Download - Carbon Disclosure Project Report 2010
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Carbon Disclosure Project 2010S&P 500 Report
On behal o 534 investors with assets o US$64 trillion
Report written orCarbon Disclosure Project by:
Carbon Disclosure Projectin [email protected]+1 212 378 2086www.cdproject.net
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Carbon Disclosure Project
Carbon Disclosure Project 2010
This report and all o the publicresponses rom corporations areavailable to download ree o charge
rom www.cdproject.net.The organizations highlighted in blueare based in the U.S.
ABRAPP - AssociaoBrasileira das EntidadesFechadas de PrevidnciaComplementar
Aegon N.V. Akbank T.A.S. Allianz Global Investors AG ATP Group Aviva Investors AXA Group
Banco Bradesco S.A.Bank o America Merrill LynchBBVABlackRockBP Investment ManagementLimitedCali ornia Public EmployeesRetirement SystemCali ornia State TeachersRetirement SystemCalvert GroupCatholic SuperCCLA Investment ManagementLtdCo-operative AssetManagementEssex Investment Management,LLCEthos FoundationGeneration InvestmentManagementHSBC Holdings plcING
KLP InsuranceLegg Mason, Inc.The London Pensions Fund
AuthorityMergence A rica Investments(Pty) LimitedMitsubishi UFJ Financial Group(MUFG)Morgan StanleyNational Australia Bank Limite
Neuberger BermanNewton InvestmentManagement LimitedNordea InvestmentManagementNorthwest and EthicalInvestments LPPFA PensionRai eisen SchweizRBS GroupRobecoRocke eller & Co. SRI GroupRussell InvestmentsSchrodersSecond Swedish NationalPension Fund (AP2)Sompo Japan Insurance Inc.Standard Chartered PLCSun Li e Financial Inc.
TD Asset Management Inc.TDAM USA Inc.The Wellcome TrustZurich Cantonal Bank
MEMBER 2010
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CDP Signatories 2010
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Carbon Disclosure Project 2010
534 inancial institutions with assetso over US$64 trillion were signatoriesto the CDP 2010 in ormation requestdated February 1st, 2010, including:
Aberdeen Asset Managers Aberdeen Immobilien KAG Active Earth Investment Management Acuity Investment Management Addenda Capital Inc. Advanced Investment Partners Advantage Asset Managers (Pty) Ltd AEGON Magyarorszg Be ektetsi Alapkezelo Zrt. Aegon N.V. AEGON-INDUSTRIAL Fund Management Co., Ltd Aeneas Capital Advisors AGF Management Limited AIG Asset Management Akbank T.A.S. Alberta Investment Management Corporation(AIMCo) Alberta Teachers Retirement Fund Alcyone Finance Allianz Global Investors AG Allianz Group Altshuler Shaham AMP Capital Investors AmpegaGerling Investment GmbH Amundi Asset Management ANBIMA - Brazilian Financial and Capital Markets Association APG Asset Management Aprionis ARIA (Australian Reward Investment Alliance) Arma Port y Ynetimi A.S. ASB Community Trust ASM Administradora de Recursos S.A. ASN Bank Assicurazioni Generali Spa ATP Group Australia and New Zealand Banking Group Limited Australian Central Credit Union incorporatingSavings & Loans Credit Union Australian Ethical Investment Limited AustralianSuper AVANA Invest GmbH Aviva Investors
Aviva plc AvivaSA Emeklilik ve Hayat A.S. AXA GroupBaillie Gi ord & Co.Bakers Investment GroupBanco Bradesco S.A.Banco de Credito del Peru BCPBanco de Galicia y Buenos Aires S.A.Banco do BrazilBanco SantanderBanco Santander (Brasil)Banesprev Fundo Banespa de Seguridade SocialBanesto (Banco Espaol de Crdito S.A.)Bank o America Merrill Lynch
Bank Sarasin & Co, LtdBank VontobelBankhaus Schelhammer & SchatteraKapitalanlagegesellscha t m.b.H.BANKINTER S.A.BankInvestBanque DegrooBarclays GroupBBC Pension Trust LtdBBVABed ordshire Pension FundBeutel Goodman and Co. LtdBioFinance Administrao de Recursos deTerceiros LtdaBlackRockBlue Marble Capital Management LimitedBlue Shield o Cali ornia GroupBlumenthal FoundationBMO Financial GroupBNP Paribas Investment PartnersBNY MellonBoston Common Asset Management, LLCBP Investment Management LimitedBrasilprev Seguros e Previdncia S/A.British Columbia Investment ManagementCorporation (bcIMC)BT Investment ManagementThe Bullitt FoundationBusan BankCAAT Pension PlanCadiz Holdings LimitedCaisse de dpt et placement du QubecCaisse des DptsCaixa de Previdncia dos Funcionrios do Bancodo Nordeste do Brasil (CAPEF)Caixa Econmica FederalCaixa Geral de DepsitosCaja de Ahorros de Valencia, Castelln y Valencia,BANCAJACaja NavarraCali ornia Public Employees Retirement SystemCali ornia State Teachers Retirement SystemCali ornia State TreasurerCalvert GroupCanada Pension Plan Investment BoardCanadian Friends Service Committee (Quakers)CAPESESPCapital Innovations, LLCCARE Super Pty LtdCarlson Investment ManagementCarmignac GestionCatherine Donnelly FoundationCatholic SuperCbus Superannuation FundCCLA Investment Management LtdCeleste Funds Management LimitedThe Central Church Fund o FinlandCentral Finance Board o the Methodist ChurchCeres, Inc.Cheyne Capital Management (UK) LLPChristian SuperChristopher Reynolds FoundationCI Mutual Funds Signature AdvisorsCIBC
Clean Yield Group, Inc.ClearBridge AdvisorsClimate Change Capital Group LtdClose Brothers Group plcThe Collins FoundationColonial First State Global Asset ManagementComite syndical national de retraite BtirenteCommerzbank AGCommInsureCompanhia de Seguros Aliana do BrasilCompton Foundation, Inc.Connecticut Retirement Plans and Trust FundsCo-operative Asset ManagementCo-operative Financial Services (CFS)The Co-operators Group LtdCorston-Smith Asset Management Sdn. Bhd.Crdit Agricole S.A.Credit SuisseDaegu BankDaiwa Securities Group Inc.
The Daly Foundationde Pury Pictet Turrettini & Cie S.A.DekaBank Deutsche GirozentraleDeutsche Asset ManagementDeutsche Bank AGDeutsche Postbank Vermgensmanagement S.A.,LuxemburgDevelopment Bank o Japan Inc.Development Bank o the Philippines (DBP)Dexia Asset ManagementDnB NOR ASADomini Social Investments LLCDongbu Insurance Co., Ltd.DWS Investment GmbHEarth Capital Partners LLPEast Sussex Pension FundEcclesiastical Investment ManagementEconomus Instituto de Seguridade SocialThe Edward W. Hazen FoundationEEA Group LtdElement Investment ManagersELETRA - Fundao Celg de Seguros ePrevidnciaEnvironment Agency Active Pension undEpworth Investment Management LtdEquilibrium Capital GroupErste Group Bank AGEssex Investment Management, LLCEthos FoundationEureko B.V.Eurizon Capital SGREvangelical Lutheran Church in Canada PensionPlan or Clergy and Lay WorkersEvli Bank PlcF&C Management LtdFAELCE Fundacao Coelce de Seguridade SocialFASERN Fundao Cosern de PrevidnciaComplementarFdris Gestion dActi sFIDURA Capital Consult GmbHFIM Asset Management LtdFinancire de ChamplainFIRA. - Banco de Mexico
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CDP Signatories 2010
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NGS SuperNH-CA Asset ManagementNikko Asset Management Co., Ltd.Nissay Asset Management CorporationNord/LB Asset Management Holding GmbHNordea Investment ManagementNor olk Pension FundNorges Bank Investment Management (NBIM)Norinchukin Zenkyouren Asset Management Co., LtdNorth Carolina State TreasurerNorthern Ireland Local Government O icersSuperannuation Committee (NILGOSC)Northern TrustNorthwest and Ethical Investments LPOddo & CieOld Mutual plcOMERS Administration CorporationOntario Teachers Pension PlanOP Fund Management Company LtdOppenheim Fonds Trust GmbHOpplysningsvesenets ond (The Norwegian ChurchEndowment)OPSEU Pension TrustOregon State TreasurerOrion Asset Management LLCOTP Fund Management Plc.Pax World FundsPensioen onds VervoerPension Fund or Danish Lawyers and EconomistsThe Pension Plan For Employees o the PublicService Alliance o CanadaPension Protection FundPensionsmyndighetenPETROS - The Fundao Petrobras de SeguridadeSocialPFA PensionPGGMPhillips, Hager & North Investment Management Ltd.PhiTrust Active InvestorsPictet Asset Management SAThe Pinch GroupPioneer Alapkezelo Zrt.PKAPluris Sustainable Investments SAPohjola Asset Management LtdPort olio 21 InvestmentsPort olio PartnersPorto Seguro S.A.PRECE Previdncia ComplementarThe Presbyterian Church in Canada
PREVI Caixa de Previdncia dos Funcionrios doBanco do BrasilPREVIG Sociedade de Previdncia ComplementarPrinciple Capital PartnersPsagot Investment House LtdPSP InvestmentsQ Capital Partners Co. LtdQBE Insurance Group LimitedRabobankRai eisen SchweizRailpen InvestmentsRathbones / Rathbone Greenbank InvestmentsRBS GroupReal Grandeza Fundao de Previdncia e Assistncia Social
Rei SuperResona Bank, LimitedReynders McVeigh Capital ManagementRhode Island General TreasurerRLAMRobecoRobert Brooke Zevin Associates, IncRocke eller & Co. SRI GroupRose Foundation or Communities and theEnvironmentRoyal Bank o CanadaRREEF Investment GmbHThe Russell Family FoundationRussell InvestmentsSAM GroupSampension KP Livs orsikring A/SSamsung Fire & Marine InsuranceSamsung Li e InsuranceSanlam Investment ManagementSanta F Port olios LtdaSauren Finanzdienstleistungen GmbH & Co. KGSchrodersScotiabankScottish Widows Investment PartnershipSEBSEB Asset Management AGSecond Swedish National Pension Fund (AP2)Seligson & Co Fund Management PlcSentinel InvestmentsSERPROS Fundo MultipatrocinadoService Employees International Union Bene itFundsSeventh Swedish National Pension Fund (AP7)The Shiga Bank, Ltd.Shinhan Bank
