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THE CLIMATE CHANGE ORGANISATION (THE °CLIMATE GROUP)

ACCOUNTS FOR THE 12 MONTHS TO 30 JUNE 2007

COMPANY NUMBER: 4964424

CHARITY NUMBER: 1102909

TRUSTEES AND ADVISORS

1 THE CLIMATE CHANGE ORGANISATION (THE ˚CLIMATE GROUP)

Registered name The Climate Change Organisation

Trading name The °Climate Group

Charity number 1102909

Company number 4964424

Principal office and Registered office

The°Climate Group

The Tower Building, 3rd

Floor

York Road

London SE1 7NX

Charity Trustees and Company Directors

Mr J Coomber (Chair)

Mr S Archibald

Mr J Cameron

Ms R Crossley

Mr D Gregson

Ms C Heaton

Mr R Napier (resigned 30 April 2007)

Company Secretary

Dr S Howard

Management Team

Dr S Howard* CEO

Ms E Farnworth* Director, Corporate Leadership Programme

Mr D Hall Director, Together Campaign

Mr M Kenber* Policy Director

Ms A Lucas* Communications Director

Mr M McGuire Head of Strategic Engagement

Mr R Posner Australia Director

Mr C Walker North America Director

Mr J Walker* COO

Ms C Wu Greater China Director

* Executive Management Committee

TRUSTEES AND ADVISORS (CONTINUED)


Accountants

JS2 Limited

One Crown Square

Woking

Surrey GU21 6HR

Bankers

HSBC Bank plc

34 High Street

Walton-On-Thames

Surrey KT12 1DD

Lawyers

Ms C Heaton [on a pro bono basis]

Mr M Rogers

Solicitors

Mackrell Turner Garrett

21-25 Church Street West

Woking

Surrey GU21 6DJ

Auditors

Deloitte and Touche LLP

Chartered Accountants and Registered Auditors 180 Strand London WC2R 1BL

REPORT OF THE BOARD OF TRUSTEES

(For the 12 months ended 30 June 2007)


1 STRUCTURE, GOVERNANCE AND MANAGEMENT

1.1 The nature of the governing document

The Climate Change Organisation is a UK charitable company limited by guarantee, trading as The˚Climate Group.

The company was incorporated on 14 November 2003 and registered as a UK charity on 26 March 2004. It was

founded under a Memorandum of Association which establishes its objects and powers. The company is governed

under its Articles of Association. In the event of the company being wound up members may be required to contribute

an amount not exceeding £10.

1.2 Recruitment and appointment of trustees

The directors of the company are also trustees for the purposes of charity law. Under the requirements of the

Memorandum and Articles of Association the trustees are elected to serve for a period of three years after which they

must be re-elected at the next Annual General Meeting. After six years trustees must take a minimum of 12 months‟

break before re-appointment for a third term. Trustees meet quarterly, with additional meetings if required.

Due to the nature of the charity‟s work, a range of skills and expertise is sought by the trustees for representation on

the board, including familiarity with the key elements of leading business and government responses to climate

change, of which the charity aims to raise awareness. Communications skills are represented on the current board

together with traditional business and legal skills. The trustees began the reporting period with a board of seven.

During the period reported herein, Robert Napier stepped down as a trustee following his move from WWF-UK to

Chair the UK Meteorological Office. The board would like to express their gratitude for Robert‟s contribution as a

founding trustee of the charity. The trustees will seek to strengthen the board in 2007-8 with respect to representation

of key business and fundraising skills and knowledge of the international operating arena.

1.3 Trustee induction

New trustees are briefed by the CEO and are encouraged to observe one or two trustee meetings to familiarise

themselves with the charity before formal election. The briefing covers:

(i) An update on recent progress

(ii) The obligations of the trustees

(iii) The Memorandum and Articles

(iv) The charity‟s fund raising and financial position

(v) Future plans and objectives

The Charity Commission publication The Essential Trustee is distributed to all new trustees along with the

Memorandum and Articles of Association and minutes of the three most recent trustee meetings.

REPORT OF THE BOARD OF TRUSTEES (CONTINUED)



1.4 Organisational structure and decision-making

Over the reporting period, the total number of staff employed by The°Climate Group grew from 18 to 35, with the

geographical distribution as follows:

Region June 30, 2006 June 30, 2007

UK (international programme staff) 11 18

UK (UK / Europe programme staff) 3 6

North America 3 7

China 0 2

India 0 0

Mainland Europe 0 0

Australia 1 2

Total 18 35

Day-to-day management of the charity is the responsibility of the CEO who is supported by a staff Management

Team. The CEO and COO report regularly to the Board of trustees on the charity‟s progress and financial position as

well as its future plans. The charity‟s financial advisor and accountant (JS2 Limited) also reports to the trustees at

Board meetings.

The charity also draws on the expertise of its International Advisory Board, a group of leaders in sub-national

government and major corporates, who act as a sounding-board and provide strategic advice to the Management

Team and board. The International Advisory Board met formally once during the reporting period.

1.5 Subsidiaries

To enable its operations to be effective internationally, the charity is represented by legal entities in the United States

(registered on 5 March 2004) and Australia (registered on 19 May 2005). These operate in close conjunction with the

UK charity, with a close relationship maintained via places on the boards for members of the charity‟s management

team (the CEO sits on the US corporation board, and CEO and COO on the board of the Australian company). The

charity underpins its relationship with the foreign subsidiaries by implementing legal contracts between the UK and

the foreign representative in each case. The legal contracts cover co-ordination of work programmes and licensing of

the name and trademarks to the subsidiary representatives. Legal entities in Australia and the US commenced

operations on 1 July 2005 and 1 November 2005 respectively, and the charity is in the process of strengthening its US

Board and establishing legal entities in Hong Kong, China and India.

UNITED STATES

The°Climate Group Inc

Registered Office: Incorporated in Delaware on 5 March 2004

Corporation Trust Center

1209 Orange Street Federal Employer Identification Number (FEIN) 43-2073566

Wilmington

Delaware USA




President: Professor W Moomaw

Secretary: Mr C Walker

Treasurer: Dr S Howard

Trustee: Mr J Swartz

AUSTRALIA

The°Climate Group Limited

Registered Office Registered under the Companies Act 2001 in Victoria on

c/o Baker and McKenzie Limited 19 May 2005

Level 39, Rialto Australian Company Number (ACN) 113 993 856

525 Collins Street

Melbourne VIC 3000

Directors:

Prof T Flannery (joined November 2007)

Dr S Howard

Mr K Scott (stepped down November 2007)

Mr A Stock

Mr J Thwaites (joined November 2007)

Mr J Walker

1.6 Risk identification and management

The major risks to which the charity is exposed have been reviewed by the trustees and the systems and procedures

that are in place are outlined below.

Risk Explanation Level of

significance

Management

Reputation

risk

The charity has a wide range of

associations with corporations,

governments and other non-profit bodies,

and in many cases works to raise

awareness of the efforts of these partners

on climate change. Events or

announcements damaging the reputation

of the charity‟s partners could similarly

damage the charity‟s reputation by

association.

High The charity requires business and

government partners to commit to

leadership at the highest level (CEO,

highest Elected Official) and such

partners are signatory to Membership

Principles. Reputation risk is

considered early in all partnerships.





significance

Management

Funding risk As a recently-formed organisation, funding

has typically been uncertain beyond a

twelve-month (sometimes less) time

horizon. Funding has been the main

limiting factor on the charity‟s growth and

effectiveness to date.

High The charity‟s fundraising efforts are

co-ordinated by a team of

experienced professional

fundraisers, and the charity will

continue to review the structure and

management of its fundraising

function. The charity has hired a

Finance Manager, and will continue

to strengthen budget and financial

planning procedures.

Exchange

rate risk

A significant proportion of the charity‟s

core funding comes from outside the UK,

particularly from the US, Canada,

Germany and The Netherlands. The

falling US dollar has impacted the

charity‟s income over the period since its

launch and there is an ongoing currency

mismatch between the bulk of income (a

significant proportion of which is in US

dollars) and expenditure (which is mainly

in pounds sterling).

