-
Contacts
Carbon Disclosure ProjectPaul DickinsonChief Executive
Officer+44 (0) 20 7415 [email protected] Bowling
Green LaneLondonEC1R 0NEUnited Kingdomwww.cdproject.net
BVI Bundesverband Investmentund Asset Management e. V.Rudolf
SiebelManaging Director+49 69
[email protected] Anlage 2860318 Frankfurt
am MainGermanywww.bvi.de
Professor Dr. Alexander BassenUniversität Hamburg+49 40 42 838
[email protected] 920146
HamburgGermany
Bundesverband Investment und Asset Management e.V.Eschenheimer
Anlage 28 · 60318 Frankfurt am MainTelefon 0 69/15 40 90-0 ·
Telefax 0 69/5 9714 [email protected] · www.bvi.de
WWFMatthias KoppProjektleiter Finanz- und Energiesektor+49 30
3087 [email protected]ße Präsidentenstraße 1010178
BerlinGermanywww.wwf.de
-
Carbon Disclosure ProjectReport 2008GermanyOn behalf of 385
institutional investors with assets of 57 trillion US Dollars
CARBON DISCLOSURE PROJECT
-
The information included herein this report is based on that
provided in respondent submissions, which the authors and
publishersbelieve to be reliable, but the authors and publishers do
not guarantee its accuracy or completeness. The authors and
publishers makeno assurance, representation or warranty express or
implied, concerning the fairness, accuracy, or completeness of the
information andopinions contained herein. All opinions expressed
herein are based on the authors and publishers judgment at the time
of publishing thisreport and are subject to change without notice
due to economic, political, industry and firm-specific factors. The
report makes allattempts to adhere to the disclosure permission
requests of the individual company respondents. Comprehensive and
unedited informa-tion from the original submissions is available at
www.cdproject.net. The authors and publishers and their affiliated
companies, or theirrespective shareholders, directors, officers
and/or employees, may have a position in the securities discussed
herein. The securitiesmentioned in this document may not be
eligible for sale in some states or countries nor suitable for all
types of investors; their value andthe income they produce may
fluctuate and/or be adversely affected by exchange rates. The
contents of this report may be used by any-one providing
acknowledgment is given.
Report written by Prof. Dr. Alexander Bassen, University of
HamburgOctober 2008
-
© BVI Bundesverband Investmentund Asset Management e.V.
Eschenheimer Anlage 2860318 Frankfurt am MainTelefon 0 69/15 40
90-0Telefax 0 69/5 9714 [email protected]
Author: Prof. Dr. Alexander Bassen, University of Hamburg
Print and Design: Druck- und Verlagshaus Zarbock GmbH & Co.
KG, Frankfurt am Main
This brochure has been printed in a FSC certified company,using
a recycling paper consisting of 100 percent recovered paper.
ISBN 978-3-937790-25-1
Imprint
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ABRAPP – AssociaçãoBrasileira das EntidadesFechadas de
PrevidênciaComplementar Brazil
Aegon N.V. Netherlands
APG InvestmentsNetherlands
ASN Bank Netherlands
ATP Group Denmark
AXA Group France
Banco Real Brazil
BlackRock U.S.
BP Investment Management Limited United Kingdom
Caisse de dépôt et placementdu Québec Canada
Caisse des Dépôts France
California Public Employees’Retirement System U.S.
California State TeachersRetirement System U.S.
Calvert Group U.S.
Canada Pension PlanInvestment Board Canada
Catholic Super Australia
CIBC Canada
Ethos FoundationSwitzerland
Folksam Sweden
Fortis Investments Belgium
Generation InvestmentManagement United Kingdom
ING Netherlands
KLP Insurance Norway
Legg Mason, Inc. U.S.
Carbon DisclosureProject 2008This report and all of the public
responsesfrom corporations are available to down-load free of
charge fromwww.cdproject.net. The contents of this report may be
usedby anyone providing acknowledgement isgiven.
London Pensions FundAuthority United Kingdom
Merrill Lynch & Co.,Inc. U.S.
Mitsubishi UFJ FinancialGroup (MUFG) Japan
Morgan Stanley InvestmentManagement U.S.
Morley Fund ManagementUnited Kingdom
National Australia BankLimited Australia
Neuberger Berman U.S.
Newton InvestmentManagement LimitedUnited Kingdom
Pictet Asset Management SASwitzerland
Rabobank Netherlands
Robeco Netherlands
SAM Group Switzerland
Schroders United Kingdom
Signet Capital ManagementSwitzerland
Sompo Japan Insurance Inc.Japan
Standard Chartered PLCUnited Kingdom
Sun Life Financial Inc.Canada
Swiss Reinsurance CompanySwitzerland
The Ethical Funds CompanyCanada
The RBS Group United Kingdom
The Wellcome Trust United Kingdom
Zurich Cantonal BankSwitzerland
CARBON DISCLOSURE PROJECT
MEMBERS 2008
3
CDP Members 2008
-
BankInvest Denmark
Barclays Group United Kingdom
BayernInvest KapitalanlagegesellschaftmbH Germany
BBC Pension Trust Ltd United Kingdom
Beutel Goodman and Co. Ltd Canada
BlackRock U.S.
BMO Financial Group Canada
BNP Paribas Investment Partners France
Boston Common Asset Management, LLCU.S.
BP Investment Management Limited United Kingdom
Brasilprev Seguros e Previdência S/A.Brazil
British Coal Staff Superannuation SchemeUnited Kingdom
British Columbia Investment ManagementCorporation (bcIMC)
Canada
BT Financial Group Australia
BVI Bundesverband Investment und AssetManagement e.V.
Germany
CAAT Pension Plan Canada
Caisse de dépôt et placement du QuébecCanada
Caisse des Dépôts France
Caixa Beneficente dos Empregados daCompanhia Siderurgica
Nacional – CBSBrazil
Caixa de Previdência dos Funcionários doBanco do Nordeste do
Brasil (CAPEF)Brazil
Caixa Econômica Federal Brazil
Caixa Geral de Depósitos Portugal
California Public Employees’ RetirementSystem U.S.
California State Teachers RetirementSystem U.S.
California State Treasurer U.S.
Calvert Group U.S.
Canada Pension Plan Investment BoardCanada
Canadian Friends Service CommitteeCanada
CARE Super Pty Ltd Australia
Carlson Investment Management Sweden
Carmignac Gestion France
Catherine Donnelly Foundation Canada
Catholic Super Australia
CCLA Investment Management Ltd United Kingdom
Central Finance Board of the MethodistChurch United Kingdom
Ceres U.S.
CERES-Fundação de Seguridade SocialBrazil
Cheyne Capital Management (UK) LLPUnited Kingdom
China Investment Corporation China
CDP Signatories 2008385 investors (including the 41 germanbased
corporations as shown below inred) with assets of over 57 trillion
US dollars were signatories to the CDP6 infor-mation request dated
1st February 2008including:
AACHENER GRUNDVERMÖGENKapitalanlagegesellschaft mbH Germany
Abax Global Capital United Kingdom
Aberdeen Asset Managers United Kingdom
ABRAPP – Associação Brasileira dasEntidades Fechadas de
PrevidênciaComplementar Brazil
Acuity Funds Canada
Aegon N.V. Netherlands
Aeneas Capital Advisors U.S.
AGF Management Limited Canada
AIG Investments U.S.
Alberta Teachers Retirement Fund Canada
Alcyone Finance France
Allianz Group Germany
Altshuler Shacham LTD Israel
AMP Capital Investors Australia
AmpegaGerling Investment GmbHGermany
ANBID – National Association of BrazilianInvestment Banks
Brazil
APG Investments Netherlands
ASB Community Trust New Zealand
ASN Bank Netherlands
ATP Group Denmark
Australia and New Zealand Banking GroupLimited Australia
Australian Ethical Investment LimitedAustralia
Australian Reward Investment Alliance(ARIA) Australia
Aviva plc United Kingdom
AXA Group France
Baillie Gifford & Co. United Kingdom
Banco Sweden
Banco Bradesco S.A. Brazil
Banco do Brazil Brazil
Banco Itaú Holding Financeira Brazil
Banco Pine S.A. Brazil
Banco Real Brazil
Banco Santander, S.A. Spain
Banesprev – Fundo Banespa de SeguridadeSocial Brazil
Bank Sarasin & Co, Ltd Switzerland
Bank Vontobel Switzerland
Christian Super Australia
CI Mutual Funds’ Signature AdvisorsCanada
CIBC Canada
Citizens Advisers, Inc. U.S.
Clean Yield Group, Inc. U.S.
ClearBridge Advisors, Socially Aware Investment U.S.
Close Brothers Group plc United Kingdom
Colonial First State Global AssetManagement Australia
Columbia Management U.S.
Comité syndical national de retraiteBâtirente Canada
Commerzbank AG Germany
Companhia de Seguros Aliança do BrasilBrazil
Connecticut Retirement Plans and TrustFunds U.S.