Shinhan BNP Paribas Investment TrustManagement Co., LtdShinkin Asset Management Co., LtdSiemens Kapitalanlagegesellscha t mbHSignet Capital Management LtdSIRA Asset ManagementSMBC Friend Securities Co., LTDSmith Pierce, LLCSNS Asset ManagementSocial(k)Sociedade Ibgeana de Assistncia e Seguridade(SIAS)Solaris Investment Management LimitedSompo Japan Insurance Inc.Sopher Investment Management
SPF Beheer bvSprucegrove Investment Management LtdStandard Bank GroupStandard Chartered PLCStandard Li e InvestmentsState Street CorporationStatewideStorebrand ASAStrathclyde Pension FundStratus GroupSumitomo Mitsui Banking CorporationSumitomo Mitsui Card Company, LimitedSumitomo Mitsui Finance & Leasing Co., LtdSumitomo Mitsui Financial Group
Sumitomo Trust & BankingSun Li e Financial Inc.Super und Asset Management GmbHSustainable CapitalSvenska Kyrkan, Church o SwedenSwedbank Ab (publ)Swiss Reinsurance CompanySwisscanto Holding AGSyntrus Achmea Asset ManagementTD Asset Management Inc.TDAM USA Inc.Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF)Tempis Capital Management Co., Ltd.Terra Forvaltning AST L Pension FundThe University o Edinburgh Endowment FundThird Swedish National Pension Fund (AP3)Threadneedle Asset ManagementTokio Marine & Nichido Fire Insurance Co., Ltd.Toronto Atmospheric FundThe Travelers Companies, Inc.Trillium Asset Management CorporationTRIODOS BANKTrygVestaUBS AGUnibanco Asset ManagementUniCredit GroupUnion Asset Management Holding AGUnipensionUNISON sta pension schemeUniSuperUnitarian Universalist AssociationThe United Church o Canada - General CouncilUnited Methodist Church General Board o Pensioand Health Bene its
United Nations FoundationUniversities Superannuation Scheme (USS)Vancity Group o CompaniesVeritas Investment Trust GmbHVermont State TreasurerVicSuper Pty LtdVictorian Funds Management CorporationVietNam Holding Ltd.Viso Prev Sociedade de PrevidenciaComplementarWaikato Community Trust IncWalden Asset Management, a division o BostonTrust and Investment Management CompanyWARBURG - HENDERSONKapitalanlagegesellscha t r Immobilien mbHWARBURG INVESTKAPITALANLAGEGESELLSCHAFT MBHThe Wellcome TrustWells FargoWest Yorkshire Pension FundWestLB Mellon Asset ManagementKapitalanlagegesellscha t mbH (WMAM)The Westpac GroupWinslow Management CompanyWoori BankYES BANK LimitedYork University Pension FundYouville Provident Fund Inc.Zegora Investment ManagementZurich Cantonal Bank
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ForewordPaul Dickinson, CEO Carbon Disclosure Project
This year began with the clouds o global recession hanging over the economy. It was also tainted with heavy disappointment atthe ailure to reach agreement on a global deal at Copenhagen and smears against climate change science. Many asked uswhether this would decrease corporate engagement in climate change. Would companies abandon commitments to carbonreporting and management to ocus instead on shorter term wins? Would companies throw out their carbon reduction plans due
to the lack o a global ramework? The answers to these questions lie in CDPs 2010 dataset and I am delighted to say, that theanswer is a categorical no.
Fuelled by opportunities to reduce energy costs, secure energy supply, protect the business rom climate change risk anddamaged reputation, generate revenue and remain competitive, carbon management continues to rise as a strategic priority ormany businesses. Companies globally are seizing commercial carbon opportunities, o ten acting ahead o any policy requirements.More companies than ever be ore are reporting through CDP and measuring and reporting their emissions.
S&P 500 companies see the trajectory o carbon policies orming across major economies, including right at home. The U.S.Environmental Protection Agency (EPA) is preparing to regulate greenhouse gas emissions, despite the legal challenges. For the
irst time ever, heavy-emitting acilities are now required to report their emissions to the EPA. Regional cap-and-trade initiativesare gaining momentum, making it clear that some states want action now. We still have a long way to go, but these are important
irst steps.
The demand or primary corporate climate change data is growing too it is now accessed through Bloomberg and GoogleFinance . It is also used by an increasing number o investment research providers and sell-side brokers to generate new insightsinto the impacts o climate change on global industry and to highlight the associated opportunities. The demand or analysis o CDP data is also growing and this year we launch a new per ormance score, which identi ies companies who exhibit leadershipin managing their carbon risks and exposures. We have also launched two index products based on CDP data the FTSE CDPCarbon Strategy Index series and the Markit Carbon Disclosure Leadership Index . These products give investors exposureto companies better positioned in the transition to a low carbon economy.
CDP has set three key ocus areas or the immediate uture. One is to work with companies and the users o our data to continueimproving quality and comparability. Data that supports action is central to ul illing CDPs mission, to accelerate solutions to climatechange by putting relevant in ormation at the heart o business, policy and investment decisions. We have given greater weightingwithin our scoring to veri ication this year and advancing reporting consistency is crucial. In addition, we are also launching a newpackage, Reporter Services, exclusively or responding companies, to help them develop their carbon management strategiesthrough increased data quality, deeper analysis and the sharing o best practice.
Never orget that climate change is a global problem and we need a global solution. That is why our second key ocus is onglobalizing CDPs programs in all major economies in the coming years. Beyond CDPs Investor Program, which sits at the heart o CDP, we intend to grow our Supply Chain and Public Procurement programs, as well as CDP Water Disclosure, to ensure that wemaximize the ul ilment o CDPs mission.
Our third key ocus is mitigation and emissions reduction. The number o companies within the Global 500 (FTSE Global EquitySeries) reporting reduction targets has already increased our old since CDPs irst reporting year. But this is just the irst step.We know that we can do ar more to help advance emissions reductions and are ully committed to working with investors andindustry to achieve this.
It is through partnerships that we can achieve the largest impact. Were delighted to be working with our global advisorPricewaterhouseCoopers and our global sponsor Bank o America Merrill Lynch , as well as Accenture , Microso t andSAP to accelerate our mission and highlight the huge opportunities or business to capitalize on the transition to a lowcarbon economy.
These are exciting times or business, with signi icant changes coming to the way we produce and consume energy. New powerrom low or zero emissions sources is an urgent priority or climate change policy that simultaneously helps deliver energy security.
New technologies, such as smart grids, electric vehicles, alternative uel sources and advanced telepresence videocon erencing, areshowing a clear case or business growth with reduced emissions. The opportunities or business are enormous it is through theintelligent investment o capital in the right solutions, identi ied by the business community, that we will achieve the low carbon uturewe need.
Paul DickinsonCEO, Carbon Disclosure Project
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ExecutiveSummary
In the 10 years since the launch o theCarbon Disclosure Project (CDP), thequality and quantity o reporting onclimate change has improved to a levelwhere CDP can now identi y whichcompanies are actively taking stepstoward a low-carbon economy. In 2010,CDP asked companies in Standard& Poors 500 Index (S&P 500) more
pointedly than ever to demonstratethe actions they are taking to reduceglobal emissions.
Its a air request on behal o investors. According to PricewaterhouseCoopersbroad-range estimates or the WorldBusiness Council or SustainableDevelopment, moving to a moresustainable world could generate US$3trillionUS$10 trillion per year by 2050at todays values, or around 1.54.5%o world gross domestic product in2050. That compares with International
Energy Agency estimates o around 1%o gross domestic product just or theadditional investment required to reducecarbon emissions rom energy use to asustainable level by 2050. 1
To seize this opportunity, businesseswill need to pay increased attention toclimate change concerns over the nextseveral yearseven i comprehensiveclimate and energy policy is slowto develop.
This year, CDP (backed by 534institutional investors representing more
than US$64 trillion o assets undermanagement) sent questionnaires tomore than 4,700 o the worlds largestcorporations, requesting in ormation ongreenhouse gas (GHG) emissions, onthe signi icant risks and opportunitiesrelated to climate change and onthe actions companies are taking tomanage those risks and opportunities.
The results are published in more than20 countries around the world and are
reely available at www.cdproject.net.
