steven tebbe: leading business strategies for carbonneutrality

1StevenTebbe,CDP,2016

Steven Tebbe Executive and Managing Director CDP Europe

CDP An investor lead initiative

Climate Leadership Council February 17th, 2016

Helsinki, Finland


Agenda

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

{  Questions and Answers


What we do

We are in the information business.


What we do

We rate and score companies.


… in order to create a level playing field


for carbon, water and forestry reporting.

… and a credible, common standard

The “Gold Standard”


What gets measured, gets managed.

Why this is important


“Not everything that can be counted counts,

and not everything that counts can be counted.“

Be selective


Measurement criteria

Governance & Strategy

Targets & Performance

Risks & Opportunities

GHG Emissions


”A prosperous global economic system that operates within sustainable environmental

boundaries and prevents dangerous climate change”

“To leverage the power of organizations and information to drive urgent action at scale by

business, investors and regulators”

Vision & Mission statements


Information is the lifeblood of

financial markets.

The key


We harness the power of investors.

Our leverage


> 800 institutional investors with US$ 100 trillion in assets

> 50% of world’s invested capital &

75 corporate buyers covering US$ 2 tn procurement spend & >7800 suppliers

5.500 companies from > 80 countries reporting to CDP

= 60% of global market cap &

>300 major cities

AUTHORITY DECISION CRITERIA

Investors give us the mandate

INFORMATION

AUTHORITY

AUTHORITY


Forests

180 Reported in 2015

Water

571 Reported in 2015

Climate change

5,500 Reported in 2015

0

10

20

30

40

50

60

70

80

90

100

0

100

200

300

400

500

600

700

800

900

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Assets(U

S$Trillio

n)

Num

bero

fSigna

torie

s

ClimateChangeSignatories WaterSignatories CarbonAcConSignatories

ForestsSignatories ClimateChangeSignatoryAssets WaterSignatoryAssets

CarbonAcConSignatoryAssets ForestsSignatoryAssets

Over half of the world’s invested capital wants environmental data


58 Nordic investors

Including:


Not a niche anymore


{ 149 for investors, e.g. H&M, Nordea, KONE, Nokia, SSAB, Novo Nordisk, Statoil

{  39 for customers (supply chain, e.g. Lantmännen, Lego, Tetrapak

{  17 more e.g. Vattenfall

CDP in the Nordic region (Sweden, Finland, Denmark, Norway)

85% of Nordic market cap

205 Nordic corporations disclosed in 2015


Disclosure (100-0)

Performance (A-D)

Measuring transparency and performance


What gets measured, gets managed.

Why this is important


www.cdp.net | @CDP Page 9

Measurement turns into action …


{  Board-level responsibility for climate change

{  Staff incentives

{  Integration with business strategy

{  Integrated communication

{  Risk assessment and management

{  Implementation of GHG emissions reduction

project

{  Setting Science based GHG emissions

reduction targets

{  Emissions intensity reduction

{  Data verification

115 companies on the global

A list

… actions turn into leadership …


… leadership turns into financial outperformance …


CPLIndexoutperformsDJSWIndexby19,6%&BloombergWorldIndex

by9,6%overpast10years

(CDPClimatePerformanceLeadershipIndex)


Company Score Examples of emission reductions for A listers

100 A 12 Emission reduction activities implemented in the reporting year leading to 74210 estimated annual CO2e savings in metric tonnes CO2e à 7% CO2 total global decrease through proactive measures. Extensive engagement w value chain, Scope 3 reductions namely through purchased goods and services:e.g. increased energy efficiency by the data center service providers.

100 A 4,6% (6,600 tCO2e) reduction & avoided emissions (S1&2) through proactive measures target to reduce our operational carbon footprint by 3% annually relative to net sales and to further reduce the energy consumption and thereby GHG emissions of our solutions.