Co-operative Financial Services (CFS)United Kingdom
Credit Agricole Asset Management France
Credit Suisse Switzerland
Daegu Bank South Korea
Daiwa Securities Group Inc. Japan
DEGI Deutsche Gesellschaft fürImmobilienfonds mbH Germany
Deka FundMaster InvestmentgesellschaftmbH Germany
Deka Investment GmbH Germany
DekaBank Deutsche Girozentrale Germany
Deutsche Bank Germany
Deutsche Postbank Privat Investment Kapitalanlagegesellschaft
mbH Germany
Development Bank of Japan Japan
Development Bank of the Philippines (DBP)Philippines
Dexia Asset Management France
DnB NOR Asset Management Norway
Domini Social Investments LLC U.S.
DPG Deutsche Performancemessungs-Gesellschaft für
Wertpapierportfolio mbhGermany
DWS Investment GmbH Germany
Economus Instituto de Seguridade SocialBrazil
ELETRA – Fundação Celg de Seguros ePrevidência Brazil
Environment Agency Active Pension fundUnited Kingdom
Epworth Investment ManagementUnited Kingdom
Erste Bank der Oesterreichischen Sparkassen AG Austria
Ethos Foundation Switzerland
Eureko B.V. Netherlands
Eurizon Capital SGR Italy
Evli Bank Plc Finland
4
Carbon Disclorsure Project 2008
-
Generation Investment ManagementUnited Kingdom
Genus Capital Management Canada
Gjensidige Forsikring Norway
GLG Partners LP United Kingdom
Goldman Sachs & Co. U.S.
Governance for Owners United Kingdom
Groupe Investissement Responsable Inc.Canada
Guardian Ethical Management Inc Canada
Guardians of New Zealand SuperannuationNew Zealand
Hang Seng Bank Hong Kong
Harrington Investments U.S.
Harvard Management Company U.S.
HANSAINVEST Hanseatische InvestmentGmbH Germany
Hazel Capital LLP United Kingdom
Health Super Fund Australia
Helaba Invest KapitalanlagegesellschaftmbH Germany
Henderson Global Investors United Kingdom
Hermes Investment ManagementUnited Kingdom
HESTA Super Australia
Hospitals of Ontario Pension Plan (HOOPP)Canada
Housing Development Finance CorporationLimited (HDFC Ltd.)
India
HSBC Holdings plc United Kingdom
I.B.I. Investments House Ltd. Israel
IDEAM – Integral Development AssetManagement France
Ilmarinen Mutual Pension InsuranceCompany Finland
Industrial Bank China
Industry Funds Management Australia
ING Netherlands
Inhance Investment Management IncCanada
Insight Investment Management (Global)Ltd United Kingdom
Instituto Infraero de Seguridade Social –INFRAPREV Brazil
Insurance Australia Group Australia
Interfaith Center on CorporateResponsibility U.S.
Internationale KapitalanlagegesellschaftmbH Germany
Investec Asset Management United Kingdom
Jarislowsky Fraser Limited Canada
JPMorgan Asset Management U.S.
Jupiter Asset Management United Kingdom
KAS Investment Servicing GmbH Germany
KBC Asset Management NV Belgium
F&C Management Ltd United Kingdom
FAELCE – Fundação Coelce de Seguridade Social Brazil
FAPERS – Fundação Assistencial ePrevidenciária da Extensão Rural
do RioGrande do Sul Brazil
FAPES – Fundação de Assistencia ePrevidencia Social do BNDES
Brazil
Fédéris Gestion d’Actifs France
First Affirmative Financial Network U.S.
First Swedish National Pension Fund (AP1)Sweden
FirstRand Ltd. South Africa
Fishman & Co. Israel
Five Oceans Asset Management PtyLimited Australia
Florida State Board of Administration (SBA)U.S.
Folksam Sweden
Fondaction Canada
Fonds de Réserve pour les Retraites – FRRFrance
Fortis Investments Belgium
Forward Funds/Sierra Club Funds U.S.
Fourth Swedish National Pension Fund(AP4) Sweden
Frankfurter Service Kapitalanlage-Gesellschaft mbH Germany
FRANKFURT-TRUST Investment Gesellschaft mbH Germany
Franklin Templeton Investment ServicesGmbH Germany
Frater Asset Management South Africa
Front Street Capital Canada
Fukoku Capital Management Inc Japan
FUNCEF – Fundação dos EconomiáriosFederais Brazil
Fundação AMPLA de Seguridade Social –Brasiletros Brazil
Fundação Atlântico de Seguridade SocialBrazil
Fundação Banrisul de Seguridade SocialBrazil
Fundação Codesc de Seguridade Social –FUSESC Brazil
Fundação Corsan – dos Funcionários daCompanhia Riograndense de
SaneamentoBrazil
Fundação São Francisco de SeguridadeSocial Brazil
Fundação Vale do Rio Doce de SeguridadeSocial – VALIA Brazil
FUNDIÁGUA – Fundação de Previdência daCompanhia de Saneamento e
Ambiental doDistrito Federal Brazil
Gartmore Investment Management LtdUnited Kingdom
GEAP Fundação de Seguridade SocialBrazil
Generali Investments DeutschlandKapitalanlagegesellschaft mbH
Germany
KCPS and Company Israel
KfW Bankengruppe Germany
KLP Insurance Norway
Kyobo Investment Trust Management Co.,Ltd. South Korea
La Banque Postale Asset ManagementFrance
LBBW – Landesbank Baden-WürttembergGermany
Legal & General Group plc United Kingdom
Legg Mason, Inc. U.S.
Libra Fund U.S.
Light Green Advisors, LLC U.S.
Living Planet Fund Management CompanyS.A. Switzerland
Local Authority Pension Fund ForumUnited Kingdom
Local Government Superannuation SchemeAustralia
Lombard Odier Darier Hentsch & CieSwitzerland
London Pensions Fund AuthorityUnited Kingdom
Macif Gestion France
Macquarie Group Limited Australia
Maine State Treasurer U.S.
Man Group plc United Kingdom
Maple-Brown Abbott Limited Australia
Maryland State Treasurer U.S.
MEAG MUNICH ERGO Asset ManagementGmbH Germany
MEAG MUNICH ERGOKapitalanlagegesellschaft mbH Germany
Meeschaert Gestion Privée France
Meiji Yasuda Life Insurance CompanyJapan
Merck Family Fund U.S.
Meritas Mutual Funds Canada
Merrill Lynch & Co.,Inc. U.S.
METZLER INVESTMENT GMBH Germany
Midas International Asset ManagementSouth Korea
Mirae Investment Asset ManagementSouth Korea
Mistra, Foundation for Strategic Environmental Research
Sweden
Mitsubishi UFJ Financial Group (MUFG)Japan
Mitsui Sumitomo Insurance Co.,Ltd. Japan
Mizuho Financial Group, Inc. Japan
Monega Kapitalanlagegesellschaft mbHGermany
Monte Paschi Asset Management SGRS.p.A Italy
Morgan Stanley Investment ManagementU.S.
Morley Fund Management United Kingdom
5
CDP Signatories 2008
-
Carbon Disclorsure Project 2008
6
Pension Fund for Danish Lawyers and Economists Denmark
Pension Plan of the Evangelical LutheranChurch in Canada
Canada
PETROS – The Fundação Petrobras deSeguridade Social Brazil
PGGM Netherlands
Phillips, Hager & North InvestmentManagement Ltd. Canada
PhiTrust Active Investors France
Pictet Asset Management SA Switzerland
Pioneer InvestmentsKapitalanlagegesellschaft mbH Germany
Portfolio 21 Investments U.S.
Portfolio Partners Australia
Porto Seguro S.A. Brazil
PREVI Caixa de Previdência dosFuncionários do Banco do Brasil
Brazil
Prudential Plc United Kingdom
PSP Investments Canada
QBE Insurance Group Limited Australia
Rabobank Netherlands
Railpen Investments United Kingdom
Rathbones/Rathbone GreenbankInvestments United Kingdom
Real Grandeza Fundação de Previdência eAssistência Social
Brazil
REDEPREV – Fundação Rede dePrevidência Brazil
RREEF Investment GmbH Germany
Rei Super Australia
Rhode Island General Treasurer U.S.
RLAM United Kingdom
Robeco Netherlands
Rock Crest Capital LLC U.S.
Royal Bank of Canada Canada
SAM Group Switzerland
Sanlam Investment Management South Africa
Santa Fé Portfolios Ltda Brazil
Sauren Finanzdienstleistungen Germany
Savings & Loans Credit Union (S.A.) LimitedAustralia
Schroders United Kingdom
Scotiabank Canada
Scottish Widows Investment PartnershipUnited Kingdom
SEB Asset Management AG Germany
Second Swedish National Pension Fund(AP2) Sweden
Seligson & Co Fund Management PlcFinland
SERPROS Fundo Multipatrocinado Brazil
Service Employees International Union Benefit Funds U.S.