This report, prepared by CDPs global
advisor, PricewaterhouseCoopers(PwC), analyzes the responsesrom S&P 500 corporationsthose
considered to be representative o the U.S. large-cap equities market. 2 Particular attention was paid toways that organizations in everysector are capitalizing on commercialopportunitiesin particular, thosepresented by emissions reductions.
Highlights rom 2010disclosures
Disclosures improve, morereport emissions
The S&P 500 saw an increase inresponse rates, to the highest levelever: up to 70% (350) in 2010 rom66% (332) in 2009. Thirty-twocompanies responded to CDP orthe irst time, six o which are new tothe S&P 500 in 2010. 3 Overall, thisactivity sends an important messageto investors rom companies that aremanaged in the United Statesdespitelegislative uncertainty and nearly threeconsecutive years o slow economicgrowth climate change is an importantbusiness concern.
More companies are reporting carbonemissions data despite a decreasein the total reported volume. In 2010,59% (294) o S&P 500 companiesreported carbon emissions to CDP, up
rom 52% (262) in 2009 (see Figure2). The largest non-respondents in2010 are shown in Figure 3 in ordero market capitalization. All S&P 500companies, their response statuses andtheir response summaries are listed in
Appendix 1.
Figure 1: Total response rates and disclosed emissions over time
(Scopes 1 and 2; S&P 500 respondents CDP 2007 to CDP 2010)4
1 PricewaterhouseCoopers analysis or Vision 2050:The new agenda or business, World Business Council
or Sustainable Development (February 2010),http://www.wbcsd.org/Plugins/DocSearch/details.
asp?DocTypeId=25&ObjectId=MzczOTc.2 Please see the Important Notice on the back cover o
this report regarding its content and use.
3 Although the year-over-year increase is 18 companies,the companies that make up the S&P 500 change romyear to year. As such, the number o companies listedas irst-time respondents can exceed the year-over-yearincrease in response rate.
4 A decrease in total reported emissions by volume ismostly attributed to a select group o companies thatdid not report to CDP in 2010 but that have reportedin prior years. Scopes 1, 2 and 3 emissions are termsused under the GHG Protocol. For a ull description,see GHG Protocol: A Corporate Accounting andReporting Standard, available atwww.ghgprotocol.org/ iles/ghg-protocol-revised.pd .
N u m
b e r o
f r e s p o n s e s
C O2
emi s si on
s ( b i l l i onm
e t r i c t onn
e s )
Total disclosed emissions, Scopes 1 and 2
400
350
300
250
200
150
100
50
0
2.1
2.0
1.9
1.8
1.7CDP 2007 CDP 2008 CDP 2009 CDP 2010
2.0 (280)
1.9 (314)
1.8 (349 )
2.1 (332)
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Carbon Disclosure Project
Regulatory uncertainty continues
As in previous years, a commonmessage in the disclosures is thatregulatory uncertainty makes itdi icult to plan or the long term.
Although President Barack Obamahas advocated an emissions reductiontarget o 17% by 2020, measuredagainst a 2005 baseline, and an80% reduction by 2050, Congresshas not reached a consensus oncomprehensive ederal climate andenergy legislation mandating suchreductions. However, narrowermeasures creating additional incentives
or renewable energy developmenthave sur aced in both the House andthe Senate.
The Administration has taken severalactions that call attention to climateconcerns. The actions include:
x Greenhouse gas emissions reportingrequirements or heavy-emitting
acilities under the Clean Air Act5
x An increase in average uel economystandards or cars and light trucks to35.5 miles per gallon by 2016 6
x
A presidential executive orderrequiring the ederal governmentto reduce its own greenhouse gasemissions 28% by 2020 7
x U.S. Securities and ExchangeCommission (SEC) guidancehighlighting climate changedisclosures that should beconsidered by registrants 8
Perhaps most important to thoseocused on accelerating innovation,
these actions also coincide with the
nations plans to und up to US$80billion in the clean energy economyvia the American Recovery andReinvestment Act o 2009.
5 See EPA commentary, pg 16.
6 U.S. Environmental Protection Agency (April 2010) See: http://www.epa.gov/otaq/climate/regulations.htm
7 Executive Order: Federal Leadership in Environmental, Energy, and Economic Per ormance, The White House (October 2009)http://www.whitehouse.gov/assets/documents/2009 edleader_eo_rel.pd .
8 Commission Guidance regarding Disclosure Related to Climate Change, SEC (February 2010),http://www.sec.gov/rules/interp/2010/33-9106.pd .
9 The counts and percentages or Responded and Publicly available are based on the data disclosed at time o printing.
Data or other indicators are based on responses received by July 10th, 2010.
Figure 2: Year-over-year disclosure levels 9
0% 20% 40% 60% 80%
Responded
Publicly available
Disclose GHG emissions
Report on GHG emissions in annual corporate report
Board or executive-level oversight
Disclose emissions reduction targets
Verify emissions
332 (66%)
350 (70%)
262 (52%)
294 (59%)
255 (51%)
29 4 (59%)
251 (50%)
269 (54%)
169 (34% )
170 (34%)
222 (44%)
226 (45%)
2010 2009
132 (26% )
116 (23%)
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Executive Summar
10 Based on market capitalization data available rom Thomson Reuters as o May 15, 2010.
Figure 3: Largest non-respondents by market capitalization in 2010 10
Company name Amazon.comVisaComcastHoneywell InternationalDIRECTV GroupThe Southern CompanyExpress ScriptsGeneral Dynamics AutoNationTime Warner Cable
SectorConsumer DiscretionaryIn ormation TechnologyConsumer DiscretionaryIndustrialsConsumer DiscretionaryUtilitiesHealth CareIndustrialsConsumer DiscretionaryConsumer Discretionary
The availability ocomparable data onenvironmental andsocial issues haslong bedeviled theinvestment industry.CDP now providesa oundation orsophisticated analysiso carbon-related risksand opportunities.By enabling directcomparisonsbetween companies,improvements in thequality o companystrategies andper ormance in thisarea will undoubtedlyaccelerate.
Seb Beloe,Head o SRI Research,Sustainable &Responsible InvestmentHenderson GlobalInvestors
In 2010, 59% oS&P 500 companiesreported carbonemissions to CDP, uprom 52% in 2009.
Seventy percent plan to capitalizeon commercial opportunities
Overall, 70% (234) o S&P 500respondents disclosed how theyplan to capitalize on commercialopportunities related to climatechange, whether as a result o regulatory, physical or commercialdrivers. Resource commitments areclear in the responses. For example,Bank o America Merrill Lynch s
rontline businesses develop specific revenue, balance sheet or league table
performance targets for their low carbon business activities and investments, some o which all within the banksUS$20-billion 10-year environmental
business initiative. Praxair estimatesthat innovations representing 45%of its R&D pipeline should avoid 2
million tonnes of equivalent CO 2 (CO 2 e) annually when commercialized.
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11 A total o 386 o 500 companies rom the Global 500(FTSE Equity Series) responded to CDP byJuly 10, 2010, and were included in this analysis.
Figure 4: Top 10 companies recognized on both the Carbon Disclosure Leadership Index andthe Carbon Per ormance Leadership Index
Company nameConsolidated EdisonNews CorporationSpectra EnergyPraxairCisco SystemsDean FoodsCSXExelonPG&EXcel Energy
Carbon disclosure score96949493929191909089
Carbon per ormance score A A A A A A A A A A
SectorUtilitiesConsumer DiscretionaryEnergyMaterialsIn ormation TechnologyConsumer StaplesIndustrialsUtilitiesUtilitiesUtilities
Leaders emerge
As the level o understanding o climatechange and its challenges or business
has improved, so have the number o companies taking positive action tomitigate the risks o climate change.
This year, CDP recognizes 14S&P 500 companies in its new CarbonPer ormance Leadership Index (CPLI).
The CPLI recognizes companies thatare taking action to reduce globalemissions by listing the companieswith the highest per ormance scores.
These carbon per ormance leadershave demonstrated commitment tostrategy, governance, stakeholdercommunications and most o all,
emissions reduction in their CDPresponses. The CPLI does notreplace but complements the existingCarbon Disclosure Leadership Index(CDLI), which assesses the quality o companies carbon reporting. The top10 companies on both indexes or2010 are shown in Figure 4.
The Utilities sector is the mostrequently represented sector on the
CPLI, with ive companies represented. The relatively higher scores or this
sector can be attributed to the natureo the sector, with its signi icant burdento reduce GHG emissions, but alsodue to its experience in working sideby side with regulators.
A call to action
Lessons rom the per ormance scoringare that S&P 500 respondents aremovingsometimes slowly, sometimesmore quicklytoward a low-carbon
uture. Indeed, the data show thatS&P 500 respondents lag their
Global 500 peers in the numbersand types o actions they aretaking to reduce global emissions.Global 500 respondents representmore than three times as manycompanies (48) that score wellenough to be recognized as carbonper ormance leaders. 11 Over the comingmonths and years, policy makers will
continue national and internationalclimate negotiations that will a ectbusinesses, including their ability toinnovate.
CDP 2010 provides a view o where corporations are today, sothat investors, policy makers andcorporations can work together ina uni ied way on these issues going
orward. The global key trends thatCDP tracks or this purpose areprovided in Appendix 2.