Medium The charity manages exchange rate

risk within its budget. The impact of

the falling US dollar has to a certain

extent been offset by growth in the

charity‟s operations in the US,

enabling more of US funding raised

to be expended in the same territory.

Human

resource

risk

The charity relies heavily on the

relationships that it develops with partner

organisations and supporters, exposing it

to risk of impact from departure of key

staff, both from the charity and its

partners. It has proved challenging to

recruit Directors for the charity‟s

operations in India and on the US West

Coast. Recruitment is anticipated to be a

continuing challenge in India and China,

given the high demand for the relatively

few individuals with appropriate skills and

experience.

High The charity has established a contact

database to improve retention and

co-ordination of relationship

information internally. During the

report period, the charity developed

and implemented comprehensive

employment policies for the UK and

US, and will continue to focus on this

area.





significance

Management

International

expansion

The charity has increased its presence in

the US, employing a total of seven staff in

New York, California and Florida at the

end of the reporting period. It has also

recruited five permanent staff in China,

and plans to expand further in China,

Hong Kong and India. Rapid expansion

presents risks to the charity‟s overall

effectiveness in delivering against its

objectives.

Medium The charity has established an

international management team,

which will convene regularly (in

person or via video conference), and

will focus on international and

regional strategies.

2 OBJECTIVES AND ACTIVITIES

2.1 Objects of the charity

The charity‟s objects, as set out in the governing document, are as follows:

(a) To promote for the benefit of the public the protection of the world’s climate systems in such parts of the world

and by such charitable means as the trustees may from time to time think fit

(b) To advance the education of the public and interested parties in the effective reduction of greenhouse gases

and to promote and carry out for the public benefit research into the effects of climate change and to publish

and widely disseminate the useful results of such research

2.2 Mission and vision

The charity‟s mission is to catalyse business and government leadership on climate change in order to put the world

on track for a low carbon economy. It strives to amplify the impact of the work of pioneering companies and

governments who are beginning to lead the way on addressing „global warming‟. Research conducted by the charity

shows that many Fortune 500 companies and city governments have already achieved significant reductions in their

greenhouse gas emissions over time. In some cases the reported reductions are already approaching the generally

accepted target (60-80%) amongst the scientific community for the developed world to avert the worst impacts of

climate change over the next 50 years. Contrary to commonly-held belief, reports from these organisations indicate

that their actions, which include energy efficiency, fuel switching and process re-engineering, have in fact been

beneficial to the bottom line.

The charity uses these and other examples to build and educate a leadership coalition of public and private sector

organisations and to boost confidence for wider action. It employs targeted research, outreach, the promotion of best

practice exchange, and high-impact awareness-raising projects. Its approach centres on the encouragement of

solutions based on sound business and economic analysis.




The charity‟s work is driven by a vision for 2010 where:

(i) „Smart‟ climate policies1 to achieve ambitious emissions reduction targets, supported by the necessary

legislation, are implemented in the G8 + 5 countries2 (and Australia by virtue of its political significance in

international negotiations on climate change)

(ii) Robust greenhouse gas reduction strategies are adopted by the majority of FT Global 500 (and equivalent)

companies, backed up by medium- (5-10 year) and long-term (20-30 year) targets commensurate with the overall

emission reductions demanded by the prevailing climate science

(iii) Investment in sustainable energy and energy efficiency and the development of innovative financing

mechanisms are core business activities for the world's largest financial institutions (top 20 banks and

institutional investors)

(iv) The general public in the G8 + 5 nations is actively engaged3 on climate solutions

(v) A robust international climate change agreement4 is in place

2.3 Main objectives for the period

At the outset of the reporting period, the key objectives of the charity were as follows:

(i) To build confidence amongst key global governments and companies for reducing greenhouse gas emissions

and to build political will at all levels to accelerate these reductions

(ii) To raise awareness within the international business and government community by providing credible and

newsworthy information on successful GHG reduction strategies and policies to respected media outlets

(iii) To increase collaboration and the sharing of best practice policies and strategies for greenhouse gas reduction

amongst proactive companies and governments

(iv) To build capacity within key businesses and governments to address the challenge of climate change

2.4 Strategies for achieving the charity’s objectives

The charity set the following strategies for achieving its stated objectives in 2006-7:

(i) Building capacity to deliver in the US through The°Climate Group‟s California and New York offices;

(ii) Building initial presences in China, India and mainland Europe;

(iii) Consolidating the programme of work with The°Climate Group‟s business and government partners and

continuing to make strategic recruitments to the membership coalition;

1 „Smart‟ policies are defined as directed at controlling or reducing greenhouse gas emissions in line with scientific understanding of the level of action required, whilst minimising impacts on the economy and maximising opportunities for growth of new technology and service solutions sectors. 2 The G8+5 group of leaders consists of the heads of government from the G8 nations (Canada, France, Germany, Italy, Japan, Russia, UK and the US), plus the heads of government of Brazil, China, India, Mexico and South Africa. 3 i.e. making voting and purchasing decisions on the basis of climate change and implementing changes in their own behaviour to limit energy use. 4 Defined as a policy framework ratified by all the major emitting nations that, if enforced, will lead to global emissions reductions of

at least 60% over the next half century. Also incorporating meaningful strategies, commitments and incentives to: provide low carbon solutions in the energy, industrial and transport sectors; stimulate a step-change improvement in energy efficiency; significantly reduce tropical deforestation; and reduce the vulnerability and enhance the adaptive capacity of the world's poorest nations/people and most fragile ecosystems.




(iv) Engaging individual business and political leaders at the highest level on opportunities to mitigate climate

change through initiatives including the charity‟s Leadership Council and Corporate Climate Alliance

(v) Advancing the work of the charity‟s leadership programmes that seek to assist businesses and governments to

improve performance on climate change at a strategic organisational level;

(vi) Developing the charity‟s research programme, including a third edition of the report Carbon Down Profits Up,

new work to track the development of the climate solutions economy and continued development of the Low

Carbon Leader awards for leadership on climate within business and government;

(vii) Developing an industry standard for voluntary carbon offsets to build confidence in the voluntary carbon market;

(viii) Building the charity‟s awareness-raising programme, including media outreach, online communications and

targeted events; and

(ix) Developing and launching a Climate Academy.

Significant changes in strategy since the previous reporting period include:

Establishing a third US base in Florida, given its importance as the third largest state in the US, to capitalise on the

opportunity presented by the round-table event facilitated by the charity following Florida Governor Crist‟s

announcement of the state‟s ambitious targets for greenhouse gas emissions

Discontinuation of the Low Carbon Leader awards, due to rapid proliferation in similar activities undertaken by other

organisations during the reporting period

2.5 Significant activities

The°Climate Group‟s significant activities are divided into the following categories:

Research into corporate and government best practice

The°Climate Group identifies, documents and disseminates successful approaches to reducing greenhouse gas

emissions and implementing „low carbon‟ solutions in the public and private sector. The programme includes

development of case studies exploring strategies and policies adopted by companies and governments in

successfully reducing greenhouse gas emissions.

Raising awareness of solutions

The°Climate Group uses high impact communications and quality events to raise awareness of the solutions available

to tackle climate change, drawing strongly on the outputs of the research programme and the participants in the

building leadership programme (below).

Building leadership

The°Climate Group works with a range of members and other organisations drawn from leading large businesses and

sub-national governments on climate change, with a view to building understanding of the solutions available, and

growing confidence to advance and expand leadership in sectors influential on future world emissions of greenhouse

gases.




Governance and generating funds

The charity operates fundraising and governance activities to support the above core programmes. The performance

of these areas of activity in the financial year 2006/7 is reviewed in Section 3 of this report.

3 ACHIEVEMENTS AND PERFORMANCE

3.1 Research into corporate and government best practice

During the financial year 2006/7, the charity‟s research efforts identified and documented work being undertaken in

companies and city, regional and national governments, with resulting publications being disseminated via the

charity‟s website, a monthly e-bulletin and in a range of publications distributed by post and at The°Climate Group‟s

events internationally. The charity dedicated 10% (2005/6: 17%) of its expenditure to research activities in the

reporting period. The following reports were published in the period covered by this document:

Carbon Down, Profits Up is The°Climate Group‟s annual publication that showcases the rapid growth experienced

by companies providing low carbon products and services. The third edition of Carbon Down Profits Up was produced

in February 2007, and distributed to 12,000 readers. The report was published in English and Mandarin and was

supported by Garfield Weston Foundation, DOEN Foundation and Rockefeller Brothers Fund.

