Sustainability Stock Index Firms Beat Overall Market

Ford, General Electric, Intel, Hewlett-Packard and Campbell Soup are among the companies listed on a stock index of sustainability leaders launched by the UN Global Compact that shows a total investment return of 26.4 percent during the past year, surpassing the general global stock market.

The GC 100, released in partnership with research firm Sustainalytics, is composed of a representative group of Global Compact companies selected based on their adherence to the 10 principles, which cover topics including labor, human rights and the environment, as well as evidence of executive leadership commitment and consistent base-line profitability.

The GC 100 tracked the stock market performance of these companies during the past three years, comparing the results against a broad market benchmark, the FTSE All World. The data for total returns is as follows:

 GC 100 rose 26.4 percent during past one year; FTSE All World rose 22.1 percent

 GC 100 rose 19 percent during past two years; FTSE All World rose 17.7 percent

 GC 100 rose 12 percent during past three years; FTSE All World rose 12 percent

Georg Kell, executive director the UN Global Compact, says based on the performance of the GC, there “appears to be an exciting correlation” between corporate sustainability practices and stock performance. The results may also reflect the fact that investors are paying more attention to firms’ sustainability performance.

Sustainalytics carried out the research in constructing the GC 100, using a proprietary methodology that takes into consideration a range of indicators based on the Global Compact’s 10 principles. In creating the index, Sustainalytics only evaluated those Global Compact signatories that are currently covered in its research universe: approximately 722 companies in total. (The Global Compact today includes almost 8,000 corporate signatories, of which approximately 1,000 are publicly traded companies.)

CDP Global 500: 10% of Largest Companies Produce 73% of GHGs

BMW, Daimler, Philips Electronics, Nestlé, financial firm BNY Mellon, Cisco Systems and utility Gas Natural SDG are the best companies in terms of climate change disclosure and performance, according to the CDP Global 500 Climate Change Report 2013. The report is co-written by CDP, formerly known as the Carbon Disclosure Project, and PricewaterhouseCoopers. The analysis is based on the climate and energy data of 389 companies listed on the FTSE Global 500 Equity Index. Some companies, such as Apple and, did not respond to CDP’s request for emissions.

On the other end of the spectrum, 50 of the 500 largest listed companies in the world are responsible for nearly three quarters of the group’s 3.6 billion metric tons of greenhouse gas emissions, the report says.

The carbon emitted by the 50 highest emitting companies, which primarily operate in the energy, materials and utilities sectors, has risen by 1.65 percent to 2.54 billion metric tons over the past four years, the report says.

Also, the report says that there is a lack of detailed reporting and information of GHGs from sources related to company activities (Scope 3 emissions). Two thirds (72 percent) of the Global 500 measure emissions are associated with business travel but this equates to just 0.2 percent of the sample’s reported Scope 3 emissions. Nearly all financial businesses are managing their travel emissions but only 6 percent are reporting the emissions associated with their investments, the sector’s prime source of Scope 3 emissions.

The report says companies that demonstrate a strong commitment to managing their impact on the environment are generating improved financial and environmental results.  Analysis of the corporations leading on climate progress, as based on CDP’s methodology and including BMW, Nestlé and Cisco Systems, suggests that they generate superior stock.

Also it is important to emphasize that two leadership indices for the Global 500 are released in the report. The Climate Performance Leadership Index (CPLI) marks companies that are implementing a robust climate strategy and approach to reducing emissions. The Climate Disclosure Leadership Index (CDLI) identifies the most climate transparent companies. Both indices are used by investors to inform investment decisions relating to climate risks and opportunities.

Germany, Switzerland and the UK are over represented on the CPLI relative to the geographic composition of the Global 500. Although European companies are more likely to outperform in comparison to their peers in the USA, the number of North American companies achieving a position on the CPLI has more than doubled since 2012.

U.N. aviation body reaches consensus on emissions deal

The United Nations civil aviation body reached consensus to create what would be a market-based scheme to help curb carbon emissions from a major industry by 2020, but rejected a European proposal that would have let it apply its own market scheme to foreign airlines in the interim.

The resolution sets steps for the International Civil Aviation Organization’s member states to take from now to the next triennial assembly in 2016 to curb growing emissions from the aviation sector. So, the committee agreed to “decide to develop a global MBM (market-based mechanism) scheme for international aviation” in 2016.