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Contents
10
Contents CEO Foreword 5
Executive Summary 6
1 The 2010 Carbon Disclosure Scores 11
Commentary for the Carbon Disclosure Project: 16 Lisa Jackson, Administrator US Environmental Protection Agency
2 The 2010 Carbon Per ormance Scores 17
Commentary for the Carbon Disclosure Project: 21 Doug Kangos and Liz Logan, PartnersPricewaterhouseCoopers
3 A Profle o Carbon Per ormance Leadership 22
4 Industry Perspectives: Sector Snapshots 28 Consumer Discretionary 29Consumer Staples 30Energy 31Financials 32Health Care 33Industrials 34In ormation Technology 35Materials 36Telecommunications 37Utilities 38
Appendix 1: Table of emissions, scores and sector 39 information by company
Appendix 2: Global key trends summary 51
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1The 2010 CarbonDisclosure Scores
The carbon disclosure scores assessrespondents on the quality andcompleteness o their disclosures andconsider actors including:
x Clear consideration o business-speci ic risks and potentialopportunities related toclimate change
x Good internal data managementpractices or understanding GHGemissions, including energy use
It is important to note that the carbondisclosure score is not a metric o acompanys per ormance in relation toclimate change management, becausethe score does not make any judgmentabout mitigation actions. A companysdisclosure score is based solely on thein ormation disclosed in the companysCDP response.
The Carbon Disclosure LeadershipIndex (see Figure 5) includes thecompanies with the highest disclosure
scores and provides a valuableperspective on the range and qualityo responses to CDPs questionnaire.
This years CDLI includes the top-scoring 10% o the S&P 500: 53 intotal. To quali y or this leadership indexa company must respond to CDP byusing the Online Response System priorto the deadline and make its response
available or public use.12
12 The top-scoring 10% includes tied scores.
High (>70) A higher score typically indicates oneor more o the ollowing.
x Strong understanding andmanagement o company-speci ic exposure to climate-related risks and opportunities
x Strategic ocus andcommitment to understandingthe business issues related to
climate change, emanatingrom the top o the organization
x Ability to measure and managethe companys carbon ootprint
x Regular and relevant disclosure
to key corporate stakeholders
Midrange (5070) A midrange score typically indicatesone or more o the ollowing.
x Growing maturity in understandingand managing company-speci icrisks and potential opportunitiesrelated to climate change
x Good evidence o ability tomeasure and manage carbon
ootprint across global operations
x Commitment to theimportance o transparency
Low (
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Disclosure score highlights
Disclosure is steadily improving amongS&P 500 respondents; the average
CDLI score is 86, up our points rom2009. Remaining respondents improvedtheir average scores rom 53 in 2009to 58 in 2010. Among the 2010 CDLI,34% (17) have the distinction o beingcarbon disclosure leaders or threeconsecutive years. These companies(each shown with an asterisk inFigure 5) represent every sector inthe economy. Their ability to scorewell year over year demonstrates thatthey are keeping pace with changingexpectations or increased disclosureon climate issues.
Seventy percent plan to capitalizeon commercial opportunities; 66%disclose signi icant risk
This year, 70% (234) o respondentsindicated how they plan to capitalizeon opportunities related to climatechange. According to responses, S&P500 companies see a vast potential
or products and services that reduceglobal emissions in both developed anddeveloping economies.
At the same time, 66% (219) disclosesigni icant risk. Companies in thecarbon-intensive sectors o Utilities,Energy, Materials and Industrials citedregulatory risk at the highest rates (see
Figure 6). Companies with exposureto extreme weather cite physicalrisk at relatively higher ratesmostnotably, Consumer Discretionary and
Consumer Staples companies, whichhave dependencies on agriculture orother natural resources and operatenumerous retail acilities.
Figure 6: S&P 500 respondents reporting signi icant risk
9 3 %
6 6 %
7 6 % 7
8 %
5 7 %
5 7 %
7 2 %
4 8 %
6 4 %
6 4 %
5 8 % 6
1 %
4 4 %
6 7 %
4 4 %
4 3 %
5 9 %
5 5 %
4 0 %
4 0 %
4 0 %
4 0 %
3 4 % 3 8
% 3 8 %
4 8 %
2 9 %
1 7 %
1 7 %
3 3 %
Regulatory risk
Physical risk
Other risk
U t i l i t i e
s E n
e r g y
M a t e r
i a l s
I n d u s t r i a
l s
C o n s
u m e r
S t a p l e
s
I n f o r m
a t i o n
T e c h
n o l o g
y
F i n a n
c i a l s
C o n s
u m e r
D i s c r e
t i o n a
r y
H e a l t h C
a r e
T e l e c
o m m u
n i c a t i
o n s
% o
f r e s p o n
d e n
t s i n s e c t o r r e p o r t
i n g r i s k
100
90
80
70
60
50
40
30
20
10
0
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The 2010 Carbon Disclosure Scores
14
In conveying how climate change isrelevant to the speci ic nature o their businesses, carbon disclosureleaders set themselves apart rom
all other respondents. On average,carbon disclosure leaders scored upto 34 points higher on the disclosurescale than did other S&P 500respondents or articulating company-speci ic risk due to climate changeand 41 points higher or identi yingcompany-speci ic opportunities.
As a result, an understanding o company-speci ic risk has typicallymotivated these companies tomeasure their carbon impact and movetoward reducing it. In doing this, theyare positioning themselves to capitalize
on the opportunities that have thegreatest potential to create value ortheir businesses.
More S&P 500 companies disclosecarbon emissions in 2010
In 2010, 59% (294) o S&P 500companies reported carbon emissionsto CDP, up rom 52% (262) in 2009.Direct emissions (Scope 1) represents1.54 billion t CO 2-e or 84% o totalemissions reported. The Utilitiessector reported the highest volume o
Scope 1 emissions o any sector andalone was responsible or more thanhal o the total Scope 1 emissionsreported. The Energy, Materials andIndustrials sectors have the highestvolumes o Scope 1 emissions a terUtilities (see Figure 7).
Figure 7: Scopes 1 and 2 total reported emissions
Scope 1: 1.54 billion t CO 2-e (84% of total reported emissions)
Scope 2: 288 million t CO 2-e (16% of total reported emissions)
Utilities 57%
Energy 24%
Materials9%
Consumer Discretionary 1% Consumer Staples 2%
Financials0.1%
Health Care0.4%
Industrials6%
InformationTechnology 0.3%
Telecommunications 0.1%
Utilities 7%
ConsumerStaples 16%
Energy 16%
Materials 26%
Consumer Discretionary 10%
Financials 4%
Health Care 3%Industrials 7%
InformationTechnology 6%
Telecommunications6%
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One o the drivers behind the increase inthe practice o reliable carbon emissionsreporting is the wave o reductionprograms developing in domestic and
international markets. On a regionallevel, U.S. and Canadian cities, statesand provinces have created or aredeveloping GHG emission reductionprograms that cover much o theEastern, Midwestern and Westernparts o the United States. S&P 500companies operating in internationalmarkets with reduction commitmentssuch as the U.K., Europe and Japanwill adapt to the changing requirementsin those markets. Wal-Mart Stores ,
or example, will be subject to the U.K.sCRC Energy E iciency Scheme within
the next two years.15
Beyond reporting, companies withthe largest-emitting U.S.-operated
acilities are preparing or stricter ederalpermitting requirements aimed atlimiting GHG emissions under the Clean
Air Act. Under its proposed TailoringRule, the U.S. Environmental Protection
Agency (EPA) may impose signi icantnew permitting requirements orquali ying stationary sources, requiringinstallation o best-available controltechnology (BACT) to minimize GHG
emissions.16
Consolidated Edison ,or example, discloses that its possiblethat installing BACT for new Title V
locations [under the Clean Air Act] would add significant costs (>10% of
asset value) through lengthy periods of scheduled outages, and permittingof facilities.
A second driver behind the increasein emissions reporting is growingstakeholder demand or companiesto manage climate-related risk. With
more than hal o S&P 500 companiesreporting some orm o emissions,many S&P 500 businesses havemoved beyond recognition o theissues into a measurement andmanagement phase.
15 Formerly the U.K.s Carbon Reduction Commitment program; see http://www.carbonreductioncommitment.in o.
16 Prevention o Signi icant Deterioration/Title V Greenhouse Gas Tailoring Rule, U.S. EPA;see http://www.regulations.gov/search/Regs/home.html#docketDetail?R=EPA-HQ-OAR-2009-0517.
In todays economicenvironment, climatedata is o ten inadequateand not uni ormlydelivered. We wantto support CDPse orts at providingcomprehensive andconsistent climateemissions data to theinvestment community.CDP data is anessential input into ourcorporate governanceengagement e ortsthat work to enhanceshareholder value.
Jack Ehnes, CEOCalSTRS
Companies with thelargest-emitting U.S.-operated acilities arepreparing or stricter
ederal permittingrequirements aimed atlimiting GHG emissionsunder the Clean Air Act.
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Commentary or the Carbon Disclosure Proje
16
Commentary or the Carbon Disclosure ProjectLisa Jackson, US Environmental Protection Agency, Administrator
For President Obama and theUnited States, the global e ort tocon ront climate change must beginat home. Over the past ew years,several states pioneered actions toreduce greenhouse-gas emissions.In April 2010, I joined our Secretaryo Transportation to announce newstandards that will require an average
uel economy o 35.5 mpg in 2016or cars and light trucks. During
the li etime o these new vehicles,the national standard will reduce oilconsumption by an estimated 1.8billion barrels, prevent greenhouse-gasemissions o approximately 950 millionmetric tons, which is the amountproduced by about 42 million cars,and save more than $3,000 in uelcosts or consumers who purchasea 2016 model car.