Seventh Swedish National Pension Fund(AP7) Sweden
Motor Trades Association of AustraliaSuperannuation Fund Pty Ltd
Australia
Münchner Kapitalanlage AG Germany
Munich Re Group Germany
Natcan Investment Management Canada
Nathan Cummings Foundation U.S.
National Australia Bank Limited Australia
National Bank of Kuwait Kuwait
National Grid Electricity Group of theElectricity Supply Pension
Scheme United Kingdom
National Grid UK Pension Scheme TrusteeLtd United Kingdom
National Pensions Reserve Fund of IrelandIreland
Natixis France
Nedbank Group South Africa
Needmor Fund U.S.
Nest Sammelstiftung Switzerland
Neuberger Berman U.S.
New Alternatives Fund Inc. U.S.
New Jersey Division of Investment U.S.
New Jersey State Investment Council U.S.
New Mexico State Treasurer U.S.
New York City Employees RetirementSystem U.S.
New York City Teachers Retirement SystemU.S.
New York State Common Retirement Fund(NYSCRF) U.S.
Newton Investment Management LimitedUnited Kingdom
NFU Mutual Insurance Society United Kingdom
NH-CA Asset Management South Korea
Nikko Asset Management Co., Ltd. Japan
Nissay Asset Management CorporationJapan
Norfolk Pension Fund United Kingdom
Norinchukin Zenkyouren Asset Management Co., Ltd Japan
North Carolina State Treasurer U.S.
Northern Ireland Local GovernmentOfficers’ Superannuation
Committee(NILGOSC) United Kingdom
Northern Trust U.S.
Oddo & Cie France
Old Mutual plc United Kingdom
Ontario Municipal Employees RetirementSystem (OMERS) Canada
Ontario Teachers Pension Plan Canada
Opplysningsvesenets fond (The Norwegian Church
Endowment)Norway
Oregon State Treasurer U.S.
Orion Energy Systems, Inc. U.S.
Pax World Funds U.S.
SH Asset Management Inc. South Korea
Shinhan Bank South Korea
Shinkin Asset Management Co., Ltd Japan
Shinsei Bank Japan
Siemens Kapitalanlagegesellschaft mbHGermany
Signet Capital Management LtdSwitzerland
Skandia Nordic Division Sweden
SNS Asset Management Netherlands
Société Générale France
Sompo Japan Insurance Inc. Japan
SPF Beheer bv Netherlands
Standard Chartered PLC United Kingdom
Standard Life Investments United Kingdom
State Street Corporation U.S.
Storebrand ASA Norway
Sumitomo Mitsui Financial Group Japan
Sumitomo Trust & Banking Japan
Sun Life Financial Inc. Canada
Superfund Asset Management GmbHGermany
Sustainable World Capital U.S.
Svenska Kyrkan, Church of SwedenSweden
Swedbank Sweden
Swiss Reinsurance Company Switzerland
Swisscanto Holding AG Switzerland
TD Asset Management Inc. and TD AssetManagement USA Inc.
Canada
Teachers Insurance and Annuity Association – College Retirement
EquitiesFund (TIAA-CREF) U.S.
Telstra Super Australia
Tempis Capital Management South Korea
Terra fondsforvaltning ASA Norway
TfL Pension Fund United Kingdom
The Bullitt Foundation U.S.
The Central Church Fund of Finland Finland
The Collins Foundation U.S.
The Co-operators Group Ltd Canada
The Daly Foundation Canada
The Dreyfus Corporation U.S.
The Ethical Funds Company Canada
The Local Government Pensions Insitution (LGPI) (keva)
Finland
The RBS Group United Kingdom
The Russell Family Foundation U.S.
The Shiga Bank, Ltd. Japan
The Standard Bank of South Africa Limited South Africa
The Travelers Companies, Inc. U.S.
The United Church of Canada –General Council Canada
-
CDP Signatories 2008
7
The Wellcome Trust United Kingdom
Third Swedish National Pension Fund (AP3)Sweden
Threadneedle Asset ManagementUnited Kingdom
Tokio Marine & Nichido Fire Insurance Co., Ltd. Japan
Trillium Asset Management CorporationU.S.
Triodos Bank Netherlands
Tri-State Coalition for Responsible InvestingU.S.
TrygVesta Denmark
UBS AG Switzerland
Unibanco Asset Management Brazil
UniCredit Group Italy
Union Asset Management Holding AGGermany
Unitarian Universalist Association U.S.
United Methodist Church General Board ofPension and Health
Benefits U.S.
Universal-Investment-Gesellschaft mbHGermany
Universities Superannuation Scheme (USS)United Kingdom
Vancity Group of Companies Canada
Vårdal Foundation Sweden
VERITAS INVESTMENT TRUST GmbHGermany
Vermont State Treasurer U.S.
VicSuper Pty Ltd Australia
Victorian Funds Management CorporationAustralia
Visão Prev Sociedade de PrevidenciaComplementar Brazil
Wachovia Corporation U.S.
Walden Asset Management, a division ofBoston Trust and
Investment ManagementCompany U.S.
WARBURG-HENDERSONKapitalanlagegesellschaft für ImmobilienmbH
Germany
West Yorkshire Pension Fund United Kingdom
WestLB Mellon Asset Management (WMAM)Germany
Winslow Management Company U.S.
XShares Advisors U.S.
YES BANK Limited India
York University Pension Fund Canada
Youville Provident Fund Inc. Canada
Zurich Cantonal Bank Switzerland
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Mankind is currently facing huge challenges: climate change,
drastically increasingresource consumption worldwide and rapidly
rising resource and energy prices arethreatening the ecological and
economic foundations of our lives. In the case ofmajor global
problems, economic, ecological and social aspects have
becomeintrinsically linked. How we produce and how we manage our
natural resources hasbecome a crucial issue that affects the whole
of mankind. It is not only the state ofthe climate and environment,
but also the state of the financial markets that makeclear:
business as usual is not an option for the future.
At the same time, the need for change also brings with it major
opportunities forgrowth. We at the Federal Environment Ministry
have responded with the concept ofecological industrial policy.
Companies that take account of these megatrends in theirstrategies
avoid possible risks, make active use of new opportunities and
recognisetheir social responsibility. Corporate social
responsibility (CSR) is a key strategicinstrument for companies to
secure their competitiveness for the long term. Theactive
participation of a number of large companies in the carbon
disclosure project isproof that energy efficiency and climate
protection are no longer side issues on thefinancial markets!
Globalisation increases expectations regarding corporate
responsibility. The public,consumers and financial markets no
longer only ask how high company profits areand how companies use
their profits, they also ask how these profits are made.
I therefore wish you every success and broad participation in
your project.
Sigmar GabrielFederal Minister for the Environment, Nature
Conservation and Nuclear Safety
Foreword of the Federal Minister for the Environment, Nature
Conservation and Nuclear Safety,Sigmar Gabriel (MdB),
for the Third German Report of the “Carbon Disclosure Project
(CDP)”
9
-
Table of Contents
�
-
11
Table of Contents
CDP Signatories 2008 . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Foreword of the Federal Minister for the Environment, Nature
Conservation and Nuclear Safety, Sigmar Gabriel (MdB) . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . 9
1 Executive Summary
Executive Summary . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2 The Carbon Disclosure Project (CDP)
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
CDP in the future . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Improved access to CDP data via CORE . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 21
Partners to the CDP6 Report for Germany . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 22
3 Climate change from the perspective of auditors and investment
professionals
Climate change from the perspective of auditors – Interview with
the largest auditing companies . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 25
CO2 risks and valuation . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
28Introduction 28Valuation 28CO2 emissions as a value driver in
practical analysis 29Indicator approach: from CO2 intensity to CO2
risk 30Objectifiable, quantifiable indicators for review
31Market-based reviewing using multipliers 31Summary and outlook
31
4 Analysis of the answers of german companies in the CDP6
Responses 33Transparency 33Methodology 34
Company-specific risks and opportunities of climate change . . .
. . . . . . . . . . . . . . . 35Risks of climate change
35Regulatory risk 35Physical risk 35General risk 36Risk management
36Company-specific opportunities arising from climate change
37General opportunities 37Regulatory opportunities 38Physical
opportunities 38
Investments due to the consequences of climate change . . . . .
. . . . . . . . . . . . . . . . 39
GHG emissions reporting . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . 40Emissions
reporting in the CDP 40Scope and distribution of emissions
41Meeting targets 42Emissions intensity 43
Governance . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44Responsibility and individual performance 44Communication 45
Emissions – a value driver . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5 Appendix
CDP6 Questionnaire . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Response of the 200 largest companies in Germany . . . . . . . .
. . . . . . . . . . . . . . . . . 54
The most important trends from the other regional and
sector-based CDP reports . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 58
Key to abbreviations . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
-
1Executive SummaryThis year, the globally active
CarbonDisclosure Project (CDP) was carriedout in Germany for the
third time. Intotal 109, 55 percent of Germany’s200 largest
companies participated inthe project. These represent over
90percent of market capitalisation.
