Dirty lit­tle se­crets

Element - - Finance - www.cd­pro­ject.net By Adam Gif­ford

De­spite a world­wide trend for trans­parency on car­bon foot­prints, New Zealand com­pa­nies are slow to show their hands.

Just 22 of the top 50 New Zealand listed com­pa­nies re­vealed their con­tri­bu­tion to cli­mate change to the Car­bon Dis­clo­sure Project this year. That com­pares with 73 per cent of the ASX top 100 and more than 90 per cent of the largest firms in the Euro­pean Union.

“It’s hard to see why New Zealand com­pa­nies think they are ex­empt,” says Paul Dickinson, the project’s ex­ec­u­tive chair­man.

The former cor­po­rate com­mu­ni­ca­tions spe­cial­ist set up the project nine years ago be­cause of his con­cern about cli­mate change.

“I thought cli­mate change cre­ated risks and op­por­tu­ni­ties for in­vestors, but in 2001 there wasn’t an ef­fi­cient sys­tem for them to gather in­for­ma­tion,” Dickinson says.

“We started with a small group of funds who had US$4 tril­lion un­der man­age­ment. We now have 551 in­vestors with US$71 tril­lion in in­vest­ments. “That’s a lot of fi­nan­cial au­thor­ity. When a cor­po­ra­tion re­ports to us, it re­ports to more than 500 in­vestors at the same time.” The not-for-profit trust makes its data freely avail­able through its web­site and via in­for­ma­tion providers like Bloomberg. It’s funded by pay­ments from some of the in­vestors, such as the Nor­we­gian govern­ment’s sov­er­eign wealth fund, and through con­sul­tancy. Dickinson says while some in­di­vid­ual ex­ec­u­tives may deny global warm­ing, cor­po­ra­tions aren’t anti-sci­ence.

“The cor­po­ra­tion is a col­lec­tive in­tel­li­gence. It is far less ran­dom than cit­i­zens.” There is money to be made from the in­for­ma­tion col­lected, both by com­pa­nies and by in­vestors.

“One con­sul­tant told us a $100 bil­lion food com­pany es­ti­mated it spent $1 bil­lion on en­ergy. He sug­gested its sup­ply chain con­sumed an­other $20 bil­lion. That’s an in­di­ca­tion of how much money there is in the en­ergy dis­cus­sion,” Dickinson says. “Peo­ple are talk­ing about a new en­ergy mea­sure­ment, the ne­gawatt – a watt avoided.” He says there will be win­ners and losers for in­vestors. “Rail, in­su­la­tion, video con­fer­enc­ing as a sub­sti­tute for busi­ness travel could be good in­vest­ments.”

He says gov­ern­ments feel they have a re­spon­si­bil­ity to sup­port in­dus­tries that keep their coun­try wealthy, but those in­dus­tries will not nec­es­sar­ily be ones de­pen­dent on fos­sil fu­els.

Com­pa­nies fear cus­tomers will shift against com­pa­nies and prod­ucts seen to be dam­ag­ing the environment.

“There’s a democ­racy in how peo­ple in­vest and spend their money. When you shop, you vote,” Dickinson says.

The 2011 CDP Aus­tralia and New Zealand Re­port de­tected a two-speed re­sponse to cli­mate change, with the fi­nan­cials sec­tor in­clud­ing bank­ing and real es­tate in­te­grat­ing cli­mate change into strat­egy and busi­ness plan­ning, but other sec­tors lag­ging be­hind. De­spite noise in the me­dia, only four per cent of com­pa­nies con­sid­ered car­bon pric­ing as a se­ri­ous busi­ness risk, with more firms con­cerned at the risk of ex­treme weather events. Nathan Fabian, the Syd­ney-based chief ex­ec­u­tive of the In­vestor Group on Cli­mate Change, says as well as pro­vid­ing in­vestors with in­for­ma­tion they can’t get any­where else, CDP also gives guid­ance on what com­pa­nies can do to re­duce emis­sions.

“In­vestors across the econ­omy want to see com­pa­nies that can re­duce emis­sions early at a rel­a­tively low cost. If com­pa­nies wait and have to do it ur­gently or make deep cuts, there will be higher costs,” he says.

“That’s a lot of fi­nan­cial au­thor­ity. When a cor­po­ra­tion re­ports to us, it re­ports to more than 500 in­vestors at the same time.”

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