We also took historic action in2009 when the U.S. EnvironmentalProtection Agency announced
that the nations largest sources o greenhouse gases or the irst time willbe required to report their emissions.
That new rule will allow the EPA andthe public to track approximately 85percent o total U.S. emissions whilerequiring only a small percentage o
acilities about 10,000 out o tenso millions o American businesses to report. We will now know withgreater accuracy how much carbon ispolluting our atmosphere and whereenergy-e iciency investments andnew technologies can be particularly
e ective at reducing greenhousegases.
The data collected will not justbe use ul or the government.
As CDP has demonstrated during thelast 10 years, data is crucial in helpingcompanies manage carbon and cutemissions. It enables businessesand other interested groups to trackemissions, compare them to similar
acilities and help identi y cost-e ective ways to reduce emissionsin the uture. The public will be able
to learn more about the sources o greenhouse gas emissions in theircommunities, and researchers willhave a rich, new data source to mine
or groundbreaking studies.
To support these endeavors, the EPAhas committed to making the dataavailable to the decision makers andthe public quickly and transparently,including posting the in ormation ona user- riendly website. Another keygoal is to develop seamless sharingo greenhouse gas in ormation with
other reporting programs, includingstates, the Carbon Disclosure Projectand other corporate-disclosureprograms, to allow or the broadestuse o the data and to reduce theburden on reporters who participate inmultiple programs.
This is an exciting time withextraordinary potential, and itrepresents a major step towardinnovation and creative solutions.We will no doubt be amazed bywhat we learn once the irst reportsare submitted in March 2011. TheEPAs new greenhouse-gas reportingprogram will provide a strong
oundation as we move orward onthe monumental task o addressing
climate change.
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In the 10 years that CDP has monitoreddisclosure practices, corporate activityhas advanced to a stage where analysiso per ormance can aid investors whowant to identi y leading companies incarbon management. In 2009, CDPpiloted a per ormance component in ane ort to respond to investor requests
or this analysis.
This year, all companies with su icientdisclosure received a per ormancescore; the quali ying threshold to receivea carbon per ormance score was aminimum carbon disclosure score o 50.Disclosure scores lower than 50 do notnecessarily indicate poor per ormance;rather, they indicate insu icientin ormation to evaluate per ormance.
While per ormance scoring is aninstructive exercise or all stakeholders,CDP recognizes that this is a process
that will evolve over time. CDPrecommends that investors reviewindividual company disclosures inaddition to per ormance rankings inorder to gain the most comprehensiveunderstanding o companyper ormance. A listing o companiesand their scores is included in
Appendix 1. Companies that did notquali y or a carbon per ormance scoreappear in Appendix 1 with a dash in thecarbon per ormance score column.
2The 2010 CarbonPer ormance Scores
Figure 8: What are the characteristics o carbon per ormanceleadership in 2010?
Strategy
Governance
Integrate climate change risks andopportunities into overall company strategy
Establish GHG emissions reduction target
Engage with policy makers on climate policy
Identify formal accountability for oversightand management
Establish incentives for climate changerelated activities
Communicate in mainstream reporting orother regulatory filings
Verify emissions data through an externalthird party
Implement energy or emissionsreduction initiatives
Achieve significant emissions reduction Capitalize on opportunities as a source of
business value
Stakeholdercommunications
Achievements
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18
While clear indicators o goodper ormance emerge rom the results,there are several actors to considerwhen evaluating where a company is
ranked in comparison to its peers.x The carbon per ormance ranking
is based solely on in ormationdisclosed in a companys CDPresponse. Any additional negativeor positive actions that are notdisclosed in a companys CDPresponse are not considered inthe application o the per ormancescore methodology.
x CDP per ormance results shouldbe considered in conjunction with
other carbon metrics to providea more comprehensive picture o a companys per ormance onmitigating climate change.
x The relative weighting o per ormance indicators within thescoring methodology does nottake into consideration certainsector-speci ic issues andchallenges, such as customerexpectations, regulatoryrequirements, or cost o doing business.
Its important or investors to keep inmind that the CDP carbon per ormancescore is not:
x An assessment o the extent towhich a companys actions havereduced carbon intensity relative toother companies in its sector.
x An assessment o how material acompanys actions are relative to thebusiness or to climate mitigation;the score simply recognizes
evidence o orward action.x A comprehensive measure o how
green or low carbon a company isbut, rather, an indicator o the extentto which a company is taking actionto manage its impacts on, and rom,climate change.
Carbon per ormance scores orm thebasis or determining the CPLI (seeFigure 9)the companies with thehighest per ormance scores. As with
the CDLI, a companys response mustbe publicly available to be eligible orthe CPLI.
The descriptions on page 19 explainthe our per ormance bands that wereused or categorizing respondents.
They provide an illustrative example o the potential pro iles o the companiesthat may be included in each band.
The key indicators that identi y thecharacteristics o 2010s per ormanceleaders are outlined in Figure 8.Investors are also encouraged to read
individual company responses in orderto gain urther context or a companyscarbon per ormance score. Care shouldbe taken when comparing per ormanceacross companies.
More in ormation can be ound atwww.cdproject.net in the questionnaire,supporting methodology and guidancedocuments, as well as within individualcompany responses.
2010 S&P 500 CPLI
CDP congratulates the 2010 S&P 500carbon per ormance leaders identi ied
in Figure 9. The Utilities sector has thehighest representation on the CPLIwith 36% (5). The carbon-intensivesectorsincluding Utilities, Materials,Energy and Industrialsconstitutedmore than hal overall (9 o 14). Thehigh composition by the carbon-intensive industries is an indication thatthose companies that have been mostregulated may already have many o the mechanisms in place to acilitatethe transition to a low-carbon economy.
That notion is urther supported by thetotal scoring results or each o these
sectors. Aside rom the Energy sector,the Utilities, Materials and Industrialssectors all had median per ormancescores, which ranged rom 2.5 to 10.5points above the overall S&P 500median per ormance score.
Figure 9: 2010 S&P 500 Carbon Per ormance Leadership Index
Company nameJohnson ControlsNews CorporationDean FoodsSpectra EnergyBank o America Merrill LynchCSXCisco SystemsMeadWestvacoPraxairConsolidated EdisonExelonPG&EPublic Service Enterprise GroupXcel Energy
SectorConsumer Discretionary
Consumer StaplesEnergyFinancialsIndustrialsIn ormation TechnologyMaterials Utilities
The 2010 Carbon Per ormance Score
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The CDP 2010 carbon per ormance bands
The carbon per ormance score isgiven as a banded score. Indicativedescriptions o the bands ollow andare or guidance only. The drivers o any individual company score mayvary across a number o di erentindicators. As such, investors shouldread individual company responsesto understand the context or eachbusiness.
Band A (Leading): Companieswith carbon per ormance scoresgreater than 80
Companies in this band excel oroverall per ormancerelative to thosein other bandsindicating both higherdegrees o maturity in their climatechange initiatives and achievemento their objectives. Companies inthis band demonstrate the ollowingcharacteristics:
x Strategy: With the highestnumber o signi icant risksand opportunities identi ied,companies in this groupwere the most likely todemonstrate integration o their climate-related prioritiesinto their overall businessstrategy. They requentlydisclose targets aligned withthose ambitions and emissionreduction initiatives.
x Governance: These companiesdemonstrate the moststructured and most de inedclimate change management
mechanisms by requentlyreporting ormalizedaccountability, incentives andoversight rom the board orexecutive level.
x Stakeholder communications: These companies alsorecognize the importance o providing transparent andquality disclosure or theirstakeholders by taking stepsto veri y data and reportclimate-related in ormation intheir external communications.
x Achievements: In support o their commitment to reduceemissions, these companiesdisclose the highest numbero actions taken to reducetheir emissions, and mostreport success in achievingemissions reduction.
Band B (Fast ollowing):Companies with carbonper ormance scores o 51 to 80
Companies in band B also recognizethe importance o climate changeand are quickly ollowing in the
ootsteps o the leading companies.
While the majority o companies inband B note climate change as apriority, their responses indicate thatactions and initiatives may not be asestablished or as well integrated intothe companies overall structuresand strategies compared with thosein band A. However, there may bea broad spectrum o per ormancematurity within this tier, becausesome seemingly higher-per ormingcompanies in this band may haveprovided limited in ormation or certainkey per ormance areas, thereby
constraining the ability to ullyevaluate them.
Band C (On the journey):Companies with carbonper ormance scores o 21 to 50
Companies in band C indicate someactivity on climate change. Mostcompanies in this group identi y atleast one risk rom climate change andaccordingly exercise some degree o oversight to monitor the progress o their climate change initiatives.Thelevels o integration and maturity o those initiatives tend to vary accordingto disclosure o emissions reductiontargets, implementation o emissionsreduction activities, employeeincentives and veri ication o emissionsin ormation. This group representsa variety o companies, includingthose that are new to taking actionon climate change, those that do nothave climate change objectives asstrategic actions or the organization,and those that do not believe theagenda to be a shorter-term priority.
