Industry Leaders in Climate Action Generate Higher Return On Equity

Stock MarketA new report released by CDP on September 23 presents evidence that S&P 500 industry leaders that are actively managing and planning for climate change:

  • Generate Superior Profitability: 18% higher ROE (Return On Equity) than peers and 67% higher than companies who do not disclose on climate change;
  • Ensure More Stability: 50% lower volatility of earnings over the past decade than low-ranking peers; and
  • Grow Dividends to Shareholders: 21% stronger than low-ranking peers.

The report tracks industry-leaders over the last three years against their financial performance. The analysis revealed that those who lead on climate disclosure and performance have generated higher profitability (ROE).

The analysis demonstrates how these companies – some of the most profitable in the world – are planning for the future and protecting their profitability by taking action on climate change including:

  • Disclosing to CDP;
  • Setting ambitious greenhouse gas emissions reduction goals;
  • Putting in place strong governance and risk management of climate change; and
  • Using internal carbon pricing.

Each year, CDP ranks companies based on their climate-related disclosures to investors in two indices: the Climate Disclosure Leadership Index (CDLI) [1] – a measure of a company’s transparency; and the Climate Performance Leadership Index (CPLI) [2] – a measure based on that transparency of the company’s actions to address climate change.

This year’s report announces CDP’s 2014 CPLI and CDLI leaders from the S&P 500 (Listed in Full Below).

Top Companies in CDP’s 2014 Climate Performance Leadership Index

CDP’s 2014 Climate Performance Leadership Index

Top Companies in CDP’s 2014 Climate Disclosure Leadership Index

CDP’s 2014 Climate Disclosure Leadership Index

As CDP CEO Paul Simpson put it, “With this comprehensive analysis of S&P 500 companies, the market has new, compelling evidence of the link between industry leadership on climate change and corporate profitability. There is only upside for corporations acting in a prudent way to address the challenges of climate change – for which disclosure through CDP lays the foundation.”

For now, the market has not put a price premium on these leaders indicating that an investment opportunity may exist.

 

Check the following link to read/download the Full Report – “Climate Action and Profitability: CDP S&P 500 Climate Change Report 2014”:
https://www.cdp.net/CDPResults/CDP-SP500-leaders-report-2014.pdf

 

Source: CDP.

 

Notes:

[1]The Climate Performance Leadership Index (CPLI) marks companies that are implementing a robust climate strategy and approach to reducing emissions.

[2] The Climate Disclosure Leadership Index (CDLI) identifies companies that are the most climate transparent. The index comprises those that score within the top ten percent for the quality of the data they disclose.