasin Bank focuses on invesCng according to ESG
principles:

“In addition to traditional financial analysis, by taking into
account environmental and social aspects you can
reduce a number of commercially relevant risks and
exploit opportunities.
The majority of scientific studies to date point to a positive
correlation between sustainability and the financial
value development of companies.”*
*Source: Sarasin study "Sustainability and equity performance" in cooperation with the European Centre for European Research and the CCRS (Center
for Corporate Responsibility and Sustainability) of the University of Zurich, November 2008. See also: S. Hörter, W. Mader, B. Menzinger (2010): „ESG
Risk Factors in a Portfolio Context. An Innovative Study for Institutional Investors.“
Private investor

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The Johannesburg Stock Exchange now
requires all listed companies to adopt
integrated reporCng through a comply-or-
explain basis enforced by the King Code on
Governance (King III).

“The JSE enforces the King III, not merely
because it’s a good idea, but because it
makes sound business sense”.
Market

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Enel esCmates that Socially Responsible
Investment (SRI) funds account for
about 19% of its free-ﬂoat (roughly
5.5% of its market cap).
Corporate

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The corporate news services, Bloomberg and Thomson
Reuters, both added social and environmental data
feeds to their standard corporate metrics and
intelligence plaeorms.

Brokers, raCng agencies, investment consultants, buy-
side teams, index and data providers are developing ESG
analysis services, which is mainstreaming it among the
ﬁnancial community.
Service providers

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The Result
Investors drive
company values
and can help
save the planet.

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The Impact

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The Impact

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CDP Nordic office contact:
Salla Sulasuo
Project Officer, CDP Nordic
Tel: +358 (0)40 650 1988
Email: salla.sulasuo@cdp.net
Resources available at www.cdp.net
{ Questionnaire guidance
{ Drafting document
{ CDP scoring methodology
{ Reporting roadmap
{ Technical guidance
{ FAQs
{ Live & recorded webinars
Next steps
Join CDP spring workshop in Helsinki 4.4.2016
kindly hosted by Imarinen

CDP Data Helps Investors and Companies Manage Climate Risk

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