Low Carbon Leader is a series of publications showcasing leadership case studies. These are broken down by

region and sector, so that those who influence and make decisions can see tangible outcomes and practical actions

from their peers. Each edition focuses on a different region or sector. During the reporting period, two editions were

published: States and Regions (December 2006) and New York (April 2007).

In the Black is The°Climate Group‟s annual publication that tracks the growth opportunities, jobs and value created

by companies and organisations that are „enabling‟ the shift towards a low carbon economy. The latest edition was

published in May 2007 with support from Barclays Bank.

Top Tips is a series of publications containing practical tips on key issues in carbon management and emissions

reduction for companies. Three editions were produced during the reporting period: Top Ten ways to motivate

employees on climate change (March 2007), Top Ten tips for developing your carbon footprint (April 2007) and Top

Ten things to consider when disclosing carbon risks and benefits (June 2007).

The°Climate Group also published Public / Private partnership: local initiatives (May 2007), focussing on initiatives

that have been delivered through city and business partnerships. The report covered work in Europe, Australia, US,

Canada, India, Mexico and South Africa, and covered issues from renewable energy generation to sustainable

transportation.

Over the reporting period, readership of The°Climate Group‟s monthly e-bulletin 360° was expanded to over 5,800

recipients (2005/6: 4,000). The bulletin covers news items on climate change, case studies and interviews with

opinion formers. The charity has continued to develop its website to nearly 900 pages of content at December 2007.




3.2 Raising awareness of the solutions to climate change

The°Climate Group continued its awareness-raising campaign during the financial year 2006/7, directed at the

international business and government community, directing 28% (2005/6: 38%) of its expenditure towards this

programme. This campaign centred on a series of events designed to bring together influential individuals within city,

state and national governments and Fortune 500 (or equivalent) companies, to provide a platform to encourage new

commitments on climate change and to provide an opportunity for more accurate coverage of the issue by

mainstream business media.

In July 2006, The°Climate Group convened, with support from BP, the Long Beach Climate and Energy Round-table,

in California bringing together the then UK Prime Minister Tony Blair, Governor Arnold Schwarzenegger and 15

international business leaders. These business leaders represented half a trillion dollars in turnover, over 315,000

employees, and more than 207 million customers. The°Climate Group facilitated frank and far-reaching discussions

on a global partnership approach to reducing greenhouse gas emissions. The event helped to build firm collaboration

between California and the UK.

The round-table also reinforced Governor Schwarzenegger's commitment to climate leadership. Just two months

later, he signed Assembly Bill AB32 („The California Global Warming Solutions Act of 2006‟), a piece of landmark

legislation that was agreed upon by a coalition of Republicans, Democrats, climate and energy scientists, activists

and a cadre of industry leaders. Northern California Utility, Pacific Gas and Electric and Assembly Speaker Fabien

Nuñez, who took part in the Long Beach event, were key supporters of the Bill, which sets a cap on greenhouse gas

emissions statewide, and a 25% reduction by 2020. Even more crucially, the state will place emission controls on the

largest industrial sectors including utilities, oil refineries and cement manufacturing.




Also in September 2006, HSBC, BP and Swiss Re, founder members of The°Climate Group, were all cited as „best in

class‟ in the Carbon Disclosure Project‟s Climate Leadership Index (CLI). The CLI reveals for investors which high-

impact FT500 companies have the most comprehensive climate-change disclosure practices in place.

In November 2006, at the 12th Conference of the Parties (COP) to the United Nations Framework Convention on

Climate Change (UNFCCC) in Nairobi, The°Climate Group convened a round-table event with Linda Adams,

California‟s Secretary for Environmental Protection, and heads of regional governments from around the world. This

meeting gave the leaders an opportunity to discuss the crucial role of regional governments in addressing global

warming, and to examine examples of best practice. The event served to strengthen The°Climate Group‟s States and

Regions Climate Alliance launched 12 months earlier at COP11 in Montreal. The Alliance focuses on sharing best

practice on state government policy development and implementation.

In December 2006, The°Climate Group launched The Climate Academy, in partnership with Duke University and

Cambridge University Programme for Industry. The Academy‟s Climate Leadership Programme aims to combine the

universities‟ world class knowledge of climate science and policy with The°Climate Group‟s insight into business

leadership and seeks to provide participants with the vision and practical tools for success in a world moving towards

a low carbon economy. The first Climate Academy courses were held at Duke University in May 2007, and at

Cambridge University in October 2007.

In January 2007, The°Climate Group launched a Greenhouse Gas indicator for the State of Victoria (Australia). The

indicator provides accurate and real time information on the amount of greenhouse gases produced each week in

Victoria from energy use, which accounts for about 85% of the state‟s greenhouse gas emissions. Results are

broadcast weekly in The Age newspaper, The°Climate Group‟s website and on local TV and radio. The indicator has

subsequently been extended to New South Wales.

The following month, The°Climate Group facilitated the first ever climate briefing of international legislators in the US

Senate. Four of our members - Jim Rogers (CEO, Duke/Cinergy), Roger Ferguson (Chairman, Swiss Re America

Holding), Sir Richard Branson (CEO, Virgin) and Rick Lazio (Government Relations, JP Morgan), with Joe Pettus

(Senior Vice President, Fuel and Energy Operations, Safeway) - highlighted the business case and economic

advantages for corporations taking leadership on climate action. The business leaders presented to US Senators, US

Congressmen and senior government leaders from across the globe including German Chancellor and G8 President

Angela Merkel.




In 2007 The°Climate Group joined EarthWatch Institute, The Smithsonian

Tropical Research Institute and WWF to form the HSBC Climate

Partnership – a five-year US$100 million programme on climate change –

launched by HSBC and its partners in May 2007. This is the largest

corporate donation each of the partners have ever received.

The Partnership aims to inspire action by individuals, businesses and governments worldwide to combat the impacts

of climate change, with a focus on selected world cities and major rivers. The°Climate Group will receive US$17

million over the five years of the programme.

The°Climate Group's work as part of the HSBC Climate Partnership will promote low carbon solutions and practices in

five world cities – Hong Kong, London, Mumbai, New York and Shanghai – to make them cleaner and greener cities

to promote as models for the world. Our programme will support climate action by influential businesses and

governments (city, state and national) based in these cities. In addition, it will seek to engage and enable consumers

in the five cities though the Together campaign, which convenes a range of consumer brands and public-facing

organisations to deliver climate solutions to the general public.

In April 2007, The°Climate Group hosted a briefing in San Francisco on the economics of climate change featuring Sir

Nicholas Stern – then Head of UK Government Economics Service – followed by a discussion with a select group of

prominent business leaders and members of the McKinsey Global Institute. The event was the first opportunity for US

business leaders to engage in a private briefing with Sir Nicholas, author of the highly influential Stern Review on the

Economics of Climate Change.

In the same month, eight major UK companies (B&Q, Barclaycard, British Gas, Marks and Spencer, O2, Royal

and SunAlliance, BSkyB and Tesco) joined with Tony Blair and The°Climate Group in London to unveil Together, a

campaign to provide consumers with compelling products and services that make it easier to reduce their CO2

emissions. Together will be rolled out internationally in the US and Australia in 2008.

May 2007 saw the second C40 Large Cities Climate Summit in New York City. The°Climate Group, a co-founder of

the initiative with London in 2005, hosted the final plenary session in New York, exploring creative financing

mechanisms for sustainable infrastructure, such as clean energy and energy efficiency projects in cities.

Also in May 2007, The°Climate Group was announced as one of four lead partners in the HSBC Climate Partnership

(see box, page12), a groundbreaking five-year, US$100 million initiative to respond to the urgent threat of climate

change worldwide.