But the ICAO Assembly’s president Michel Wachenheim amended the text to reflect requests made by some developing countries, such as India, to say that the 2016 decision should take into account “environmental and economic impacts” of different global MBM options, including feasibility and practicability.

So, it is clear that all the countries want to reach a global agreement to reduce emissions. However, there is a dilemma with EU. It is not known if the committee would be able to reach consensus on the global MBM after a group of mostly developing countries voted to limit the ability of the European Union to apply its emissions trading system (ETS) to international airlines until a global scheme starts.

The EU had insisted that a deal at the ICAO should allow it to be able to apply its ETS while countries continue to work toward a global market, but gradually started backing down amid fierce pushback from countries ranging from Argentina to Russia.

So, now, the European Parliament will have to act quickly to endorse any extension of the European Commission’s decision to “stop the clock” on its law in time for an April 2014 deadline.



Why Disney, BP And Rio Tinto Are Exploring Ecosystem Services

Sissel Waage of BSR (Business of Social Responsibility) wrote an interesting article two months ago. He discussed reasons why ecosystem services thinking is on the rise as the number of governments invests in ecosystem services and companies incorporating their environmental impacts into existing business models continue to grow. Biodiversity and Ecosystem services (BES) refer to the benefits that humans enjoy from functioning ecosystems. That includes goods or products that ecosystems produce, and the natural processes that ecosystems regulate.

Waage cites companies such as Disney, BP and Rio Tinto. He says that these companies see an increasingly persuasive business case for tracking the impacts and dependencies on BES.

So, according to him, the case for corporate action on BES has solidified, with internal and external dimensions that are more and more compelling. “Ecosystem services are essential to businesses, as well as to some 450 million people whose livelihoods depend upon their ongoing flow”, he claimed.

One of the steps has been the foundation of the internal business case, in order to improve current risk and opportunity identification processes. For example, one corporate leader said that an ecosystem services analysis highlighted issues likely to occur in the coming months and years that otherwise wouldn’t have been identified, such as saltwater intrusion into coastal freshwater aquifers.

On the other hand, this uptake of ecosystem services thinking is underway among a growing range of key corporate stakeholders as well as governments. For example, more than 16 government agencies around the world either are investing in ecosystem services initiatives or developing related policies. This includes Brazil, Canada, China, Colombia, the European Union, India, Israel, Japan, Nepal, Peru, South Africa, Spain, Tanzania, the United Kingdom, the United States and Vietnam.

It is also clear that the investor and financial services sector is interested in new, integrated and ecologically accurate ways of understanding and avoiding environmental risk. Companies will need to demonstrate robust risk management practices that are in line with investor due diligence and corporate ranking approaches that now include consideration of ecosystem services, such as the World Bank’s International Finance Corporation (IFC), the 79 Equator Banks and the Dow Jones Sustainability Index.

So, according to Waage, it is clear that BES is coming of age.

Listed companies in the UK will be required by law to publish details of their GHG emissions from tomorrow

All companies listed on the on the London stock exchange will be obligated from the 1st of October to report their GHG emissions, under the UK Climate Change Act. This act commits the UK to reducing emissions by at least 80% in 2050 from 1990 levels. The UK is the first country to set this as a legal requirement.

The Government has taken a number of steps to limit the UK’s emissions of greenhouse gases, however, some reports which have been published show companies still don’t take climate change seriously. CDP, an international organization which works with market forces to motivate companies to disclose their impacts on the environment and natural resources and take action to reduce them, has just released an analysis which reveal lack of action on emissions by top FTSE Global 500 corporations.

Even during a period of global recession, total direct emissions from the 500 largest listed companies in the world have not changed significantly in the past five years. In fact, the report concludes: “The biggest emitters, who have the largest impact on global emissions and so present the greatest opportunity for large-scale change, need to do more to reduce their emissions. There is a disparity between companies’ strategies, targets and the emissions reductions which are required to limit global warming to 2C. This means that major corporations are doing too little to support the fight against climate change.

The analysis, based on the climate and energy data from 389 companies listed on the FTSE Global 500 Equity Index, also shows little progress in measuring, managing and reducing greenhouse gas emissions in supply chains, known as scope 3.  In addition, the report shows that companies are seeking to take the simplest route by measuring the easiest to reach aspects of their supply chains, even when they know they are having a negligible impact. For example, nearly three quarters of the Global 500 companies measure emissions associated with business travel but this equates to just 0.2% of their overall reported scope 3 emissions.