Band D (Just starting): Companieswith carbon per ormance scoreso 20 or below
Companies in this band recognize theimportance o participating in CDP,and they have there ore achievedreasonable levels o disclosure (i.e.,a carbon disclosure score >50).However, they have disclosedlimited evidence o actions taken onmitigation or adaptation. Companiesin this band may include those thatbelieve that issues regarding climatechange are not relevant to them and
those that are just beginning to takeaction on climate change. As such, nourther assertions can be made about
their per ormance.
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The 2010 Carbon Per ormance Score
20
The 2010 S&P 500 CPLI comprises14 companies that achieved band
A scores. In comparison, the Global500 CPLI comprises 48 companies.
The dispersion o the scores o theS&P 500 and Global 500 respondentsindicated in Figure 10 urther highlightsthat companies operating in regulatedenvironments (e.g., in Europe, underthe European Unions Emission TradingScheme) that have been required orencouraged to report emissions aremore likely to take steps to reducetheir emissions. It also suggests thatregardless o a companys views on
climate change, the overall marketis moving in a direction to measureand manage emissions and positioncompanies or a low-carbon economy.S&P 500 companies, while disclosing
ewer actions, are no doubt looking tothe highest standards or per ormance.
An average o 48% o sales by S&P500 companies comes rom marketsoutside the U.S. 17 Whether U.S. climatelegislation comes slowly or morequickly, climate action will continue tobe a component o doing business in acomplex global economy.
17 Paul Vigna and John Shipman, Domestic Sales Lag: International Revenue Buoys Pro its or Some Companies,Wall Street Journal Online, April 2010.
Figure 10: Global 500 respondents are more active in addressingclimate change
Note: 29% (98) o S&P 500 respondents and 20% (77) o Global 500 respondents received no
per ormance scores due to disclosure scores o less than 50.
CDP enablescollaboration withother investors toobtain valuable climatechange in ormationand to emphasizeto companies theimportance o climatechange to investors.We use CDP data as abasis or our dialoguewith companies aiming
or better conduct inenvironmental issues.
Erik Breen,Head o ResponsibleInvestingRobeco
We are usingextensively the CarbonDisclosure Projectto ine tune ourCO2 analysis on thecompanies we cover.The Carbon DisclosureLeadership Index is avery important metric:the more transparentthe company, theless risk to discoveradditional CO2 emissions (and costs)moving orward.
Thierry Bros,Senior Gas Equity AnalystSocit Gnrale
% o
f r e s p o n d e n
t s
Carbon performance score range
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%0 - 9 10 - 19 20 - 29 30 - 39 40 - 49 50 - 59 60 - 69 70 - 79 80 - 89 90 - 100
S&P 500 respondentsGlobal 500 respondents
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The journey to reliable carbon reportingBy Doug Kangos and Liz Logan, Partners, PricewaterhouseCoopers
Carbon reporting by U.S.-basedcompanies today has broadsimilarities to inancial reportingbe ore enactment o the Securitiesand Exchange Act o 1934. Just asmarket orces and regulation evolvedthen, so too now are we seeing asimilar trend. We expect that withinthis decade, more companies willregard carbon as signi icant and willdevelop and implement increasinglysophisticated and accurate programsto track, manage and report emissionsdata. And to the extent that carbonemissions are monetized through,
or example, a cap-and-tradesystem, they will become subjectto conventional accounting andreporting, with their demands orhigh levels o accuracy, reliabilityand timeliness.
Reporting demands can come rommany sources. Procter & Gamble, orexample, recently joined Wal-MartStores and others in initiating asustainability scorecard program orits suppliers. While the substanceo these programs varies with thenature o each business, the trendis undeniable and serves as aspringboard or other manu acturersand retailers to ollow. Based onthese early programs, companiesshould prepare themselves or moredata requests in the near term rommajor customers.
Investors, in particular, are demandingdisclosure o companies carbon
numbers. Investors want to knowthat the in ormation can be validatedin some manner, whether explicitlyby third-party assurance or throughdisclosure o comparable keyper ormance indicators used bymanagement. When necessary,investors will triangulate all thein ormation they can ind so as to eela level o com ort that the numbersseem reasonable.
Building assurance about thesemeasures is a journey that can takecompanies several years and canconsist o a number o stages andstarts with assessment and re lection.Doing so enables an organizationto gain valuable knowledge aboutits challenges and opportunities,which can pay o in e iciencies andincreased strategic value. Greaterdetail, reliability and sophistication incarbon emissions reporting can osterinnovation in emissions reduction atan organizations every level, as well asenable executives to more e ectivelyincorporate climate change risksand opportunities into their strategicplanning.
What are the indicators that will markthe advancing maturity in carbonreporting? First, regulatory attention.
The increasing recognition o the valueo carbon emissions data is resulting(or will eventually result) in some kindo regulation.
A second indicator will involveimproved methods or trackingemissions data. Many o todaysprograms are in the early stages o development, but we can see steadyprogress. Companies and theiradvisors (e.g., accounting irms,environmental consultants) arebecoming more experienced andsavvy about monitoring and assessingcarbon emissions in increasinglymeaning ul and e ective ways.
Veri ication can mean a vastlydi erent thing rom one company toanother. It may re er to a rigorous andcomprehensive examination that iscare ully attested to, or it may simplyconsist o a series o interviews andreviews o high-level analytics. Further,some service providers adhere to strictaccreditation standardsthattranslate into common practicesamong their peerswhile others are
not required to do so, depending onwhether the statement is obtained
rom a consultant, an engineer or acerti ied accountant. The sophisticatedinvestor will look under the covers o averi ication or assurance statement todetermine its reliability.
A third indicator wont come romthe companies themselves but romtheir external stakeholders as theyseek greater transparency and makegreater use o reported in ormation intheir investment decisions. Investors,nongovernmental organizationsand regulators will get more o thein ormation they really want romcompanies: the data that mattersmost. And with each passing year,they will demand higher levels o speci icity and objectivity. Companiesdata and stakeholder demands willgradually align. The actual orm thatalignment takes will be dictated bymarkets and regulators, especially i some orm o cap-and-trade legislationbecomes law in the United States.
Regardless o the path carbonreporting ultimately takes, there aresignals now that help us understandwhere we are headed. Reliability ispossible when strong and vigilantboards recognize the signi icance o the data to the business and integrateit with their strategies. They createappropriate controls, processes andsystems to monitor and measure thedata they need. Once this is in place,third-party assurance can enhance
reliability or both management andits stakeholders.
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22
Overall, respondents that are listed onthe CPLI (see Figure 9) are more likelyto implement high-payo climatestrategies, make progress towardemissions reduction targets, monitorper ormance through stronggovernance, and communicate resultsto stakeholders on a regular basis.
While it is not common or a singlecompany to demonstrate strength inevery area, the CPLI companies totalscores indicate relative maturity o practice in both disclosure and overallactions to reduce emissions.Figure 11 provides a detailed view o the key indicators used or identi yingper ormance leaders, and it shows howS&P 500 respondents compare withGlobal 500 respondentsbeginningwith the leaders and then the totalrespondents. The discussion that ollowsdemonstrates the characteristics o the
S&P 500 leaders or these indicators.
Strategy
CDPs 2010 request or in ormationincluded, or the irst time, a questionthat asks how a companys carbonstrategy is integrated with the widercorporate strategy o the business.In 2010, 35% (116) o S&P 500respondents disclosed how actions
on climate change integrate into theiroverall business strategies. A lookat the top two per ormance bandsin isolation shows that 93% (13) o CPLI companies and 51% (43) o per ormance band B companiesprovide evidence o integratedcarbon strategies.
A strategic response to climate changemeans that a company will do morethan manage its own carbon ootprint.Equally important is an assessment o both short- and long-term risks or all
sustainability drivers, including climatechange. As companies evaluate
sustainability trends togethersuchas competition or natural resources,economic globalization, greaterconnectivity o consumers and otherstakeholders, and climate changethe likely outcome is a undamentalshi t in strategy.
Companies making that shi t report
changes in core business processes,including risk assessments, researchand development, new product andservice development, operationalprocesses, capital expenditures, andcorporate reporting. They also reportbene its, including new commercialopportunities, increased customer andemployee satis action, and improvedstakeholder relations.
Leaders in this area design corporate-level objectives to aggressively pursuegrowth while simultaneously reducing
emissions. The objective-settingprocess most o ten begins with an
3 A Profle oCarbon Per ormanceLeadership
Figure 11: Key indicators o per ormance: leaders versus all respondents by index
Per ormance scorecardSample sizeStrategy
Integration o climate change risks or opportunitiesinto overall business strategyImplementation o emissions reduction targets
GovernanceBoard or executive-level oversightMonetary incentives
Stakeholder communicationsVerifcation o emissionsDisclosure o climate change in ormation in mainstreamflings or other external communications
AchievementsProgress toward meeting targetsSignifcant emissions reduction in the past year
Global 500 CPLI48
85%
96%
100%92%
100%92%
94%52%
S&P 500 CPLI14
93%
93%
100%93%
93%86%
100%64%
Global 500386
48%
65%
85%49%
61%60%
55%19%
S&P 500334
35%
51%
68%35%
35%42%
45%15%
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emissions reduction target or globaloperations. As IBM states, its strategybegins with making its own operationsas energy e icient as possible, because
this is what allows the company to generate the greatest business and climate protection benefit.
A strategic response also requires realinnovation. For many businesses, theonly way to make emissions reductioncongruent with revenue growth or boththe short and long terms is to innovate.Consider the auto industry, or example,where meeting new uel-e iciencystandards is a requirement or the shortterm. At the same time, auto leadersare making signi icant investments in
R&D or the uture, including plans orregionally appropriate technologiessuch as electric, bio uel and hydrogen
uel cell vehicles.