In June 2007, The°Climate Group convened a group of UK business leaders to meet with Governor

Schwarzenegger, then Prime Minister Tony Blair and then Chancellor Gordon Brown on the event of the

Governor‟s visit to London. The meeting sought to reinforce California and the UK‟s commitment to collaboration on

low carbon technologies and climate leadership announced at the Long Beach, California event in July 2006.




The Together campaign, launched in the UK in 2007 by The°Climate Group and a

range of business, government and NGO partners, aims to provide both ideas for

behavioural change and practical solutions for consumers to help them reduce their

household emissions by one tonne over three years. Should every UK household

take up the campaign initiatives, there is a potential saving of 25 million tonnes of

CO2.

The business partners are B&Q, Barclaycard, British Gas, Marks and Spencer, O2,

Royal and SunAlliance, BSkyB and Tesco.

The coalition reaches outside business with active support coming from the Energy

Saving Trust, Defra, the National Consumer Council, The Church of England, Stop

Climate Chaos and Live Earth.

Building over three years, Together aims to reach every UK household by continuing to increase the number of

brands in the partnership, and the number of initiatives offered to consumers.

Partners provide products, services and / or advice for consumers to actively facilitate the reduction of household

emissions. These initiatives are tracked and reported on the campaign website (www.together.com), where the

collective reduction in emissions is calculated, intermediate targets established, and users given access to

information on how they can take part.

The effectiveness of the campaign is being measured in two ways: firstly the aggregated carbon savings as a result of

consumer uptake of partner solutions are measured using a model developed by the Energy Saving Trust.

The°Climate Group also tracks behavioural change as a result of solutions promoted via the campaign.

The°Climate Group generated strong media coverage during the year, with over 500 reports internationally (2005/6:

150) including the following selected items:

The Washington Post, Thursday 31 May 2007. HSBC Donates Funds For Climate Research

The New York Times, Wednesday 16 May 2007. At Mayor’s Summit, Bloomberg Campaigns for Clean Air

The Guardian, Tuesday 24 April 2007. Eight leading British firms launch campaign to help shoppers cut carbon

emissions: Tesco to halve price of energy-saving light bulbs ; M&S to relabel clothes to encourage 30°C washes

The Independent, Tuesday 24 April 2007. Retail coalition unveils eco-friendly crusade

The Times, Tuesday 24 April 2007. Blair backs top companies green scheme

The Evening Standard (London), Monday 23 April 2007. Businesses launch ‘affordable’ drive to cut carbon print

The Age (Melbourne, Australia), Monday 5 March 2007. Going green can lift the bottom line

The Times, Monday 12 March 2007. Business can lead the way to reversing damage

Financial Times, Wednesday 27 September 2006. China turns others green

Newsweek, Tuesday 14 August 2006. Force of Nature; Environmentalism is no longer the province of the left.

Conservative politicians and big business have both jumped on the bandwagon

San Francisco Chronicle, Tuesday 1 August 2006. State, UK strike emissions deal, bypassing Bush

The Observer, Sunday 23 July 2006. Business: Change in the air: Environmental manoeuvres from UK plc

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3.3 Building leadership

The°Climate Group‟s education programme works through partnership with businesses and governments to build

capacity for action on climate change, through sharing of best practice and development of new approaches. Our

target is to be actively working with 100 of the world‟s most influential companies through membership by 2010,

together with 40 sub-national governments.

During the reporting period, the following companies continued their membership of The °Climate Group: ABN

AMRO, AIG, Alcan, Allianz Group, Arup, Austin Energy, Baker and McKenzie, BG Group, BP, British Sky

Broadcasting, BT Group, Catalyst Paper, Cheyne Capital, HDR, HSBC Holdings, Interface, Johnson and

Johnson, Man Group, Munich Re, MWH, Pratt Industries, Severn Trent, Starbucks, Swiss Re Group,

Timberland.

In addition, we are pleased that Barclays, Duke Energy, Google, JP Morgan Chase, Marks and Spencer, News

Corporation, Swire Group, Tesco, Virgin Group and Vodafone joined during the year.

During the reporting period The Climate Group introduced a second tier of partnership (Network Partner) for national-

level companies, including non-member partners in the charity‟s Together campaign. Network partners joining during

the reporting period were: British Gas, National Express, O2, Vodafone, B&Q, Barclaycard, Royal and

SunAlliance, Severn Trent and Webex.

Since the reporting period, Bloomberg, Dell, Dow Chemical, Florida Light and Power, Goldman Sachs,

McKinsey, Nike and Standard Chartered Bank have also joined The°Climate Group as members or network

partners.

The following municipal and regional governments continued their membership of The°Climate Group: State of

Connecticut (US), Commonwealth of Massachusetts (US), Greater London Authority (UK), State of California

(US), State of Maine (US), Province of Manitoba (Canada), New York State (US), Province of Ontario (Canada),

State Government of Victoria (Australia).

During the reporting period, the following became members: New York City (US), Province of British Columbia

(Canada), Province of Quebec (Canada), State of South Australia (Australia).

The°Climate Group directed 44% (2005/6: 29%) of its expenditure towards the „Building Leadership‟ programme

during the accounting period.

The°Climate Group‟s strategy continues to be to engage and support leading corporations taking action on climate

change, and to support Low Carbon Leadership. During the reporting period, The°Climate Group has provided

support in areas including internal communications, product development, commodities trading and the labelling of

consumer products. The charity has also acted as a trusted sounding board and mentor at Director level.

The°Climate Group continued to facilitate working groups on key issues, which have made good progress on

developing and implementing practical tools that can be used widely in their respective sectors. For instance, a




Supply Chain group is formed of leaders in the consumer / retail sector, and over the year shared best practice, and

explored opportunities for reducing the supplier and producer footprint. A Finance working group continued to work on

the development of low carbon principles for the financial sector.

In September 2006, on behalf of the leadership group for global brands and retailers, The°Climate Group

commissioned research into how better to serve the „climate-conscious consumer,‟ namely the growing sector of the

population concerned about climate change and interested in factoring this concern into their purchasing decisions.

The research was carried out by Lippincott Mercer and sponsored by BSkyB. The findings indicated that, although

28% of UK consumers and 19% of US consumers are “strongly concerned” about climate change (a further 53% and

39% recognising global warming as an important issue in the UK and US respectively), they are largely unaware of

the options available to them to act on this concern. However, the research also indicated that the barriers to action

go beyond low awareness: respondents also revealed active suspicion towards the effectiveness of some existing

propositions. The study concluded that consumer brands are uniquely placed to help consumers remove these

barriers, with critical roles to play as educators, leaders, facilitators, contributors and marketers. The °Climate Group

devised and launched the Together campaign (see box, page 14) with its members and partners to act on these

findings.

In addition to working groups and one-to-one support, The°Climate Group also disseminated best practice and

practical tools via webinars. Issues covered during the reporting period include carbon footprinting, carbon offsetting

and carbon disclosure.




The°Climate Group continued to support the Green Power Market Development Group – Europe, in partnership

with the World Resources Institute. Since its launch in 2005, this group, now composed of 14 members, has shared

learning and best practice, as well as working with energy providers and political decision-makers to incentivise,

facilitate and promote the use of renewable energy. During the financial year 2006/7, the group also published The

business case for corporate use of renewable energy in Europe (May 2007) and a series of case studies (June 2007).

In addition, The°Climate Group continued to support the Institutional Investors Group on Climate Change (IIGCC),

a forum for collaboration between asset owners and asset managers aimed at encouraging the investment chain to

address the risks and opportunities associated with climate change in investment decision-making. On 12 and 13

October 2006, major European pension funds, consultants and asset managers met in Paris at the IIGCC

Conference: Managing Investments in a Changing Climate. The conference provided an opportunity for investors to

consider the risks and opportunities presented by climate change, to review the contribution that has been made to

date by institutional investors and to map out the future direction for investor action on climate change. Membership of

the group grew from 26 to 40 during the reporting period, and IIGCC now includes some of the largest asset

managers and pension funds in the UK and continental Europe. New IIGCC members in the reporting period include

ABP Investments, Church Commissioners for England, Credit Agricole Asset Management, HSBC

Investments and PGGM Investments.