Overall, the companies’ reporting onthe significance of climate
change fortheir respective business modelsappears to be much
improved in com-parison with previous years.
�
-
Table 1: Climate trends of the year 2007/2008
Executive Summary
13
transport and logistics companies see thephysical risks as being
the most signifi-cant.
A level of standardisation can be recog-nised in the reporting
on greenhouse gas(GHG) emissions. 32 percent of the com-panies
already use the Greenhouse Gas(GHG) Protocol. The level of
transparencyregarding the companies’ own emissionshas also seen a
significant increase; justunder 60 percent of the companies
canquantify their emissions. There is, howev-er, considerable scope
for development indifferentiating according to type andregion.
There are particular deficienciesregarding emissions produced by
theadded value chain and product use. 49percent of the companies
use emissionstargets as a means of ensuring a reduc-tion in their
emissions. This reductionshould primarily be achieved through
anincrease in energy efficiency.
Although the risk was generally judged tobe similar to the
previous year’s results,risk is assessed very differently
accordingto industry sector and also variously pre-sented from
company to company. Fur-thermore, the regulatory risk is seen as
themost meaningful risk, while the physicalrisk is of equal
importance to insurancecompanies and transport and
logisticsbusinesses. However, 75 percent of com-panies indicate
that they have implement-ed a form of risk management. This
year,the companies once again viewed theopportunities presented by
climatechange as being greater than the risks.Opportunities are
generated by new prod-ucts, in particular those which aim to
saveenergy. Particularly financial servicesproviders and capital
goods producerssee a heavy bias towards opportunities asopposed to
risks. Energy providers, on theother hand, see a bias towards
regulatoryrisks rather than opportunities, while
Developments over thelast 12 months
Results
Scientific
Consequences (examples)
New research on the current statusof climate change
• Nasa Chief Climate Scientist James Hansen et al. use
newevaluation methods to reach the conclusion that climatechange
can only be held within tolerable boundaries ifglobal emissions
reduction targets of around 350ppm CO2in the atmosphere are adhered
to. Previously, research(IPCC 2007) had acted on the assumption of
stabilisationat around 450ppm CO2.Today, the concentration is
alreadyover 385ppm CO2
The limits for stabilisation (2015–2020) and global CO2emissions
reduction (50–85 percent by 2050 worldwide) for-mulated by the
Intergovernmental Panel on Climate Changeare too broad, orientation
towards maximum limits is neces-sary. The goal must be a CO2-free
society by the middle ofthe century and significant efforts to
lower emissions in theshort to medium-term by 2020
The UN Climate Change Confer-ence of December 2007 culminat-ed
in the “Bali Roadmap”
• By 2009 a treaty to succeed the Kyoto protocol is to
beratified on the basis of the fourth IPCC report, i. e. 450ppm
• Developing countries and the USA have joined thisprocess
• Transfer of technology and finance will play a far
moreexplicit and key role in this
• “Uncertainty over the future framework conditions” isreduced,
a global successor treaty to Kyoto is probable
• Global CO2 regulation is becoming likely
• New business opportunities will arise, financing modelsare
becoming relevant for private-sector stakeholders inaddition to
development banks
Global politics
A highly sophisticated model has devel-oped in relation to the
positive economiceffect of emissions. This effect varies to alarge
degree depending on the industry;naturally, energy providers,
transport, rawmaterials, consumables and supplies areparticularly
affected. However, this is alsodue to the fact that these companies
havesupplied insufficient information aboutemissions resulting from
the added valuechain and product use, meaning that ithas, so far,
not been possible to takethese risks into account.
The following table gives an overview ofimportant new
developments that haveinfluenced the discussion on climatechange
and examples of resulting conse-quences.
Australia ratifies Kyoto protocol • Australia becomes one of the
last industrialised countriesto accept the obligations outlined in
the Kyoto protocol
• CO2 regulation foreseeable
• Emission trading system discussed in Australia
• Product limitations announced, for example prohibition
ofconventional light bulbs from 2010
G8 summit in Japan agrees tohalve global greenhouse gas
emis-sions by 2050
• The G8 heads of government approve the Bali process
• G5 states agree on the most stringent reduction scenariosof
the IPCC report as a global guideline
• CO2 regulations are foreseeable
• Statements from the emerging countries (G5) indicate thatthey
will also introduce regulation
-
Developments over thelast 12 months
Results
Global politics
Consequences (examples)
EU energy and climate changepackage (EU package) approved
• Concrete reduction targets approved using 1990 as abasis: 20
percent unilateral reduction by 2020 and 30 per-cent by 2020
through multilateral activities
• This package introduces concrete building blocks forthese
targets to be reached in all economic areas
• European emission trading rules introduced for the
period2013–2020 within the scope of the EU package:
- Full auctioning of emissions certificates for the
electricitysector, in other sectors an increasing proportion of
auc-tioning
- Quota of permitted reduction certificates from CDM/JIprojects
significantly limited
- Air traffic integrated into emission trading from 2012
• Clear reduction targets, energy efficiency targets, renew-able
energy targets, supporting or demanding a clear inte-gration of CO2
costs or opportunities in reviews of activi-ties and giving
incentives for minimising CO2
• Political framework conditions for CO2-minimisingeconomies
begin to take shape
• Germany’s EU reduction target is 14 percent, German tar-get
for renewable energy is 18 percent by 2020
• Electricity producers will have to carry the actual costs
ofCO2 emissions and plan power plant investments with thisin
mind
• Emissions will become a real cost factor for airlines for
thefirst time, which will have an indirect impact on
aircraftmanufacturers and also, for example, on transport costs
Integrated climate and energypackage of the German
FederalGovernment (IKEP)
• Germany implements a climate target of 40 percent by2020 with
a concrete package of measures that addressesa comprehensive range
of economic areas
• CO2 is established as a driving force for political
measures,renewable energy and cogeneration (KWK Gesetz
(Cogen-eration Law), EEG Gesetz (Renewable Energies Law),
EE-Wärmegesetz (Renewable Energies Heating Law)), build-ings,
traffic etc. are addressed
• Many sectors are still exempt, however further steps in
thisdirection can be expected as the measures are
probablyinsufficient for reaching the target of 40 percent (CO2
auto-mobile tax, energy efficiency specifications for productsetc.
have been announced)
Key emerging countries announceclimate programmes or
actionplans
• South Africa, India, China and other countries announcedetails
of concrete national climate programmes and insti-tutionalise
them
• South Africa aims to achieve stabilisation by 2020,
Indiaorganises sector-specific measures and China establishesan
explicit climate programme
Although they have rather more the basic character of
adeclaration of intent, these announcements point to signifi-cant
changes in dynamics – for the first time, emergingcountries are
displaying their own initiative regarding regula-tion and drawing
up clear institutional methods for imple-mentation
European and German politics
Inclusion of air traffic in emissiontrading as of 2012
• Limitation at 97 percent of average emissions of2004–2006
• 15 percent of emissions certificates auctioned
• Airlines have to broaden their efforts to increase
efficiency(e.g. by also using biofuel), however it is difficult to
presentreductions with the current business model;
particularlycost-sensitive business models could be appropriate
• Increasing emissions growth tends to require follow-upsteps
(possibly kerosene tax etc.) – the new influencingfactors on the
business model should be taken intoaccount
Pan-European CO2 regulation forautomobiles with consumption
lev-els above the manufacturers’ fleetaverage is imminent (there
arealready fees for CO2 emissions, forexample France already has
apunitive tax on cars >160g/km,200 Euro – 2600 Euro
surcharge)
• Voluntary commitment not fulfilled in 2008, binding
regula-tion with set limits is to be introduced, 120 g CO2/km
isexpected from 2012 with special regulations
• CO2 is now a factor when drawing up business strategies(in
many cases as a reactive step)
• As a result, automobile manufacturers are striving to
intro-duce innovations, in particular electricity-powered
vehicles
• The sector’s inaction has led to political regulation
encom-passing labelling, advertising etc.