100 A Kesko’s Responsibility Programme and K-responsibility Concept provide information, ideas and support to e.g. retailers to improve energy and material efficiency and other activities to mitigate CC, and to customers on how to do environmentally and climate friendly choices with their purchases - more than 1600 activities reported and 12,980 tonnes CO2 avoided emissions

99 A decrease of 11% (110,000 tonnes CO2) in overall emissions through proactive measures

99 A 36% reductions in emissions/tonne of product (S1 & S2), namely through investment in Skärblacka Mill, cutting the annual electricity requirement, RE: Seven units have contracted deliveries with guarantees of origin with low carbon emissions

Top Nordic companies to put on your watch list


Nordic Climate Disclosure Leaders


CDP data

INVESTORS

DISCLOSING COMPANIES

PROCURING COMPANIES

POLICY ACTORS

ACADEMICS

Need for data


Financial markets


SIGNATORY INVESTORS

REQUESTING SUPPLY CHAIN

MEMBER

INDICES

/finance

www.cdp.net

CDP ANALYTICS

YOUR INVESTORS DISCLOSING COMPANIES YOUR CUSTOMERS GENERAL PUBLIC OTHER PUBLICATIONS

PUBLIC RESPONSES

CDP REPORTS

SUSTAINABILITY RATINGS

NON PUBLIC RESPONSES

AGGREGATE DATA ONLY

SIGNATORY INVESTORS

REQUESTING SUPPLY CHAIN

MEMBER

Distribution channels


Globale Sichtbarkeit Ihrer CDP Klimaschutzbewertung

Increasingly investment decisions include CDP data


… and are available to all of us


CDP data is available to professional investors …

Source: Bloomberg


Compareacompanyagainstpeerson“Efficiency”:Forexample,GHGEmissionperSales.

… and used in analysis; e.g. peer analysis

Source: Bloomberg


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


How investors will use your data

Investors will •  Rank, score and compare companies

•  Manage risks

•  Use indices to optimize returns

•  Carbon footprinting of portfolios

•  Company engagement

•  Exclusion and divestment criteria

•  Construct ESG metrics

•  Build their own data models

•  Access CDP’s data via Bloomberg,

Google Finance, and other sustainability

rankings

Investors will NOT use CSR reports to

•  Read them end-to-end

•  Pull out individual data points


CDP data

INVESTORS


PROCURING COMPANIES

POLICY ACTORS

ACADEMICS

Need for data


1. Engage with multiple stakeholders 2. Manage through measurement

{  Better risk management leads to reduced cost of capital

{  Better understand your business

{  Realize opportunities for competitive advantage

{  Identify inefficiencies

{  Take advantage of opportunities for cost savings

{  Benchmark performance

Benefits of responding


Simple benchmarking


CDP data

INVESTORS


PROCURING COMPANIES

POLICY ACTORS

ACADEMICS

Need for data


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


Respondents Non-Respondents

49% Of 7,879 total

suppliers contacted,

49% did not submit any data

… but we are still missing half the story


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Report Scope 1/2 emissions

Identified regulatory risks

Emissions reduction targets

Engage with suppliers

3-plus years reporting 2 years reporting First year reporting

Percent of suppliers taking specific action by number of years reporting to CDP

Non-responders likely resemble first-time participants - which performed significantly worse than repeat reporters

…and the missing half is likely to perform badly


Purchasers can drive change by:

-  Leveraging their purchasing power by asking suppliers to provide information

- Engaging their procurement teams - Setting targets to articulate ambition

Improvement takes time


Emissions reduction targets


Actual emission reductions initiatives


Climate risk management


CDP data

INVESTORS


PROCURING COMPANIES

POLICY ACTORS

ACADEMICS

Need for data


Capturing information from Cities


Show us the …


Preference for financials


Financials are based on past performance


How do we know?


Most ratings are largely based on CDP data


NorwegianGovernmentPensionFundGlobal(AuM>EUR350billion):

“…the management of the assets in the

Fund shall be based on the goal of achieving the highest possible return.... A good return

in the long term is dependent on sustainable development in economic, environmental

and social terms, as well as well-functioning, legitimate and effective markets.”