2006/7 saw the final development of the Voluntary Carbon Standard (VCS). This project was conceived in late 2005,

and was undertaken in partnership with the International Emissions Trading Association (IETA) and the World

Economic Forum Global Greenhouse Register. The VCS is designed to be a global benchmark standard for project-

based voluntary emission reductions that provides a degree of standardisation to the voluntary carbon market and

creates a credible voluntary emission reduction credit, the Voluntary Carbon Unit.

In March 2006, 65 members and partners of The°Climate Group and IETA provided feedback on the first version of

the VCS, and 60 submissions were received on the second version in October. An independent steering committee

was established to review the responses to the two consultations and approve a final operating version of the VCS,

rules for accrediting verifiers and registries and the Standard‟s future governance. The steering committee addressed

the issues of VCS governance, additionality, general policy issues (e.g. forward crediting), validation and verification,

performance standard approaches, registries and land use, land use change and forestry.

The VCS, written in an ISO-compatible format, was launched after the reporting period, in November 2007.

3.4 Generating funds

The°Climate Group strives to maintain a diverse range of funding sources ranging from foundation and individual

support through to membership fees, government grants and corporate sponsorship. To assist with the growing

workload of the charity‟s full-time professional fundraiser, a second member of staff started in January 2007. Both

were responsible for developing relationships with and seeking funding from individuals, foundations, businesses and

governments. In addition, the CEO and COO spent a portion of their time on generating income. The charity directed

13% (2005/6: 14%) of its expenditure towards generating funds, with this predominantly committed to staff time.

Performance against fundraising targets is discussed in section 3.7. Since the end of the reporting period, the team

has grown to three with the addition of one in New York.




3.5 Governance

The charity committed 4% (2005/6: 2%) of its expenditure to governance, with this effort predominantly directed

toward staff time.

3.6 Performance against strategic objectives

Overall the charity made good progress against its objectives for the year. The following table assesses the charity‟s

performance against the objectives set at the outset of the reporting period.

Objective Performance

Establishing a strong US

presence. Building capacity to

deliver in the US through

The°Climate Group‟s California and

New York offices.

Good progress: The°Climate Group established a strong

team of professionals in the US during the year, including a

team of five in New York, two in Oakland and one Regional

Director-level hire in Florida (after the reporting period).

Following the departure of our previous US West Coast

Director, we have experienced a number of delays in recruiting

a replacement, however direction has been provided in the

interim via our New York and international offices and the

charity continues to work to engage a replacement Regional

Director in the San Francisco Bay Area.

Building our international

presence. Building initial presences

in China, India and mainland

Europe.

Good progress (China): Following a number of initial visits to

the region by our CEO and international staff, The°Climate

Group was successful in early 2007 in recruiting a strong

candidate to lead its China operations. Ms Changhua Wu

joined the organisation as Greater China Director in March

2007 and has since built a team of nine in Beijing and Hong

Kong. Initial outreach to the business and government

community in both cities has been received positively.

Moderate progress (India): The charity has recently recruited

an India Director in Delhi and has made progress on

establishing a legal entity. In January 2008 the charity

relocated a Project Manager to Mumbai to establish a

presence there.

Limited progress (Europe): The charity has yet to establish a

formal presence in Europe, although it has conducted a

number of successful outreach visits to Brussels and

Germany.





Building our membership

coalition. Consolidating the

programme of work with The°Climate

Group‟s business and government

partners and continuing to make

strategic recruitments to the

membership coalition.

Good progress: The°Climate Group recruited 14 new

members during the reporting period (and has recruited a

further six since the close of the period), bringing the total

number to 48 at June 30 2007 (see page 15).

Engaging world leaders. Engaging

individual business and political

leaders at the highest level on

opportunities to mitigate climate

change through initiatives including

the charity‟s Leadership Council and

Corporate Climate Alliance.

Good progress: The°Climate Group has continued to work at

the highest level with leading businesses and governments, as

demonstrated by our round-table events in California, Florida

and London, which engaged US State Governors, the UK

Prime Minister and Fortune 500 CEOs. During the reporting

period the charity held its Leadership Council at six members,

subsequently recruiting Thor Björgólfsson.

Adding value to our partners.

Advancing the work of the charity‟s

leadership programmes that seek to

assist businesses and governments

improve performance on climate

change at a strategic organisational

level.

Good progress: The charity engaged a senior professional in

October 2006 to develop our corporate engagement

programme and we continue to focus on building our capacity

to assist our members and partners in their work on climate

change. During the period the charity introduced regular web

briefings on policy and strategy for our corporate partners and

these have been well received, with briefing materials quoted

by a number of third parties. Since the close of the reporting

period we have commissioned for the first time an independent

research project to evaluate our effectiveness as a partner for

business and government and as a raiser of awareness on

climate-related threats and opportunities for businesses and

economies.

Advancing research. Developing

the charity‟s research programme,

including a third edition of the report

Carbon Down Profits Up, new work

to track the development of the

climate solutions economy and

continued development of the Low

Carbon Leader awards for

leadership on climate within

business and government.

Good progress: Carbon Down Profits Up (third edition) was

released in early 2007, our programme to track the growth in

the low carbon economy resulted in the publication of the

report In The Black in May 2007, and nine other region- /

issue-specific reports were released in the reporting period.

The charity took the decision to discontinue the Low Carbon

Leader awards programme in the light of the multiple

overlapping initiatives launched during the period (see page

10).





Developing an industry standard

for voluntary carbon offsets to

build confidence in the voluntary

carbon market.

Good progress: During the reporting period the charity,

working with partners including the International Emissions

Trading Association and a range of buyers, sellers and

retailers of voluntary carbon offsets, developed a final version

of an industry offset standard that was launched in November

2007 (see page 17).

Awareness-raising. Building the

charity‟s awareness-raising

programme, including media

outreach, online communications

and targeted events.

Good progress: The charity continued to engage in a range

of high profile events during the year (these are outlined in

Section 3.2 of this report). Reported media coverage of the

charity‟s work rose to over 500 articles in print and online

media during the year (2005/6: 150). Subscribers to our e-

bulletin rose to 5,800 (2005/6: 4,000), and the launch of the

Together campaign brought a new channel of communication

with consumers through the dedicated web site

www.together.com (see box, page 14).

Training course. Developing and

launching a Climate Academy.

Moderate progress: After developing the Climate Academy

concept and partnerships with Duke and Cambridge

Universities in 2005/6, the charity supported the Academy

through provision of content and marketing to our network of

corporate and government partners and members. The

Academy successfully held inaugural courses in the US at

Duke in May 2007 and in the UK at Cambridge in December

2007 (see page 12).

3.7 Performance against fundraising objectives

Fundraising objectives for the period covered by this report were driven by the trustees‟ desire to maintain progress

against the charity‟s objectives and the staff‟s motivation to achieve The°Climate Group‟s mission.

By the end of the period the charity had exceeded these targets, with fundraising successes late in the period bringing

total income to £2,989,219 (2005/6: £2,539,348). Unrestricted funding totalled £996,668 allowing the carrying over of

a £940,699 surplus to the following year, including £538,271 unrestricted and £402,428 restricted funds.

The trustees are grateful for the financial support to the charity from the organisations listed on page 23.

3.8 Investment performance

No material investments were made by the charity during the reporting period.




3.9 Factors affecting overall performance

As in 2005/6, the most important factor in the charity‟s achievement of its objectives was the ongoing strong support

for its mission from its network of members and other partners, particularly the support of the HSBC Climate

Partnership and other funders, and the communications opportunities generated in partnership with the UK, California

and Florida Governments and corporate partners including HSBC, News Corporation and Virgin. The most important

challenge lay in the charity‟s ability to scale up rapidly enough to meet the demands of our partners and the urgency

of climate change.

3.10 Reserves Policy

During the year the trustees have reviewed the level of reserves held and have set a provisional target to build

reserves to cover three months‟ worth of operating costs. A detailed reserves policy will be established by the end of

the 2007/2008 financial year.