• Companies with unsuitable product strategies will
sufferfinancial difficulties (from sales slumps to large-scale
writ-ing off of unsuccessful innovations)
14
Carbon Disclorsure Project 2008
-
Developments over thelast 12 months
Results
Politics in the USA
Consequences (examples)
Both presidential candidates aregoing into the election
campaignwith climate programmes – USA’snational/international
position willchange
• McCain has set a targeted reduction of > 60 percent by2050,
Obama has a long-term reduction target of 80 per-cent by 2050
• Both candidates put forward a cap and trade emissiontrading
system
• CO2 regulation foreseeable within the scope of a cap andtrade
system
• Morgan Stanley/Citi/JP Morgan’s Carbon Principles com-mit them
to increased “due diligence” regarding invest-ment plans for energy
providers due to future CO2 restric-tions
USA – regional emission tradingsystem in development
regardlessof election result
• North-eastern states (Regional Greenhouse Gas Initiative)to
start in 2009
• California (to start in 2012)
• Forthcoming regulation via cap and trade system hasresulted,
for example, in banks adopting an alternative duediligence approach
and utility companies placing greateremphasis on CO2 issues
Carbon markets
Australia plans cap and trade sys-tem (to start in 2011):
New Zealand introduced tradingsystem in 2008
• Australia: the major features of an Australian emissiontrading
system were announced in June 2007
• New Zealand: began in 2008 (in the forestry sector) and
isbeing gradually expanded to cover fossil fuels (2009),
sta-tionary energy and industrial emissions (2010) and agricul-ture
(2013)
• A global pattern of regulation designed to limit quantities
isemerging
• Implications for the value of sectors and companies mustbe
reported using a wider range of methods
ICAP (International Climate ActionPartnership) between states
andfederal states agreed to establish aglobal carbon market
• ICAP has been set up as a platform for establishing globalCO2
markets by states and federal states of the EU, theUSA, Canada, New
Zealand and Norway
• Development of models for “linking regional markets”
• A globally acknowledged CO2 price would ensure the
inter-nalisation of CO2 costs and fair competition
• An effective global price for CO2 would compel companiesand
stakeholders to place the CO2 intensity of the busi-ness model at
the centre of their considerations
CDP Supply Chain Leadership Collaboration (SCLC) established
• Multinational enterprises attempt to increase the
CO2transparency of their added value and supply chain
• Increases the relevance of CO2 intensity as a success
factor
• The pressure to recognise CO2 intensities and
sourcesincreases, even for smaller companies, in the absence of
abinding CO2 standard
CO2 product labelling entered themarket across Europe
alongsidepractical developments to deter-mine product-related
greenhouseeffects (Product Carbon Footprints(PCF))
• Great Britain: second wave of new CO2 labelling on con-sumer
products as an information source, e.g. Tesco’slabel, split into 5
categories, is displayed on 20 differentproducts
• Germany: amongst other measures, a pilot project hasbeen
carried out by nine companies to find an agreedmethodology, BMU
(German Federal Ministry for the Envi-ronment) project for finding
a universal methodology
• France: various CO2 labelling schemes on products inchain
stores including Casino
• Switzerland: Migros provide labelling on own brands etc.
• CO2 emissions as a product performance indicator isbecoming
relevant across the entire added value chain,CO2 can become a
differentiating factor and allowsimproved availability of CO2
data
• Standardised methods are being discussed, companieshave a
basis on which to quantify PCFs
• Customers can recognise the environmental friendliness
ofproducts and use this in their buying behaviour
Company level
15
Executive Summary
Financial and capital market-driven activities
CalPERS (important US pensionfund) and others demand
bindingclimate risk reporting
In October 2007, US investor groups, NY Attorney GeneralCuomo
and California Public Employees’ Retirement System(CalPERS) called
on the US Securities and Exchange Com-mission to obligate listed
stock corporations to submit areport on climate-related risks
• Market participants demand the creation of an informationbasis
for a comprehensive company assessment: physicalemissions,
emissions management, climate risks (physical,regulatory,
reputation, operational and resulting risks)
• Companies have to prepare for the demands of internaland
external reporting
Financial analyses of the influenceof climate change on
businessmodels
• For example: industry studies on the effects of climatechange
on individual sectors by CA Cheuvreux and others
• Business models of entire industries face upheaval
• Capital allocation will also depend on CO2 in future
-
Developments over thelast 12 months
Results
Financial and capital market-driven activities
Consequences (examples)
BVI integrates CDP responsebehaviour of companies in sug-gested
voting behaviour at generalmeetings
• BVI offers service for its member companies in the case
ofnon-participation in the German CDP survey with regard tothe
voting behaviour or critical questioning at generalmeetings
• Investors have to use the best available instruments
tounderstand a company’s CO2 intensity
Increasingly climate-related prod-ucts/indices on the market
• Merrill Lynch, Société Générale, UBS and Barclays Capital,for
example, have floated commodity-linked indices asproducts (based on
Kyoto or EU ETS certificates)
• Fund products increasingly incorporate CO2 as a key factor
• Visibility of climate as an factor influencing investment
• The lack of a methodical and reporting basis for the
com-prehensive review of CO2 risks prevents effective integra-tion
into mainstream analysis and investment
Banks quantify the “footprints” oftheir portfolios and loan
books
• Individual financial institutions have examined their
stockportfolios for CO2 intensity, ASN Bank from the Nether-lands
is the first bank to publish these results – Individualbanks also
develop methods for assessing the CO2 inten-sity of credit
portfolios
• In future, companies will firstly be assessed in this
catego-ry and secondly subject to greater transparency demands–
Internally, these steps lead to an improved understandingof the
financial services providers regarding their own cli-mate risk;
integration in mainstream methods is a logicalnext step
In Great Britain, compulsory com-pany reporting is part of the
pro-posed Climate Change Bill
• British companies are facing compulsory CO2
reportingrequirements
• Availability of CO2 data, continuity and quality
shouldimprove, possibility of link with financial reporting
Reporting
16
Carbon Disclorsure Project 2008
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17
Executive Summary
-
�
Introduction: The CarbonDisclosure ProjectCDP’s mission is to
facilitate a dialoguebetween investors and corporations,supported
by high quality informationfrom which a rational response to
cli-mate change will emerge.
2
-
OverviewThe Carbon Disclosure Project is thelargest investor
coalition in the world:more than 385 signatory investors, witha
combined asset base of 57 trillion USdollars, signed CDP’s sixth
annualrequest for information in 2008 (CDP6)which was sent to over
3000 companiesworldwide.
The CDP annual information request issent to the Chair of the
Board of theworld’s largest companies by marketcapitalization. It
covers four principalareas:
1) Management’s views on the risks andopportunities that climate
changepresents to the business;
2) Greenhouse gas emissions accounting;
3) Management’s strategy to reduceemissions/minimize risk and
capital-ize on opportunity; and
4) Corporate governance with regard toclimate change.
The CDP6 information request can beviewed in the Appendix.
The responses from companies to CDP’sannual requests for
corporate data pro-vide investors with vital informationregarding
the current and prospectiveimpact of climate change on their
portfo-lios, and therefore represents an importantresource for
investment decisions. Thefact that CDP’s requests are made onbehalf
of investors serves to raise theawareness of senior management that
cli-mate change is a business issue thatrequires serious strategic
focus.
After eight years of consecutive growth,CDP currently runs
projects in more than20 countries, with new projects launchedin
China, Korea, Latin America, theNetherlands and Spain in 2008. CDP
hasalso entered into a key strategic relation-
NewZealand
Australia
Japan
HongKong
Korea
Indonesia
ItalyUSASpain
Mexico
Chile
Singapore
India
Brazil
Argentina
Switzerland
France
SwedenNorway
Canada
SouthAfrica
Germany
Finland
Iceland
UK
Malaysia
China
Taiwan
Netherlands
Denmark
Thailand
EuropeNorth America South AmericaAsiaAustralia Africa
Figure 1: CDP6 signatory location by region
8% 1%
7%
47%
27%
10%
Figure 2: The countries in which CDP currently runs projects
19
The Carbon Disclosure Project (CDP)
-
ments in the UK including the Foreign andCommonwealth Office and
the Office ofGovernment Commerce in HM Treasury tounderstand supply
chain emissions, risksand opportunities.
CDP acts as secretariat for the ClimateDisclosure Standards
Board (CDSB),which aims to promote and advance
cli-mate-change-related disclosure in main-stream reports through
the developmentof a global framework for corporatereporting on
climate change. This frame-work will elicit comprehensive,
consistentand comparable information for investors,as well as
offering greater certainty on dis-closure requirements for
corporations, andthereby provide an influential model foruse by
national regulators.
By working with information users, theiradvisors, regulators and
public interestgroups, as well as the four leadingaccountancy
majors and the associatedaccountancy bodies CDSB aims to sup-port,
harmonize and strengthen existingclimate-change-related reporting
initia-tives and standards. Rather than creatinga new standard, the
aim is to bring togeth-er and enhance current best practice inthe
form of a single consistent frameworkthat can be used for
disclosure in main-stream reports.
ship with Merrill Lynch and has appointedPricewaterhouseCoopers
as its globaladvisor. These associations will supportgrowth over
the next three years.
We are pleased to report that CDPreceived a record number of
companyresponses to its 2008 annual request –more than 1550 in
total. This demon-strates an increasing understanding by theworld’s
largest corporations of the impor-tance of climate change and its
relation tobusiness strategy and shareholder value.Analysis of this
year’s responses showsan advance in greenhouse gas
emissionsaccounting with scope 3, or indirect emis-sions reporting,
registering an increasesince 2007.
