The lack of government leadership toward reducing carbon dioxide emissions has left the responsibility for meaningful progress in the hands of business leaders. However, the average long-term emissions reduction target for the companies covered in the CDP report is just 1 percent per year -- below the 4 percent annual cuts needed to limit global warming, according to PwC.
“Even with progress year on year, the reality is the level of corporate and national ambition on emissions reduction is nowhere near what is required," said Malcom Preston, PwC's global lead for sustainability and climate change. "The new ‘normal’ for businesses is a period of high uncertainty, subdued growth and volatile commodity prices. If the regulatory certainty that tips significant long term investment decisions doesn’t come soon, businesses’ ability to plan and act, particularly around energy, supply chain and risk could be anything but ‘normal’.”
What defines a climate leader?
The reports being released this week included detailed information from 379 companies; although 405 businesses submitted data for the Carbon Disclosure Leadership Index (CDLI) some were too late for the PwC analysis. Among the factors considered for the disclosure rankings were scale of emissions reductions, and preparedness to respond to regulations.
The companies with the best climate leadership strategies tend to be those that take a long-term view more than 10 years into the future. CDP has created a separate index to recognize these companies called the Carbon Performance Leadership Index (CPLI). The companies that make it onto these lists are generally generating superior returns for investors.
"An investment in a basket of stocks of CPLI companies following the publication of CDP's global report each year since 2006 and rebalanced on any annual basis to reflect that year's CDLI would have generated total returns of 67.4 percent, more than double the 31.1 percent return of the Global 500," write the CDP report authors. "Moreover, past CPLI companies generated average total returns of 15.9 percent since 2010, more than double the 6.4 percent return of the Global 500."
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