4 FINANCIAL REVIEW

4.1 Background

Financial information presented in this report relates to both the UK charity (indicated by “Charity” in the accounts)

and the consolidated accounts of the UK, US and Australia (indicated by “Group”). Figures in this section reflect the

consolidated “Group” figures.

During the accounting period the charity expended £2,659,061 (2005/6: £1,584,742), including £286,152 on research

activities (2005/6: £275,533), £733,649 on raising awareness of climate change and its solutions (2005/6: £595,315),

and £1,186,859 on education of business and government partners on leadership opportunities associated with „low

carbon‟ policy and strategy solutions (2005/6: £463,892).

2006/7 represented a 4% increase in research expenditure, a 23% increase in awareness-raising spend and a 156%

increase in educating in business and government partners compared to the previous year.

Overall expenditure increased by 68% between 2005/6 and 2006/7.

The charity closed the reporting period with a positive position of £940,699 (2005/6: £636,115) comprising a restricted

funds position of £402,428 (2005/6: £256,971) and an unrestricted funds position of £538,271 (2005/6: £379,144). No

reserves were held or investments made.

5 FUTURE PLANS

The charity‟s plans for the financial year 2007/8 focus on increasing the reach of its work programmes across the

geographical areas highlighted in its vision statement (Section 2.2, page 7) and further developed in the charity‟s

three-year business plan, including developing a presence in India, China, and mainland Europe whilst building the

impact of work in the UK, US, and Australia. The charity aims to grow and diversify its funding base in order to build

positive leadership within businesses and governments whilst remaining independent of external influences.




The°Climate Group‟s work priorities for 2007/8 are to:

Continue to develop key business programmes in Europe and North America, setting a baseline for leadership

status amongst existing business members and beginning to track the programmes' performance improvement and

value added for participants. Recruit ten additional corporate members;

Continue to develop the charity‟s state and regional government programme incorporating a third States and

Regions Alliance meeting at the UNFCCC COP meeting in Bali. Develop the charity‟s strategy for engaging in

national government policy, and develop the charity‟s city government programme, focusing on building

relationships with cities named in the HSBC Climate Partnership;

Work to support the establishment of a global deal on climate change to succeed the Kyoto protocol, working with

partners and members;

Continue to develop research activities, starting with a formal review of the programme. Update existing research

material and expand the charity‟s case study base. Create sector best practice guides in support of the charity‟s

corporate engagement, and research and release an improved fourth edition of Carbon Down Profits Up, a second

edition of In The Black, and analyses of the information and communications technology (ICT) sector and best

practice in public-private partnerships for carbon reduction;

Grow the charity‟s communications work including at least five high profile events. Our goal is to secure twelve

significant placements in broadsheet news and/or mainstream broadcast news, with an increasing focus on the US,

China, India and Germany, and further development of our online communications;

Launch the Together campaign in the US and Australia with at least ten major consumer brands involved in each

region. Grow the UK campaign to deliver combined savings of over 200,000 tonnes CO2e with five new commercial

partners to the campaign plus wider civil society groups and their memberships;

Finalise and release the Voluntary Carbon Standard; and

Continue to develop the charity‟s programme under the HSBC Climate Partnership, focusing on enabling corporate,

government and consumer action in New York, London, Shanghai, Hong Kong and Mumbai.




6 SUPPORTERS

The trustees acknowledge the support of the following during the reporting period:

Baker & McKenzie Limited

Barclays Bank

Bullitt Foundation

W. Carey Crane III, Clean Power Foundation

Stephen Dawson

The Department for Environment, Food and Rural Affairs

Catherine Drury

DOEN Foundation

Michael Edge

Esmée Fairbairn Foundation

Garfield Weston Foundation

Goldman Sachs & Co.

HDR

HSBC Holdings plc

JP Morgan Chase Foundation

Man Group plc

MSST Foundation

MWH

Oak Foundation

Paul Pheby, Lotus Asset Management

Richard and Rhoda Goldman Fund

Rockefeller Family Fund

Gary Ross and Allison Thomas

Shell International Ltd

State of Victoria

Swiss Reinsurance Company

The Carbon Trust

The Energy Foundation

The John D. and Catherine T. MacArthur Foundation

The Nand and Jeet Khemka Foundation

The Robertson Foundation

UK Foreign and Commonwealth Office

United Nations Foundation

Universal City Studios

Webex

World Resource Institute

Anonymous donors

INDEPENDENT AUDITOR’S REPORT


To the members of The Climate Change Organisation

We have audited the financial statements of The Climate Change Organisation Limited for the year ended 30 June

2007 which comprise the Consolidated Statement of Financial Activities, the Balance Sheets and the notes 1 to 15.

These financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the charitable company's members, as a body, in accordance with section 235 of the

Companies Act 1985. Our audit work has been undertaken so that we might state to the charitable company's

members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest

extent permitted by law, we do not accept or assume responsibility to anyone other than the charitable company and

the charitable company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the directors and auditors

As described in the Trustees‟ Responsibilities Statement, the trustees, who are also the directors of the charitable

company for the purposes of company law, are responsible for the preparation of financial statements, which are to

be prepared in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally

Accepted Accounting Practice).

Our responsibility is to audit the financial statements in accordance with relevant United Kingdom legal and regulatory

requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and are properly

prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information

given in the Report of the Board of Trustees is consistent with the financial statements. In addition we report to you if,

in our opinion, the charitable company has not kept proper accounting records, if we have not received all the

information and explanations we require for our audit, or if information specified by law regarding trustees'

remuneration and transactions with the charitable company is not disclosed.

We read the Report of the Board of Trustees and other information contained in the Annual Report and Accounts for

the above year and consider the implications for our report if we become aware of any apparent misstatements or

material inconsistencies with the financial statements.

Basis of opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the

Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and

disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements

made by the trustees in the preparation of financial statements, and of whether the accounting policies are

appropriate to the charitable company's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered

necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements

are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we

also evaluated the overall adequacy of the presentation of information in the financial statements.

THE CLIMATE CHANGE ORGANISATION

CONSOLIDATED STATEMENT OF FINANCIAL ACTIVITIES FOR THE GROUP

(INCLUDING AN INCOME & EXPENDITURE ACCOUNT)

For the year ended 30 June 2007


Notes Restricted Unrestricted Year ended

30 June

2007

Year ended

30 June

2006

Incoming resources £ £ £ £

Voluntary income

Donations & similar funding 407,023 262,145 669,168 880,892

Grants 2 1,534,149 - 1,534,149 1,292,715

Membership 31,264 506,596 537,860 299,849 __________ __________ __________ __________

1,972,436 768,741 2,741,177 2,473,456

Activities for generating funds

Together campaign - 180,000 180,000 25,000

Events & publications - 11,610 11,610 39,669

Other 15,861 28,589 44,450 76 __________ __________ __________ __________

15,861 220,199 236,060 64,745

Investment income 4,254 7,728 11,982 1,147 __________ __________ __________ __________

Total incoming resources 1,992,551 996,668 2,989,219 2,539,348 __________ __________ __________ __________

Resources expended

Costs of generating funds

Fundraising & publicity 99,102 255,779 354,881 214,839

Charitable activities

Research 227,277 58,875 286,152 275,533

Communications 693,391 40,258 733,649 595,315

Education & engagement 768,714 418,145 1,186,859 463,892 __________ __________ __________ __________

1,689,382 517,278 2,206,660 1,334,740

Governance costs 33,036 64,484 97,520 35,163 __________ __________ __________ __________

Total resources expended 3 1,821,520 837,541 2,659,061 1,584,742 __________ __________ __________ __________

Net incoming resources for the

period (being the net income) before

other recognised gains and losses 4 171,031 159,127 330,158 954,606

Other recognised gains and losses

(Loss) on revaluation of foreign

currency subsidiary

(25,574) -

(25,574) -

__________ __________ __________ __________

Net incoming resources for the

period (being the net income)

145,457 - 304,584 954,606

Funds at 30 June 2006 256,971 379,144 636,115 (318,491) __________ __________ __________ __________

Funds at 30 June 2007 10 402,428 538,271 940,699 636,115 __________ __________ __________ __________

All of the above results derive from continuing activities. There are no gains and losses other than those disclosed

above. Movements in funds are disclosed in Note 10 to the financial statements.