CDP is currently conducting furtherresearch into how investors
use CDP data in order to improve its under-standing of the
investment community’srequirements. The results to date
showsignatory investors using companyresponses to CDP in:
• Company engagement;
• Qualitative checking;
• Sell-side research;
• The filing of shareholder resolutions; and
• The creation of new products and indices.
This year more than 2,000 additional com-panies were brought
into CDP’s systemthrough the new CDP Supply Chain Proj-ect. More
than 30 companies, includingTesco, HP, Kellogg and Vodafone now
usethe CDP system to collect climate changerelevant data from their
suppliers. Thisrepresents a significant achievement bythe corporate
community, demonstratinghow collaboration is key to better
under-stand climate change and its impacts onprocurement.
Carbon disclosure has assumed height-ened importance on the
political agendaand the CDP process has received sup-port from
political leaders globally. Gov-ernment and public sector
organizationsalso understand the importance of meas-uring their own
carbon risks and emis-sions. More than 30 cities in the U.S.
arecurrently working together to reportthrough the CDP system, a
developmentthat will yield a much better understandingas to how
cities are preparing for the lowcarbon economy. CDP is also
workingwith central and local government depart-
Carbon Disclorsure Project 2008
20
-
The Carbon Disclosure Project (CDP)
21
“The Carbon Disclosure Projectis vital, and we’ve got to
geteverybody to participate in it.”
Bill Clintonformer U.S. President
“Before CDP we had no com-prehensive data on corporategreenhouse
gases. But withCDP, policy makers, investorsand companies
themselves cantake better informed decisions.”
Fredrik ReinfeldtSwedish Prime Minister
“The Carbon Disclosure Projectis independent and impartial, itis
a clear and transparent mech-anism for anyone to see our carbon
footprint and to judgeour performance at reducing it.”
Sir Terry LeahyChief Executive, Tesco plc
“The CDP supports AIG Invest-ments’ efforts to assess andanalyze
trends in risks andopportunities associated withclimate change and
its mitiga-tion. Climate change continuesto be a major financial
andinvestment concern for us andour clients.”
Win J NeugerChief Executive, AIG Investments
CDP in the future:• CDP is continuously working to
improve the quality and quantity ofreporting on climate change.
CDP isalso improving its online reporting sys-tem and providing
extensive guidanceon what should be measured andreported;
• CDP will refine its offering to investorsthrough the provision
of more bespokedata to service the requirements ofindividual
investment institutions. CDPis also working to expand the
availabili-ty of its information through profession-al data
distribution channels;
• CDP plans to continue its expansionaround the globe and aims
to launchprojects in Russia and other locationsin 2009;
• CDP has recently launched a new proj-ect, ‘CDP Finance’,
working with banksto better understand the opportunities,risks and
liabilities with relation to cli-mate change across their client
base,including the lending and private equityportfolios;
• CDP is also developing strategic rela-tionships with a range
of organizationsto further expand CDP’s work andreach in the
future;
• CDP is working towards a unified glob-al business response to
climate changeand through its associations withinvestors,
corporations, governmentsand the other key stakeholders,
willcontinue to help catalyze a sustainable,low carbon economy.
Improved access toCDP Data via COREIn September 2008 CDP
launched theCORE 2.0 database. CORE stands forCOrporate REsponses
and it is theenhanced access function for presenta-tion and
analysis of the CDP data, allow-ing all the CDP responses to be
searchedand sorted by index, geography, sector orCDP question. The
results are displayedon screen via a web interface and can
bedownloaded to Microsoft Excel.
CORE 2.0 is designed to enable the userto efficiently manipulate
the CDP data totheir requirements. The CORE 2.0 systemhas been
built utilizing feedback from oursignatory members in 2007.
For more information about CORE 2.0please see www.cdproject.net
or contactDaniel Turner at the CDP London
office:[email protected]
-
Partners to the CDP 6Report for Germany The partners to the CDP6
report for Ger-many are BVI Bundesverband Investmentund Asset
Management e.V. and the WorldWide Fund For Nature (WWF). The
authorof the report is Professor AlexanderBassen.
The BVI represents the interests of 89companies, which are
active in assetmanagement. Our members manage over1.6 trillion Euro
in investment funds anddiscretionary portfolios on behalf of
morethan 15 million private and institutionalinvestors. 45 BVI
members support theCDP directly as “Signatory Investors”.
The WWF is one of the world’s largestconservation organisations.
It has sup-ported the work of the CDP in compellingcapital markets
and companies toimprove transparency on man-made cli-mate change
globally since 2001 and inGermany since 2006.
The BVI and the WWF support the CDP inorder to increasingly
ensure the consider-ation of the effects of climate change onthe
economic situation of listed compa-nies and the German economy as a
wholein investment research. Holistic analysis ofthe opportunities
and risks presented byclimate change must be engaged in bycompanies
of all sectors and should notbe limited to obvious emitters of
green-house gases. Improved transparencyaccelerates the necessary
systematicintegration of climate risks in investmentdecisions on
the part of investors.
Prof. Alexander Bassen, University ofHamburg, Chair for
Management andCapital Markets, is the author of the CDP6Report for
Germany. Prof. Bassenresearches, teaches and consults on theeffect
of corporate governance, corporateresponsibility, climate change
and investorrelations on the capital market.
“CDP is one of the most valuable tools we have to helpus
evaluate climate risk acrossour whole portfolio.”
Brian RiceInvestment Officer, CalSTRS
“The Carbon Disclosure Projectis an excellent tool for
increasingthe exchange of climate infor-mation between companies
andtheir institutional investors.”
Bendt BendtsenDanish Minister for Economic and Business
Affairs
“The specialist focus of the Carbon Disclosure Project provides
a suitably rigorousstructure for an overview of acompany’s response
to climatechange, and the survey templateis a very helpful
managementtool for us to assess climate-related risks and
opportunities inour own business. It also allowsus to benchmark our
practicesagainst peers.”
Sir Tom McKillopChairman, Royal Bank of Scotland Group
Carbon Disclorsure Project 2008
22
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Das Carbon Disclosure Projekt (CDP)
23
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�
Climate Changefrom the Perspec-tive of Auditorsand
InvestmentProfessionals
3
-
René Bräunig (KPMG)
Michael Werner (PwC)
Gerd Lützeler (Ernst & Young)
Joachim Ganse (Deloitte)
Climate Change fromthe Perspective ofAuditors – Interviewwith
the largest Audit-ing Companies
1. Authorities have particularly beeninterested in a
standardization and reg-ulation of the GHG emissions
reporting.Based on your experience, what do youthink about the
latest development ofGHG emission reporting and the rele-vance for
the financial reporting of acompany?
Joachim Ganse:
The European-wide, operative minimumstandard “EU Monitoring
guidelines” existfor the European Emission Trading System(EU-ETS)
and is realised in 27 EU-coun-tries in line with the specific
national con-ditions. The general approach in Europe issimilar;
however, there are certain nationalvariations and deviations in
realisation. Sofar, the Kyoto Protocol mechanisms CleanDevelopment
Mechanism (CDM) and JointImplementation (JI) were considerably
lessregulated than the European emissiontrading within the EU-ETS.
More and moreproblems regarding the quality of theprocesses but
also the stringency of theaudits by the auditors and
authoritieswere identified. This led, as from May2008 to a massive
rise in regulation, whichpartially exceeds the level of EU-ETS.
Greenhouse gas emissions e. g. the finan-cial value of acquired
or saleable emissioncertificates is directly disclosed in form ofa
balance sheet item. So, the certificatesare part of the current
assets or liabilities.Further, they must be taken into accountwhen
reporting the balance sheet risk,which bases on the uncertainty of
the cer-tificate origin and is reflected as operativerisk.
Gerd Lützeler:
In our field of expertise we see a range ofassurance statements,
which not alwayscover the proper subjects or information.Best
practices or minimum requirementscould help to address short
comes.
Michael Werner:
From our experience with auditing greenhouse gas (GHG) data, we
see at timesconsiderable potential for improvement inthe collection
and reporting of GHG data.For this reason, GHG data often may inour
opinion lack credibility if there is noexternal audit.
Given the scope for interpretation withinthe framework of
currently applied meth-ods, a comparison of GHG data from
dif-ferent companies is very difficult. Compa-nies can currently
choose between arange of boundaries: e. g. a control vs. anequity
approach, measuring CO2 emis-sions vs. GHG emissions as a
whole,including or excluding upstream activities.Moreover, they are
given a lot of freedomin choosing the accuracy of measure-ments and
calculation principles for GHGemissions, as well as underlying
emis-sions factors As a result, direct compari-son between two
companies is not alwaysmeaningful.
The communication of data on green-house gas emissions by
companies hasincreasing implications on their evaluationby the
financial market. This is com-pounded by the introduction of the
Emis-sions Trading Scheme (ETS) within the EUand its planned
extension to cover othersectors, as well as the increased
attentionthat the general public pays to in climatechange.
Moreover, GHG emissions areincreasingly being published in
companymanagement reports, resulting in a trendtowards a heightened
significance of suchdata.