So, the CDP report states: “This suggests that current scope 3 reporting does not reflect the full impact of companies’ activities, and may mislead as to the full carbon impact of a company.”

Perhaps of most interest in the report is the finding that companies still find it easier to quantify risks rather than opportunities. The report says that more than half of the respondents quantified at least one risk while only 41% were able to quantify at least one opportunity. It concludes: “Companies tend to focus on tangible risks in areas such as carbon taxes or energy prices, whereas the benefits from climate-related opportunities are often less tangible, such as changing consumer behavior”.

While 97 companies, such as Apple, Facebook and refused to take part in the survey, the report highlights those companies that lead the 500 corporations in terms of disclosure and driving performance improvements. The top 10 were BMW, Daimler, Philips Electronics, Nestle, BNY Mellon, Cisco Systems, Gas Natural SDG, Honda, Nissan, and Volkswagen.

New Trading Evolution for International Voluntary Carbon Market

Carbon Trade Exchange (CTX) and APX, Inc. (APX), leading voluntary carbon market service providers, have announced their new interface allowing market participants to post offers to sell fully verified, non-activated Verified Carbon Units (VCUs) on the CTX exchange platform via APX’s Environmental Management Account (EMA) and Verified Carbon Standard (VCS) registry. Upon execution of the trade, the non-activated VCUs will be activated and serialized, and instantaneously transferred to the purchaser.

This seamless connectivity to transact non-activated VCUs on a spot basis will allow project developers to list their verified, non-activated credits, with issuance fees electronically deducted simultaneously during the clearance, settlement, and VCU serialization process. This first-of-its-kind technology service provides the transacting parties with instantly delivered, fully issued credits, avoiding an issuance fee outlay until credits are transacted, at which time fees will automatically be deducted from the sale of proceeds.

Advantages of this service offering include increased liquidity, reduced costs to sellers, entry of new market participants, and enhanced project origination as developers attain a faster route to market, and buyers gain access to a broader selection of VCUs. As a result, CTX and APX anticipate a substantial uptake from projects originating VCS credits worldwide.

Wayne Sharpe, CEO of Carbon Trade Exchange, stated: “This exclusive technology is a direct response to market demand, and we are proud to share the credit and partner with APX in delivering innovative solutions for the global carbon markets.” Joe Varnas, CEO of APX, is proud of this deal too. “APX partnered with CTX to create a full service platform enabling market participants to manage and trade multiple environmental commodities with connectivity to multiple carbon registries”.

David Antonioli, CEO of VCS, also has spoken about this. “This new structure gives companies an enhanced platform to access credits from the more than a thousand VCS projects all around the world”.  “As with any growing market, innovation and flexibility are key to expansion, and it is tools just like these that will help market-based solutions continue to offer a practical way forward to the challenges presented by climate change.”

We really hope that this agreement was a great contribution for the fight against the climate change.


The carbon market and the German Elections

The celebration of federal elections in Germany the last Sunday is one step more to reach a final position on back-loading, the proposal to delay the auctioning of 900 million allowances under the EU’s Emissions Trading System (EU ETS), the EU’s flagship on climate policy. The current oversupply of allowances in the market is estimated at €2 billion and the EU seems to have finally tuned into the idea that the ETS cannot fix itself and that market intervention is needed. This oversupply has caused the drop of carbon prices.

The position of Germany is seen as crucial, since the country controls the most votes in the Council. Chancellor Angela Merkel’s conservative party has won Germany’s election with absolute majority and now she is going to start the hunt for a reliable coalition partner for a new government. A coalition with the centre-left Social Democrats (SPD) is seen as most likely, but she also wants to negotiate with The Greens.

Chancellor Angela Merkel’s centre-right party (CDU/CSU) has expressed cautious support for back-loading. She has said that although there was opposition to back-loading in Germany, the oversupply in the EU ETS has to be addressed to favor cleaner generation. But the CDU/CSU wants to slow the growth of renewable power.

The key opponent of the back-loading proposal was FDP party, the coalition partner of the governing CDU/CSU until now, but it has failed to reach the 5 percent hurdle to remain in the Bundestag. So, if there is a coalition between CDU/CSU and SPD or The Greens, it is very likely that Germany supports the back-loading measure. The SPD and Merkel’s CDU have also voiced support for raising the EU’s carbon reduction target for 2020 to 30%, up from the current 20%.

Now, we have to wait what EU member states decide. But one thing is clear: the EU ETS has to be fixed.

Rosa Brosé