NOTES TO THE ACCOUNTS



1 Accounting policies

a) Basis of accounting

The financial statements have been prepared under the historical cost convention and in accordance with applicable

UK accounting standards and follow the recommendations in Statement of Recommended Practice, Accounting and

Reporting by Charities (SORP 2005) and the Companies Act 1985.

The statement of financial activities (SOFA) and balance sheet consolidate the financial statements of the charity and

its subsidiary undertakings (see note 15). The results of the subsidiary are consolidated on a line-by-line basis. No

separate SOFA has been prepared for the charity alone as permitted by Section 230 of the Companies Act 1985 and

paragraph 304 of the SORP.

b) Income

Voluntary income is received by way of donations and gifts and is included in full in the Statement of Financial

Activities when receivable. Intangible income and gifts in kind are not included unless they represent goods or

services which would have otherwise been purchased, in which case they are valued and brought in as income and

the appropriate expenditure.

Revenue grants are credited to incoming resources on the earlier date of when they are received or when they are

receivable, unless they relate to a specific future period, in which case they are deferred.

Legacies are credited to the Statement of Financial Activities when the entitlement has been established, the amount

receivable is known and the likely date of receipt has been fixed.

Grants for the purchase of fixed assets are credited to restricted incoming resources when received or receivable

whichever is earlier. Depreciation on the fixed assets purchased with such grants is charged against the restricted

fund.

c) Expenditure

Resources expended are recognised in the period in which they are incurred. Resources expended include

attributable VAT which cannot be recovered.

Resources expended are allocated to a particular activity where the cost relates directly to that activity. Remaining

support costs are apportioned to activities based on staff time, which is an estimate of the amount attributable to each

activity.

Note 3 shows how support costs have been allocated to the projects.

NOTES TO THE ACCOUNTS (CONTINUED)



1 Accounting policies (continued)

d) Fixed assets and depreciation

Fixed assets are stated at cost and such items of equipment are capitalised where the purchase price exceeds

£1,000. Depreciation costs are allocated to activities on the basis of the use of the related assets in those activities.

Depreciation is provided on all tangible assets at rates calculated to write each asset down to its estimated residual

value on a straight line basis as follows:

Office equipment - 3 years

Furniture and fixtures - 3 years

e) Fund accounting

Restricted funds are to be used for specific purposes as laid down by the donor. Expenditure which meets these

criteria is charged to the fund together with a fair allocation of management and support costs.

Unrestricted funds are donations and other incoming resources receivable or generated for the objects of the charity.

f) Governance costs

Governance costs include the management of the charitable company's assets, central, non-project and

organisational management and compliance with constitutional and statutory requirements.

g) Pension costs

Contributions to the defined contribution scheme are charged to the statement of financial activities as incurred.

h) Group financial statements

These financial statements consolidate the results of the charity and its two subsidiaries on a line by line basis.

2 Revenue grants

Restricted Unrestricted

Year ended

30 June

2007

Year ended

30 June

2006

£ £ £ £

Corporations 459,450 - 459,450 -

Government 203,615 - 203,615 169,223

-

Foundations & NGOs 871,084 871,084 1,123,492 __________ __________ __________ __________

1,534,149 - 1,534,149 1,292,715 __________ __________ __________ __________




3 Analysis of total resources expended

Cost of

generating

funds Research

Communi-

cations

Education &

engagement Governance

Year ended

30 June

2007

Total

Year ended

30 June

2006

Total

£ £ £ £ £ £ £

Direct costs

Staff costs 216,448 155,279 316,551 595,403 48,883 1,332,564 724,769

Travel & subsistence 9,834 16,630 27,306 59,362 1,749 114,881 104,839

Events & conferences 2,446 992 15,414 89,281 792 108,925 94,659

Printing & publicity 3,595 8,698 77,877 34,858 950 125,978 114,437

Communications & policy

support 5,536 6,882 78,850 63,970 828 156,066 201,347

Consultancy 17,587 11,050 52,085 61,223 5,863 147,808 -

IT support & consumables 270 3,911 49,072 37,640 - 90,893 -

Legal, audit & accountancy - - - - 12,778 12,778 15,000

Other 2,439 4,151 13,253 6,971 6,398 33,212 38,281 ________ ________ _________ _________ _________ _________ _________

258,155 207,593 630,408 948,708 78,241 2,123,105 1,293,332

Support costs

Staff costs 26,634 23,013 23,814 65,947 4,922 144,330 49,187

Travel 10,225 8,835 9,143 25,319 1,890 55,412 -

Rent, rates & insurance 14,079 10,187 19,195 34,329 3,155 80,945 70,825

Postage & stationery 1,186 946 1,321 2,914 241 6,608 18,664

Telephone & fax 5,065 3,709 6,759 12,362 1,123 29,018 20,400

Depreciation 4,646 3,714 5,158 11,424 942 25,884 13,075

Consultancy - - - - - - 9,290

IT support & consumables 13,160 11,371 11,767 32,586 2433 71,317 29,603

Finance & legal 10,820 9,349 9,674 26,790 1,999 58,632 39,834

Other 10,911 7,435 16,410 26,480 2,574 63,810 40,532 ________ ________ _________ _________ _________ _________ _________

96,726 78,559 103,241 238,151 19,279 535,956 291,410 ________ ________ _________ _________ _________ _________ _________

Total 2007 354,881 286,152 733,649 1,186,859 97,520 2,659,061 1,584,742 ________ ________ _________ _________ _________ _________ _________

Total 2006 214,839 275,533 595,315 463,892 35,163 1,584,742 ________ ________ _________ _________ _________ _________

Support costs are apportioned to activities based on staff time, which is an estimate of the amount of effort

attributable to each activity. Communication direct costs include £155,744 in relation to the Together campaign with a

further £155,744 included within education and engagement. The total cost of Together was £311,488 (2006 £nil).

NOTES TO THE ACCOUNTS (CONTINUED) For the year ended 30 June 2007


4 Net incoming/(outgoing) resources

is stated after charging/(crediting):

Year ended

30 June

2007

Year ended

30 June

2006

£ £

Operating lease rentals – other 34,233 12,242

Depreciation 25,884 13,075

Auditor’s remuneration – audit fees 15,000 15,000

Donated services – staff (238,024) - __________ __________

The trustees received neither remuneration nor expenses during either period.

5 Employees

Staff costs during the period amounted to:

Year ended

30 June

2007

Year ended

30 June

2006

£ £

Wages & salaries 994,124 605,777

Social security costs 88,194 60,807

Employer’s pension contributions 75,843 59,647

Other staff costs 47,454 2,415 __________ __________

1,205,615 728,646

Freelance staff - 42,442

Temporary staff 33,255 2,868

Donated services 238,024 - __________ __________

1,476,894 773,956 __________ __________




5 Employees (continued)

Number of employees with emoluments exceeding £60,000 2007 2006

Number Number

£60,000 - £70,000 p.a. - 1

£70,000 - £80,000 p.a. 2 -

£100,000 - £110,000 p.a. - 1

£110,000 - £120,000 p.a. 1 -

Retirement benefits are accruing to the three higher paid staff under defined contribution schemes. Employer

contributions of £24,775 (2006: £17,300) were made during the year.