René Bräunig:
Up to now there has been no standard forthe reporting of
GHG-related data whichleads to variances in the completenessand
accuracy of GHG data reporteddepending on the approach adopted.This
can result in, for example, inconsis-tent valuations as a result of
differenttreatment with respect to the scope of theentities under
review (e. g. subsidiaries,sites without production). There could
alsobe varying approaches regarding thesources and types of
emissions to be con-sidered during the determination of therelevant
GHG emissions as well as withrespect to the degree of consideration
ofindirect emissions. In addition, in terms ofthe accuracy of GHG
emissions, therealso exists the risk of differing methods of
25
Climate Change from the Perspective of Auditors and Investment
Professionals
-
Carbon Disclorsure Project 2008
data evaluation. As a result the emissionsthemselves could be
determined different-ly (measurement, calculation, estimate) orthe
calculation of the CO2 equivalentscould be based on different
conversionfactors.
The above described problems, which canarise from the lack of a
uniformly appliedstandard, can also have consequences forthe
financial reporting of a company. Hav-ing said that, with regard to
the emissiontrading, which in Germany accounts forapproximately 50
percent of GHG emis-sions, there are partially already
Europeanstandards regarding CO2 emissions.
2. Do you think that the current practiceof the GHG reporting
covers the specif-ic risk? Please, specify a potentialimprovement
within the reportingscheme.
Joachim Ganse:
Improvement opportunities arise in partic-ular with respect to
the compliance withaccuracy requirements when determininggreenhouse
gas emissions. Also the miss-ing operative practice of new rules
andsometimes also history-based oppositionin the companies are
obvious, which mustbe appropriately addressed.
Still a lot of the greenhouse gas emissionauditors have a too
low level of formationand experience. While almost all auditorshad
a technical formation, the fiscalknowledge is often missing. On the
otherhand, a similar situation is given at theresponsible persons
on the customer side,as these often also origin from the opera-tive
technical management. Regarding theKyoto mechanisms CDM/JI, this
signifi-cant weakness is currently approached bymassive
standardisation efforts of theUnited Nations.
Gerd Lützeler:
Please, specify a potential improvementwithin the reporting
scheme. According tothe accreditation rules for EA 6-03, ILAC 4and
ISO 17020 a risk assessment has tobe made by the verification body.
Thisassessment however can be set up by theverification body
itself. Guidelines or atemplate could help to assure that all
riskshave been addressed.
Michael Werner:
We see two types of GHG-related risks:on the one hand, risks
resulting from theimpending climate change ( e. g. high-water,
droughts) (risk type 1) and on theother hand risks resulting from
(future)regulations or changes in demand (risktype 2).
In our experience, type 1 risks (directeffects of climate
change) are only seldomraised as central topics by companies –but
reporting of GHG emissions is only oflimited use for assessing
these risks.
An analysis of type 2 risks requires notonly GHG emissions but
also other infor-mation on a company’s business activi-ties. With
the exception of ETS compa-nies, such indirect risks are difficult
toquantify in our opinion. A potential forimprovement with regard
to type 2 risksexists in particular in an improvement inthe
comparability of GHG data (cf. answerquestion 1) and the
development of gen-erally accepted models for risk analysis.
René Bräunig:
As mentioned above, the application ofinconsistent standards and
the use of dif-fering criteria during the evaluation ofGHG
emissions can potentially result inunclear and inconsistent
reporting. Thesetting of binding standards would there-fore be a
positive step in the right direc-tion. In any case, the standards
and crite-ria used should be disclosed as part of thereporting to
ensure comparability withother companies.
3. Which requirements (e. g. compara-bility, standardization,
integration to thefinancial reporting, materiality) do youthink
provide a proper reporting of GHGemissions?
Joachim Ganse:
The future requirements shall clearly focuson a stronger linking
of the technical andfinancial spheres. The auditors shall notonly
handle the technical level but alsoassess the fiscal effects.
Therefore, expe-rience and expertise on the field of green-house
gas relevant investment analyses,the respective accounting of
greenhousegas emissions and their derivatives as well
as knowledge on financial risk manage-ment processes are
indispensable for theauditors (also the accountants).
Concerned companies shall include thegreenhouse gas risk in
their financial man-agement. The experience shows that thishas so
far hardly done. In addition, theauditors should be personally
qualifiedand responsible, so that no qualitativeprotection is given
over a parent company,in order to reduce the latent risk of
qualityprocrastination.
The minimum requirement put on thequalification of the
responsible auditorshould be the experience of at least
20greenhouse gas audit projects. Otherwiseexperience shows that a
good work can-not be guaranteed. The very high com-plexity of
emission audits shows that ahuge operative range of experience
isnecessary. Finally, the standardisation ofthe audit procedures
should be made ineach case through all involved parties, i.
e.through the inclusion of customers, audi-tors and authorities.
Otherwise we wouldhave objections regarding too excessiveinfluences
of the authorities, which wouldput into question the legal
independencyof the audit procedures.
Gerd Lützeler:
To our opinion materiality, comparabilityand standardisation
would surely help tointegrate GHG emissions in a financialreport.
In fact we see integration of sus-tainability reports (approved
according toISAE 3000 and GRI) integrated in financialreports.
Since GHG information is part ofa normal sustainability report
integrationof activities is taking place already.
Michael Werner:
In view of the increasing relevance of theemission data for the
financial market,GHG reporting is increasingly required tomeet the
financial market’s requirements:
• Reliable systems (integrated, automated,reliable IT solutions
instead of spread-sheet analyses with numerous manualinputs) that
can supply valid data
• Clearly defined processes (controls,approval procedures,
documentation)
• A defined organisational structure withclear role descriptions
and responsibili-ties.
26
-
Climate Change from the Perspective of Auditors and Investment
Professionals
René Bräunig (KPMG):
Essential with regard to the reporting ofGHG emissions are the
principles of com-pleteness and accuracy. To illustrate this,if for
example in the case of two alumini-um producers one included the
emissionsgenerated by the external electricity sup-plier in its
calculation of GHG emissionsand the other did not, then the two
wouldnot be comparable. Also the use of differ-ent emission factors
would reduce thecomparability.
In order to avoid such inconsistencies inreporting, whilst at
the same time,enhancing the comparability of availabledata, we
recommend a standardisation ofrelevant criteria.
The same applies to the so called corner-stones of reporting,
namely “Integration inFinancial Reporting” and “Materiality”.
4. What are the main issues of GHGreporting?
Joachim Ganse:
The extreme complexity requires profes-sional knowledge.
Currently, the existingknow-how in economy is still too low or ofan
unfavourable structure. The assess-ment of measurement
uncertainties ofmeasurement devices and calculationresults,
required in emission trading, wasso far unusual in practice. So,
not only thesole balancing leads to a result, but alsothe
consideration of the error propagation.
The executing authorities try a one-sidedlaw-making although
they are constitu-tionally not responsible for this. Reasonsfor
this are the sometimes rather impre-cise or also missing rules,
providing ahuge area of discretion.
Regarding the CDM/JI projects, the publicliability of the UNO
authority is missing.Substantial remedies against
authoritativedecisions and a too slow working mannerare not
possible or international legislationis applied, respectively.
Gerd Lützeler:
Information on the amount of CO2 emis-sions is missing, accuracy
and findingsare not always reported. It is not always
27
transparent what has been reviewed andwhat improvements could be
made.
Michael Werner:
The greatest problem and source of errorsin reporting GHG
emissions are mostly thelack of processes and inadequate
organi-zation in the systematic collection of data:The emission
data must be collected,checked and approved by a
standardizedprocess throughout the complete compa-ny. A
comprehensible documentation ofdata and processes is a mandatory
taskfrom an auditor’s point of view.
To date, GHG data is often still gatheredusing a collection of
spreadsheet analy-ses. Special software packages that alsocover the
usual adequacy requirementsare slowly starting to be used.
Incomplete/Missing data and inadequatedata precision influence
the quality ofemission reporting and may impair thecredibility of
the company in the eyes ofstakeholders.
Differing methods of collection of emis-sion data as well as a
heterogeneous databasis make comparability of companyinformation
more difficult (see answer toquestion 1).
René Bräunig:
We refer to the points made above.
5. Do industrial differences exist in thereporting of emissions?
Have youalready anticipated these differenceswithin sectors? How do
you takeregional and industrial differences intoaccount? From your
point of view is theannouncement of operational risksrelated to
climate change a generalobligation of companies or just an
obli-gation of specific industries? In whatway do you expect a
monetary quantifi-cation of the risks due to climatechange and the
consequences withinthe external and internal
financialreporting?
Joachim Ganse:
In European emission trading (EU-ETS)exist only slight
differences between the
industries. However, it can be stated thatthe energy industry
has the biggest finan-cial impact, as it sets the CO2 price andalso
directly the energy price.