Public investor


“Investors are increasingly viewing CO2 emissions as a material issue and expecting companies to report accordingly. Companies who don't disclose this information themselves risk having their emissions estimated by a third party, and this number may in turn be used by data providers to develop ESG ratings that investors around the world use to evaluate and engage with companies. So if companies want to be sure of the quality of the emissions data that finds its way to the market, they need to report themselves“

Melanie Brooks, Senior Responsible Investment Analyst, Folketrygdfondet

“During my years in the financial industry I have come to the conclusion that companies who report emissions to CDP are more aware of their overall sustainability risk and opportunities. Therefore I always encourage companies to report to CDP”.

Anette Andersson, Fund Manager, SEB

Public investor


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

Private investor


Climate disclosure as a “first step” indicator of environmental risk management

“In our meetings with companies with a weak ESG profile one of our key recommendations is that they answer the CDP questionnaire because it leads companies through many of the key environmental issues they should be considering.”

Climate performance as an indicator of efficient operations

“In most mature markets stakeholder demands for carbon management are higher, and thus carbon reporting is more prevalent. For our Swedish Stars portfolio, we look not only at whether a company reports, but also, for example, how the company performs and data verification as indicators of efficient operations.” Katarina Hammar, ESG Analyst at Nordea Asset Management

Private investor


„We will vote against the report and accounts at the AGM.” Aviva

“The CDP data helps us to determine the quality of an individual company’s management response and is a factor in our overall buy, sell and hold decisions. When necessary we make specific recommendations for change. At Aviva Investors we take this very seriously as the average length of time we hold a stock is for six years, which is longer than most companies long term strategy. At one extreme, if such a company had not even bothered to respond to the CDP, then we tell them that unless this changes, we may vote against the report and accounts at the company’s next AGM. This is proving quite a successful sanction.”

“Measurement allows management. It provides a framework to consider options, shows investor transparency and benchmarking; all in turn impacting energy efficiency, costs and reputation.”

Private investor


Withtheslogan“SustainableSwissPrivateBankingsince1841”theSarasinBankfocusesoninvesCngaccordingtoESG

principles:

“In addition to traditional financial analysis, by taking into account environmental and social aspects you can reduce a number of commercially relevant risks and

exploit opportunities.

The majority of scientific studies to date point to a positive correlation between sustainability and the financial value development of companies.”*

*Source: Sarasin study "Sustainability and equity performance" in cooperation with the European Centre for European Research and the CCRS (Center for Corporate Responsibility and Sustainability) of the University of Zurich, November 2008. See also: S. Hörter, W. Mader, B. Menzinger (2010): „ESG Risk Factors in a Portfolio Context. An Innovative Study for Institutional Investors.“

Private investor


TheJohannesburgStockExchangenowrequiresalllistedcompaniestoadopt

integratedreporCngthroughacomply-or-explainbasisenforcedbytheKingCodeon

Governance(KingIII).

“The JSE enforces the King III, not merely because it’s a good idea, but because it

makes sound business sense”.

Market


EnelesCmatesthatSociallyResponsibleInvestment(SRI)fundsaccountforabout19%ofitsfree-float(roughly

5.5%ofitsmarketcap).

Corporate


Thecorporatenewsservices,BloombergandThomsonReuters,bothaddedsocialandenvironmentaldata

feedstotheirstandardcorporatemetricsandintelligenceplaeorms.

Brokers,raCngagencies,investmentconsultants,buy-

sideteams,indexanddataprovidersaredevelopingESGanalysisservices,whichismainstreamingitamongthe

financialcommunity.

Service providers


The Result

Investors drive company values

and can help save the planet.


The Impact


CDP Nordic office contact: Salla Sulasuo

Project Officer, CDP Nordic Tel: +358 (0)40 650 1988 Email: [email protected]

Resources available at www.cdp.net

{ Questionnaire guidance

{ Drafting document

{ CDP scoring methodology

{ Reporting roadmap

{ Technical guidance

{ FAQs

{ Live & recorded webinars

Next steps

Join CDP spring workshop in Helsinki 4.4.2016 kindly hosted by Imarinen

steven tebbe: leading business strategies for carbonneutrality

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