The average weekly number of employees {full time equivalents} during the period was as follows:

Year ended

30 June

2007

Year ended

30 June

2006

Fundraising & publicity 3.4 3.4

Research 2.4 2.4

Communications 5.3 4.5

Education & engagement 10.0 3.7

Support 2.2 1.8

Governance 0.9 0.2 __________ __________

24.2 16.0 __________ __________

NOTES TO THE ACCOUNTS (CONTINUED) For the year ended 30 June 2007


6 Tangible fixed assets (Group)

Office Leasehold

equipment improvements Total

£ £ £

Cost

1 July 2006 50,860 - 50,860

Additions 52,225 34,108 86,333 __________ __________ __________

30 June 2007 103,085 34,108 137,193 __________ __________ __________

Depreciation

1 July 2006 26,385 - 26,385

Charge for the period 20,077 5,807 25,884 __________ __________ __________

30 June 2007 46,462 5,807 52,269 __________ __________ __________

Net book value

30 June 2007 56,623 28,301 84,924 __________ __________ __________

1 July 2006 24,475 - 24,475 __________ __________ __________

Tangible fixed assets (Charity)

Office Leasehold

equipment improvements Total

£ £ £

Cost

1 July 2006 50,860 - 50,860

Additions 36,314 31,921 68,235 __________ __________ __________

30 June 2007 87,174 31,921 119,095 __________ __________ __________

Depreciation

1 July 2006 26,385 - 26,385

Charge for the period 16,303 5,807 22,110 __________ __________ __________

30 June 2007 42,688 5,807 48,495 __________ __________ __________

Net book value

30 June 2007 44,486 26,114 70,600 __________ __________ __________

1 July 2006 24,475 - 24,475 __________ __________ __________




7 Debtors

Charity

30 June

2007

Group

30 June

2007

Charity

30 June

2006

Group

30 June

2006

£ £ £ £

Trade debtors 142,411 142,411 620,308 620,308

Other debtors 20,832 22,018 5,850 7,000

VAT recoverable 39,866 39,866 1,735 1,735

Due from subsidiary companies - - 1,815 -

Prepayments 15,150 17,582 3,272 3,271

Accrued income 26,669 26,669 55,141 123,822 __________ __________ __________ __________

244,928 248,546 688,121 756,136 __________ __________ __________ __________

8 Creditors: amounts falling due within one year

Charity

30 June

2007

Group

30 June

2007

Charity

30 June

2006

Group

30 June

2006

£ £ £ £

Bank overdraft - - 179,609 179,609

Trade creditors 69,619 94,739 102,830 109,220

Taxation & social security 38,421 39,182 39,254 40,298

Other creditors 10.827 11,876 7,750 15,022

Due to subsidiary companies 84,601 -

Accruals 53,383 72,801 43,942 51,827

Deferred income 180,000 256,115 - 72,289 __________ __________ __________ __________

436,851 474,713 373,385 468,265 __________ __________ __________ __________

Group deferred income at 30 June 2007 includes £180,000 of Together subscriptions received in advance in the

Charity and a further amount of £76,115 for grant funds received in advance in Australia. All prior year deferred

income has been released.

9 Analysis of net assets between funds

Restricted

funds

Unrestricted

funds

Total

funds

£ £ £

Tangible assets 14,324 70,600 84,924

Current assets 510,568 819,920 1,330,488

Current liabilities (122,464) (352,249) (474,713) __________ __________ __________

Net assets 402,428 538,271 940,699 __________ __________ __________




10 Movements in funds of the Charity

At 1 July Incoming (Outgoing At 30 June

2006 resources Resources) 2007

£ £ £ £

Restricted funds

Voluntary Carbon Standard - 99,500 (59,500) 40,000

US Programme (63,666) 124,031 (60,365) -

IIGCC - 26,874 (26,874) -

NorthSouthEastWest 10,000 - (10,000) -

World Cities Programme 10,000 70,000 (50,833) 29,167

Together - 117,700 (117,700) -

Green Power Market Development Group, Europe - 32,782 (32,782) -

Research & Publication - 299665 (299,665) -

China Programme - 25,000 - 25,000

HSBC Climate Partnership - 459,450 (459,450) -

__________ __________ __________ __________

Total restricted funds (43,666) 1,255,002 (1,117,169) 94,167 __________ __________ __________ __________

Unrestricted funds 382,877 1,077,173 (1,058,977) 401,073 __________ __________ __________ __________

Total funds 339,211 2,332,175 (2,176,146) 495,240 __________ __________ __________ __________

The charity surplus for the year was £186,030.




10 Movement in funds of the Group (continued)

At 1 July Incoming (Outgoing At 30 June

2006 resources Resources) 2007

Restricted Funds £ £ £ £

Voluntary Carbon Standard - 99,500 (59,500) 40,000

US Programme 219,929 746,387 (712,235) 254,081

Australia Programme 17,042 115,193 (78,055) 54,180

IIGCC - 26,874 (26,874) -

NorthSouthEastWest 10,000 - (10,000) -

World Cities Programme 10,000 70,000 (50,833) 29,167

Together - 117,700 (117,700) -

Green Power Market Development Group, Europe - 32,782 (32,782) -

Research & Publication - 299,665 (299,665) -

China Programme - 25,000 - 25,000

HSBC Climate Partnership - 459,450 (459,450) -

__________ __________ __________ __________

Total restricted funds 256,971 1,992,551 (1,847,094) 402,428 __________ __________ __________ __________

Unrestricted funds 379,144 996,668 (837,541) 538,271 __________ __________ __________ __________

Total funds 636,115 2,989,219 (2,684,635) 940,699 __________ __________ __________ __________

NOTES TO THE ACCOUNTS



10 Movement in funds (continued)

Purpose of funds

China Programme Funding to engage Chinese government, cities and businesses.

Green Power Market

Development Group,

Europe

To co-ordinate a business group focused on expanding the market for green power

in Europe. The group is an initiative of World Resources Institute in collaboration

with The°Climate Group and is staffed by a joint hire in our UK offices.

HSBC Climate Partnership To promote low carbon solutions and practices in five world cities: Hong Kong,

London, Mumbai, New York and Shanghai, engaging businesses, governments

and consumers in carbon emissions reduction.

IIGCC Funding to manage and facilitate the Institutional Investors Group on Climate

Change, a network of pension funds and asset managers seeking to be active on

climate change.

NorthSouthEastWest To deliver a high impact photographic book and travelling exhibition profiling

climate threats and solutions around the world. The project was undertaken in

partnership with the British Council and supported by organisations including

HSBC, Swiss Re and DEFRA, and featured the work of Magnum Photos and

contributions from Tony Blair and Kofi Annan.

Research and Publications Funding for the production and dissemination of Carbon Down, Profits Up. Part of

the income reported on was for work undertaken in the US Programme, including

research into consumer attitudes and behaviour, and feasibility studies for

prospective leadership and working groups in the finance and insurance sectors.

This work is supported by the DOEN and Oak Foundations.

Together Funding to launch and implement the Together campaign in the UK, and to develop

it in the USA.

US Programme Funding to develop The°Climate Group's outreach to US state governments and

businesses. The programme includes the development of relationships with key US

states and corporations.

Voluntary Carbon Standard To develop a widely recognised standard for the verification of carbon credits on

the voluntary market (“voluntary carbon units”).

World Cities Programme Focusing in particular on facilitating partnerships between city governments and

corporations that address the threat of climate change.




11 Taxation

The Climate Change Organisation has charitable status and as such is partially exempt from tax on its income and

gains to the extent that they are applied to its charitable objects.

12 Related party transactions

There were no related party transactions during the 12 month period to 30 June 2007.

13 Cash flow statement

The charity has taken advantage of the exemptions available to small companies and not published a cash flow

statement.

14 Leasing commitments

The annual commitments under non cancellable operating leases are as follows:

2007 2006

Land and Land and

Buildings Buildings

£ £

Expiring between 1 and 2 years 68,500 49,887 ======= =========

15 Subsidiaries

The charity is represented by legal entities incorporated in the United States (registered on 5 Match 2004) and

Australia (registered on 19 May 2005). These operate in close conjunction with the UK charity with a relationship

maintained via places on the boards for members of the charity‟s management team.

United States – The Climate Group Inc

2007 2006

Net assets as at 1 July 2006 £282,416 -

Income for the year to 30 June 2007 £541,851 £325,714

Net surplus for the year to 30 June 2007 £111,416 £282,416

Net assets as at 30 June 2007 £393,832 £282,416

Australia – The Climate Group Ltd

Net assets as at 1 July 2006 £14,488 -

Income for the year to 30 June 2007 £115,193 £15,650

Net surplus for the year to 30 June 2007 £37,139 £14,488

Net assets as at 30 June 2007 £51,627 £14,488

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