NEWS | Wednesday, 04 June 2008

Assessing company performance on climate change

Insight Investment Management Limited (“Insight”), a shareholder of Valletta Fund Management Limited (“VFM”) and the Sub-Investment Manager for the VFM range of investment has published Taking The Temperature – a report assessing how the FTSE 100 (excluding investment trusts) and large cap European stocks are managing their greenhouse gas emissions.
Insight Investment based the analysis on companies’ non-confidential published literature, including annual reports, corporate social responsibility (CSR) reports, information on their websites and responses to the 2007 Carbon Disclosure Project (CDP) questionnaire. The analysis took account of data/reports published by companies up to 30 September 2007.
Positive results from an investment perspective
Commenting on the results, the report author, Dr Rory Sullivan, noted that: “From an investment perspective, the overall results are extremely positive. Most large companies now have the management systems and processes in place that they need to effectively manage their greenhouse gas emissions and related business risks.” He further noted that: “Looking forward, 80 of the 125 companies analysed have published greenhouse gas emission targets, with 39 expecting their total emissions (excluding offsets) to stabilise or reduce over the next five years.”

Areas of concern
The research identified 21 companies scoring less than 20 per cent and suggested there may be significant gaps in the manner in which these companies are managing their greenhouse gas emissions.
Dr Sullivan said: “We intend engaging with these companies to understand the reasons for their poor scores. We need to know whether it is just a question of poor disclosure or whether there are fundamental weaknesses in these companies’ management systems and processes.”
From Climate Change Governance to Climate Change Strategy
Reflecting on the broader implications of the research, Dr Sullivan commented: “The fact that two thirds of companies expect their greenhouse gas emissions to increase in the coming years suggests few companies believe that governments – in the UK or Europe – will follow through on their policy commitments to a low carbon economy. Companies have clearly responded to the climate change and governance debate. We now need to think about how climate change can be made a fundamental part of corporate strategy, so that companies properly build climate change into their business planning and investment decisions and ensure that their business models are robust enough to meet and thrive in a low carbon economy.”