Governance
Among per ormance leaders,governance plays a undamental
role in enabling companies to deviseand implement optimal processes tomanage climate risk. This means having
ormal accountability and oversight,developing a public policy positionand creating incentive structures thatmotivate employees to help a companyreach its goals.
While 100% o per ormance leadershave ormal board or executive-leveloversight o the companys responseto climate change, a smallerbut stillimpressivegroup o 68% (226) o
all S&P 500 respondents report thesame. Despite this relatively high levelo awareness among total respondents,many responding companies are stillworking to connect governance withstrategy and action.
For example, an examination o governance and strategy indicatorstogether shows that only 18% (60) o total S&P 500 respondents disclose
that all three indicators are in place:board or executive-level oversight,incentives to reduce emissions andintegration o climate change risksand opportunities into the overallbusiness strategy (see Figure 12).
Those who report that all three arein place include the CPLI companiesand almost 40 others, includingCoca-Cola Enterprises, FedExCorporation, Intel, PepsiCo,Procter & Gamble, Starbucks, and United Technologies Corporation.
Figure 12: Proportion o S&P 500 respondents displaying key per ormance indicators
Respondents with all three indicators
Board or executive-level oversight68% (226)
Monetary incentivesto support climatechange initiatives
35% (116)
Integrated strategy35% (116)
18% (60)
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A Profle o Carbon Per ormance Leadersh
24
Stakeholder communications
As part o their communications tostakeholders, S&P 500 per ormance
leaders are increasingly turning tothird parties to corroborate reportedemission igures; 93% report that theyveri y some portion o their Scope 1 or2 emissions data.
That tactic is being adopted moreslowly in the general S&P 500population, where 35% (117) o allS&P 500 respondents receive similarveri ication. O those that seekexternal veri ication, the majorityare getting their emissions veri iedthrough voluntary programs such as
the Climate Registry. Far ewer citeregulatory compliance as the reasonor veri ication. The proportions reveal
that compliance alone is not thedominant driver or veri ication amongS&P 500 companies.
The label verification statement can mean either a comparativelyin ormal process or a rigorous andcomprehensive examination thatincludes attestation by a licensedauditor. A wide range o practice existstoday, with varying degrees o quality.
A key strategic priority o CDP is toenhance the reliability o the datareported by companies so thatinvestors and other stakeholders canuse it or analyses. To do this, CDPencourages the application o robustand credible veri ication procedures
or the collection and presentation o carbon emissions and energy use data.
Progress toward emissionsreduction targets
The ability to set and meet emissionsreduction targets is a strong indicatorthat a company is making stridestoward managing carbon risk.In 2010, 100% o S&P 500 carbonper ormance leaders reported achievingreductions toward meeting thosetargets. Among the leaders, 64% (9)reported they were able to makesigni icant emissions reductionsin the past year due to e iciencyimprovements; this was in additionto any emissions reduction due toslow production because o theglobal recession.
By comparison, nearly hal o all CDPS&P 500 respondents (45%, or 150)report they made some progresstoward their emissions reduction
targets, but only 15% (50) could claimsigni icant emissions reduction romactions the company actually took toreduce them. While this representsonly one years worth o data, uturemonitoring o emissions reductionachieved will be an important measure
or examination.
Figure 13: CDP respondents by sector that are active in settingGHG emissions reduction targets
Consumer Staples (72%)
Materials (68%)
Industrials (67%)
Utilities (66%)
Health Care (63%)
Information Technology (53%)
Financials (43%)
Consumer Discretionary (40%)
Energy (35%)
Telecommunications (33%)
0% 10% 20% 30% 40% 50% 60% 70% 80%
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Overall, respondent disclose a mix o mid- and long-range targets designedto reduce emissionseither on anabsolute or intensity (or normalized)
basis rom products, processes oroperations. While intensity targets areintended to drive speci ic products orprocesses to become more e icient,they are o ten considered less desirablethan absolute targets or loweringglobal emissions because the intensityimprovements can be outweighed byadditional emissions resulting romgrowth in product demand. Absolutetargets, however, aim to keep anorganizations emissions below anemissions threshold regardless o increased demand. The sectors most
experienced in setting targetseitherabsolute or intensity-basedareshown in Figure 13. Many respondentsdescribe multiple targets that over timewill contribute to achieving corporate-level goals.
Actions to reduce emissions
Among S&P 500 respondents, energye iciency and operational processimprovement are the primary meanso reducing GHG emissions acrossall sectors. This includes heating,
ventilation and air-conditioning;lighting and other equipment upgrades;energy optimization; distributionmanagement; and reducingnon-necessary business travel.
The Industrials, Materials and Utilitiessectors report the largest absoluteGHG emissions reductions throughoperational process improvements,including:
x Technological improvements torecover natural gas
x Reduction o ugitive emissions,such as methane and sulphurhexa luoride, primarily throughequipment replacement and repair
x Demand-side management,including incentive programs orelectricity consumers thatencourage energy e iciency
x Renewable energy generation
x Fuel switching or example,replacing coal- ired electricity withnatural gas and other sources
x Fleet optimization, includingelimination o vehicles with poorgas mileage and replacement o them with hybrids or other,more-e icient models.
Spectra Energy , or example,has several large-scale projectsthat demonstrate the potential orreductions:
Spectra Energy businesses have
projects and programs in place that result in avoided or reduced direct greenhouse gas (GHG) emissions, including carbon capture and storage projects in Western Canada Transmission and Processing, fugitive and vented methane emissions avoidance in theUnited States, and energy efficiency
programs in Union Gas. Together,these projects and programs have
resulted in more than 2.9 million metrictons of avoided or reduced CO 2eemissions from 2007-2009.Spectra Energy
Companies with the mostcomprehensive GHG emissionsreduction programs make local sitesaccountable or energy e iciency andtrain employees to conduct energyaudits. Leading companies are usingenergy management systems to shutdown unused equipment and monitor
or repairs and upgrades.
Companies like Dean Foods , orexample, plan to reduce the cost o reporting through the use o a real-time
energy management system.We believe our recent installationof real time energy management
and tracking systems will allow us to reduce our cost of reporting, as well as increase our carbon-offset marginsthrough decreased validation costs.
Dean Foods
The In ormation Technology, ConsumerDiscretionary and ConsumerStaples sectors are increasinglyactive in exploring both upstream
and downstream product use toidenti y opportunities or reducing theenvironmental impact o their productlines.18 Wal-Mart Stores SupplierGHG Innovation Program, or example,is tied to a GHG reduction target20 million metric tons o CO2-eand isthe largest program designed to engagethe supply chain.
Procter & Gamble has created aspeci ic board to drive supplier-relatedsustainability goals.
Our new Supplier Sustainability Board is charged with guiding thedevelopment of supplier-related Sustainability activities and goals.It includes members from over 20
leading global suppliers. Ongoing periodic performance assessments aredone as part of regular commercial and technical supplier visits. Emphasis is
placed on suppliers that are high-risk because of country of operation or potential hazard. In addition to these internal assessments, we have third- party assessments to identify areas
for improvement. Procter & Gamble
Several companies are combiningbuilding-e iciency objectives with on-site generation o renewable power. Inaddition to building all new U.S. acilitiesaccording to Leadership in Energyand Environmental Design criteria,real estate investment trust companyProLogis plans to lease valuableroo space to host solar renewableenergy systems. Companies withnumerous manu acturing acilitieslike
Cisco Systems and Intel or retaillocationssuch as Whole FoodsMarkets and Kohls are committedto renewable sourcing or cosourcing,either through on-site generation orthrough renewable energy credits.
18 For more in ormation about supply chain emissions, see theCDP Supply Chain program at www.cdproject.net.
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ProLogiss renewable energy strategy is to lease our roof space to host solar renewable energy systems. In addition to generating roof rent from
hosting solar facilities, we also collect management fees associated with our role in the projects. Because we do not invest capital in these projects, the additional income immediately addsvalue to existing assets.
ProLogis
Intel Capital has made significant investments (more than $125 million since 2008) in companies with businessopportunities related to climate change
mitigation. This has included businesses in the field of solar power, smart grid
and advanced energy storage applications. In July 2009, Intel Capital expanded its clean-tech portfolio with
new investments in smart-grid and energy-efficient technologies.
Intel
Cisco has increased its renewableenergy purchases since FY2005 by
buying Renewable Energy Certificates(RECs) and entering into green power contracts with various electricity
suppliers in the United States to reduceGHG emissions from Cisco operations.
In FY2009, Cisco purchased 389,228MWh of Green-e certified RECs and also purchased approximately 996MWh of renewable energy.Cisco Systems
Commercial opportunities
In addition to reducing emissionsrom company operations, carbon
per ormance leaders are joined by anumber o other S&P 500 companiesthat are actively pursuing commercialopportunities. Overall, 70% o S&P500 respondents (234) say they seesigni icant opportunities arising romclimate change, whether regulatory,physical or commercial. And the outlook
or many companies is or marketgrowth and strong returns. Figure 14shows several examples o howcompanies are moving rom action onreducing their own carbon emissions tothe pursuit o commercial opportunities.
Companies like EMC and E. I. du Pontde Nemours and Company disclosedhow they expect demand or low-carbon products and services to grow
within the next ive years.Greater market opportunity for our products as IT is used for climate change mitigation and
adaptation already exists in Asia and Europe. This opportunity is expected to grow in the U.S. in the next 1-3
years. Opportunity for information security products, particularly in theemerging Smart Grid is expected to
grow worldwide in the next 1-3 years. EMC
Our corporate goal is to increase annual revenue by at least $2 billion by 2015 from products that help our customers reduce greenhouse gasemissions. As of 2009, the annual
revenue from those products that wetrack for this goal was $731 million.
E. I. du Pont de Nemours and Company
Companies in every sector are pursuingopportunities that play to their industryexpertise:
x
Industrial leaders like Boeing andUtilities leadersincluding Ameren,Consolidated Edison and PepcoHoldings are making large-scalecapital investments to anticipate
uture demand or renewable andalternative energy. For example,Boeing is teaming with majorutilities on the East Coast,West Coast and Midwest todemonstrate technologies thatincrease grid reliability, reducesystem demands and costs andincrease energy e iciency.
x In ormation Technology and Telecommunications irmsincluding Cisco Systems, SprintNextel and AT&T are improvingcommunication networks that can,among many things, supportsmart-grid technology and enablecompanies to cut down onemployee travel.
x Financial services companiesincluding Bank o AmericaMerrill Lynch, Morgan Stanley,Citigroup and Goldman SachsGroup are designing commoditymarket mechanisms or emissionstrading and are inancing renewableenergy and energy e iciencyprojects. Insurance companies arecreating environmentally orientedproducts such as green-buildinginsurance or policies that helphome owners green their propertya ter a loss event.
x Consumer Staples and ConsumerDiscretionary companiesincludingFord Motor and Wal-Mart Stores
are making their products morecarbon e icient and transparent byworking with the supply chain andunderstanding li e cycle use. DeanFoods, Sara Lee , and J.C. Penneyare experimenting with carbonlabeling or are assessing thepotential cost o such labeling sothat consumers can understand thecarbon intensity o their purchases.
Those pursuing longer-termopportunities that target the energyand communications in rastructures
like Cisco Systems and JuniperNetworks are actively engagingothers to develop industry standardsand practices that enable newtechnologies to work together.
Juniper Networks has devoted significant resources to thedevelopment of standards as they
apply to networking products. Solvingthis problem requires a coordinated effort of vendors, governments, and customers alike to identify and clarify
metrics that unambiguously and
objectively define the energy efficiency of the network world. Juniper Networks
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Figure 14: In their own words: S&P 500 respondents pursue competitive advantage
Commercial opportunity
Energy e iciency is largely viewedas the precursor to climate-relatedcommercial pursuits
Commercial opportunities includeenergy in rastructure projects,renewable/alternative energydevelopment and sourcing ornew, more sustainable productsand services
S&P 500 companies are takingadvantage o government undsand incentives to boost innovation
Those who are adapting tochanging consumer pre erencesexpect to reap rewards
Carbon-intensive example
Our gas and electric energy efficiency programs and goals are authorized by the CPUC on a three-year programcycle. PG&E exceeded the CPUCsenergy savings goals for the 2006 to
2008 cycle, saving customers morethan $650 million on their energy bills.In recognition of the 2008 results; theCPUC awarded PG&E $33.4 million in
incentives during 2009, bringing thetotal energy efficiency incentives
awarded to PG&Es shareholders for 2006 to 2008 to nearly $75 million. PG&E , Utilities
In 2010, UPS unveiled its EcoResponsible Packaging Program.This program evaluates the packagingof UPS participating customers for
strength (damage reduction potential);Product-to-Package Ratio (less wasted
space in transport); and materialscontent (environmental preferability). UPS , Industrials
In October 2009, the U.S. Departmentof Energy selected PHI to receive $168.1 million in federal stimulusfunds under the American Recovery
and Reinvestment Act to help offsetthe cost to customers for installing
meters and to help accelerate the modernization of its regulated delivery system. Pepco Holdings , Utilities
PECO Smart Ideas is a suite of programs designed to help customers save energy and save money. A $300 rebate is available to customers who replace their current inefficient natural gas heaters/boilers with ENERGY STAR qualified high efficiency units. Exelon , Utilities
Non-carbon-intensive example
In the past, energy incentives haveenabled Target and other retailers to adopt emerging technologies at a faster pace than would have been otherwise possible. Incentives have been a major driver in improvements to our prototypical
store design, energy-efficient lighting retrofits, and the installation of solar energy systems. Target , Consumer Discretionary
We have participated in the constructionof an anaerobic digester project withBig Sky Dairy in Gooding, Idaho. Usingthe rigorous Gold Standard for carbon-
reduction project quantification, thedigester converts bio-gas into electricity that is sold to the local power grid. Dean Foods , Consumer Staples
In April 2009, Sprint was notified of a $7.3M grant award from the U.S.Department of Energy as part of the
American Recovery and Reinvestment Act (ARRA). The award was finalized inMarch 2010 and provided funding for
hydrogen fuel cells as back-up power for cell-sites. The generation of hydrogen fuel cells we and others had been deploying
provided only 15 hours of back-up time.The new technology extends this to 72
hours making hydrogen fuel cells a moreviable back-up option for many industries.
Sprint Nextel , Telecommunications
Our Home Appliance team has launched a program named the Sears Big Switchto help Americans make the switch to 5
million ENERGY STAR appliances while also pulling old appliances off the grid through our home services organization. Sears Holdings , Consumer Discretionary
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The nature and scale o climate-related risks and opportunities are bestcompared on a sector-by-sector basis.While all responding companies werescored based on the same criteria, anexamination o the data by sector canprovide insight into the challenges eachsector aces in implementing its carbonreduction programs. At the same time,
it may be instructive to look acrosssectors in order to see the ull pictureo activityparticularly as it relates toCDPs per ormance rankings.
As illustrated in Figure 15, the Utilitiessector appears most requently on theper ormance scale, with the largestnumber o companies in band A.
Possible explanations include thesectors obvious role as the largestemitter, with the most pressing needto reduce GHG emissions, as well asits history o working side by side withregulators. Experience with emissionstrading o sul ur dioxide and nitrousoxide may also lend itsel to thesectors relative strength, because the
experience o measuring emissions isnot new to many o these companies.
Notably, both the In ormation Technology and Consumer Discretionarysectors each have a large number o companies that responded rom theS&P 500 (53 and 42 respondents,respectively), yet both also have the
largest number o respondents thatdo not provide su icient disclosures toCDP to receive per ormance scores.
This indicates that the nature and sizeo these sectors may mean that somebrands see less need to compete onenvironmental attributes than others do.
A brie summary o the 2010 CDP
results by Global Industry Classi icationStandard sectors is provided in theollowing sector snapshots. More
speci ic analysis by sector is availableat www.cdproject.net or investorsinterested in examining sectorperspectives in more detail.
4Industry Perspectives:Sector Snapshots
Figure 15: Number o companies in each per ormance band (S&P 500)
0 10 20 30 40 50 60
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Telecommunications
Utilities
Insufficient disclosure to evaluate performance Band D Band C Band B Band A
21
12
13
1
12
12
2
222
2
12
9
15
61815
10167
109
16812
12410
14118
1421
698
5796
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Board or executive-level oversight 68% 55%
Monetary incentives 35% 31%
Governance
Per ormance scorecard S&P Consumer500 Discretionary
Integration o climate changerisks or opportunities into overallbusiness strategy 35% 31%
Implementation o emissionsreduction targets 51% 36%
Strategy
Progress toward meeting targets 45% 36%
Signifcant emissions reductionin the past year 15% 17%
Achievements
Consumer Discretionary
S&P 500 response rate:Consumer Discretionary overall 61% (49 o 80)
Key industries within the sector:Specialty Retail (11 o 17); Media (10 o 16); HouseholdDurables (6 o 10); Hotels, Restaurants & Leisure (7 o 10)
Largest non-respondents 1 include: Amazon.com, Comcast, DIRECTV Group
Opportunities: Increasing consumer preferences for low carbon
green products may present product andreputational opportunities among companies.
Ability to demonstrate leadership in climate changeissues to consumers and employees.
Reducing emissions could yield lower operating costs.Risks: Increased frequency and severity of weather events
could cause disruptions to operations and supplychain.
Regulation, in particular for the autos industry, couldresult in increased operating and compliance costs.
Reputational risk to brand image.
D i s c
l o s u r e s c o r e r a n g e
S&P 500 CDLI S&P 500 Overall S&P 500 Consumer Discretionary
G o v e
r n a n c
e R i s
k s
O p p o
r t u n i t
i e s
S t r a t e
g y a n
d t a r g
e t s
A c h i e
v e m e
n t s
E m i s s
i o n s t
r a d i n g
E m i s s
i o n s i
n t e n s i t y
a n d h
i s t o r y
C o m m
u n i c a
t i o n s
E m i s s
i o n s r
e p o r t
i n g
p a r a m
e t e r s
S c o p
e s 1 , 2 &
3 r e p
o r t i n g
( i n c .
e n e r g
y u s e )
100
80
60
40
20
Carbon disclosure score breakdown or Sectorversus S&P 500 overall and S&P 500 CDLI 4
Carbondisclosure
score
Carbonper ormance
score
Sector leaders
1 Based on market capitalization data available rom Thomson Reutersas o May 15, 2010.
2 Percentage o respondents that repo