Regarding CDM/JI, a considerable diversi-fication of the
specific risks can beobserved, depending on the project typeand the
experience of the auditors. This isreflected in the wide range of
results aswell as in the relatively high refusal rate ofproject
activities through the UN.
This is a general duty without any excep-tion. The topic is the
linking of the finan-cial markets with the carbon market –therefore
the same quality requirementsshall apply for both market
sectors.
We anticipate a full integration of thegreenhouse gas risk
management in theusual risk management.
One basic idea is the following: the CO2certificates overtake
the function ofmoney as universal exchange mean forthe markets
carbon and energy efficiency.For the financial management they can
becontrolled as a foreign currency might be,under maximum
application of the existingfinancial reporting and risk
management.
Gerd Lützeler:
Monetary quantification will help toaddress business risks. Our
expectation isthat this part will need and get more atten-tion and
therefore knowledge is neededon this level to support companies
withthe financial consequences.
Michael Werner:
Sector-related differentiation is of majorimportance due to the
different GHG-related risks for individual sectors. Of par-ticular
importance is a differentiation ofemissions that are covered by ETS
andthose that are not
General climate change risks (type 1 – seeanswer to question 2)
can be isolatedfrom the GHG emissions of the companybecause of
their global nature. For thisreason, we regard the naming of risks
inthis area as separate from the reporting ofGHG emissions.
A monetary quantification of GHG emis-sions in the case of ETS
companies canbe made using the EUA market price. Asfar as other
companies (not subject toETS) are concerned, we expect a
quantifi-
-
In these cases the balance sheet value ofthe assets collapses
and write-downs onaccount of insufficient project quality leadto a
failure of the investment projects.
Gerd Lützeler:
Apparently self-regulation gives too muchroom for
interpretation. Since the EU ETSis one European legislation equally
imple-mented (or should be implemented equal-ly) the approach on
verification should beequal as well to achieve equal
competi-tion.
Michael Werner:
There are adequate provisions for ETSemissions in the monitoring
guidelines ofthe EU Commission and the further guide-lines on
national level. Nevertheless, wesee the definite need for clear
guidelinesfor non-ETS companies and emissionsources, to allow a
valid external analysisof THG data as well as benchmarking
ofdifferent companies. Such guidelines neednot be set forth by the
legislator. Guidingprinciples and standards from
associationinitiatives (corresponding to numerousguidelines
regarding accounting) shouldbe adequate in our opinion.
René Bräunig:
Legislative standards for sections of theGHG emissions can be
expected in thefuture and already partially exist ( e. g.
EUEmission Trading Directive). Whether themarket will introduce
self-regulation inconjunction with the standardisation ofGHG
emissions will primarily depend onwhether investors in the future
base theirinvestment decisions on GHG emissionsreporting and hence
demand such regula-tion. Another factor is the extent to
whichcompanies themselves consider they canbenefit from their
environmental stanceand provide evidence of this through
theapplication and disclosure of such gener-ally accepted
standards. Such a develop-ment is likely to vary from sector to
sector.
cation of GHG reduction targets, e. g.using own reduction
measures (that comeat a price), purchase of “green” electricityor
purchase of voluntary emission reduc-tion certificates.
René Bräunig:
In general, with regard to the reporting ofGHG emissions, we
would recommenddistinguishing between industry sectors,as emissions
can vary significantly acrosssuch groups. For example, the
energyconsumption and the CO2 emissions ofthe previously mentioned
aluminium pro-ducers constitute significant economic aswell as
ecologic issues. In contrast, theseissues would normally be rather
negligiblefor retail companies, with the exception offood retailers
(i. e. cold chain).
In our view, a quantification of risks asso-ciated with the
internal and externalreporting of GHG emissions is in general
asensible idea. This would require, howev-er, a clear definition of
the valuation stan-dards to be applied.
6. Do you think a standard set by anauthority is necessary or do
you ratherbelieve in self-regulative capabilities ofthe market?
Joachim Ganse:
Operative standards do already exist andare currently tightened.
Meanwhile a gapstill exists in the ruled linking between
theoperative and the financial risk manage-ment world. This will be
a field of moremature discussions in the next years andmight result
in respective regulations.
A regulation over the market takes alreadyplace in markets,
whose main business isthe carbon market: e. g. financial
institu-tions, which require solvency and riskadditions for certain
projects/emissioncertificates and project developers. So, anumber
of insolvencies can be currentlyobserved amongst CDM/JI project
devel-opment companies and portfolio houses.
Carbon Disclorsure Project 2008
28
CO2 Risks and Valuation1
Introduction
A major goal of the Carbon DisclosureProject is to ensure
transparency regard-ing the opportunities and risks presentedby
companies’ own GHG emissions. Thisshould allow investors to take
this infor-mation into account when making invest-ment decisions.
However, the interfacebetween information preparation
andinformation use has still to be clearlydefined. This section
therefore introducesthe various approaches and methods
forincorporating CO2 risks into the companyreview for the purposes
of the capital mar-ket. Alongside theoretical considerations,the
spotlight falls on how the variousmodels are presented by
investmenthouse analysts. In particular, the analysesof Bernstein,
CA Cheuvreux, Citigroup,Goldman Sachs, JP Morgan, Merrill Lynchand
Société Générale are referred to here.The evaluation results of the
analyses aresummarised later.
Valuation
Capital market-orientated valuation helpsto determine the fair
value of a company.The idea of this valuation procedure is
todiscount future cash flows of a companyusing a risk-adjusted
adequate discountrate. Theoretical capital market modelsare
typically used to determine this risk-adjusted discount rate. The
Capital AssetPricing Model (CAPM) is used for this pur-pose. This
equilibrium model determines afair remuneration for taking on risks
on thecapital market and derives the equity cap-ital costs of a
company.
Investment banks review companies usingso-called Discounted Cash
Flow models(DCF). The Weighted Average Cost ofCapital (WACC)
method, which is com-monly used internationally for
valuation,capitalises the cash flows of a companyusing a weighted
interest rate that takesinto account the capital structure,
taxeffects, capital costs for debt and theopportunity costs
affecting shareholders’equity.2 In addition to the reason and
pur-
1 By Prof. Alexander Bassen (University of Hamburg)/Dr. Hendrik
Gartz (head of the DVFA Committee Non-Financials)/Sebastian Rothe
(University of Hamburg)/Felix Schnella (head of the DVFA Committee
Non-Financials).
2 See Koller, T./Goedhart, M./Wessels, D.: Valuation – Measuring
and Managing the Value of Companies, 4th edition, New Jersey 2005,
p. 106.
-
Climate Change from the Perspective of Auditors and Investment
Professionals
29
pose for the calculation, the industry-spe-cific features must
be taken into accountin order to determine a fair
companyvalue.3
CO2 emission trading represents a theo-retical and practical
challenge for deter-mining the risks to the company valuearising
from CO2 emissions within theframework of capital market theory
andintegrating this into the review process.This affects the entire
added value chainof a company as well as its direct
CO2emissions.
CO2 Emissions as a Value Driver inPractical Analysis
The shareholder value approach highlight-ed by RAPPAPORT (1999)
identifies thecompany-specific value drivers4 for deter-mining the
economic value of a company,which play a key role in determining
thecompany value. The strengths of individ-ual value drivers exert
a direct influenceon the cash flow of a company and there-fore
require in-depth analysis.5 The dia-gram (Figure 3) shows a simple
value driv-er structure with a direct effect on theprofit and loss
accounts of a company.Empirical studies come to the conclusionthat
taxes, interest costs, overheads andrevenue are the parameters that
influencecompany value to the greatest degree.
The potential for increasing a company’svalue is determined by
growth and theReturn on Invested Capital (ROIC). Thelatter is
derived from quotients of NetOperating Profit Less Adjusted
Taxes(NOPLAT) and invested capital. As long asthe total of the
growth rate and the ROICexceeds the company’s cost of capital,added
value is created. The extent of theROIC is mainly dependent on the
size ofthe “revenue”, “costs” and invested “capi-tal”. From the
perspective of valuation,CO2 emissions influence the value
drivers“revenue” and “costs” and thus have alasting impact on the
financial perform-ance and the company value. Alongsidethis
influence on the success of a compa-ny, the DCF model allows the
influence onthe discounting factor to be identified. A
heightened risk arising from GHG emis-sions increases the beta
coefficient7 andthe company value falls.
However, the influence is not merely limit-ed to producers which
release emissionsduring the course of the productionprocess:
growing costs for energy, rawmaterials and for implementing new
tech-nologies result in a so-called “downsiderisk”. Looking at the
“revenue” value driv-er from the above diagram, we can drawthe
conclusion that – depending on theprice elasticity of a commodity –
anincrease in CO2 costs can only be partiallypassed on to
customers, if at all. The price
and quantity structure of the company tobe reviewed should be
analysed individu-ally. In addition, the “operating profit mar-gin”
of a company falls if, all other thingsbeing equal, cost increases
relating toCO2 regulation cannot be fully passed onto the
customers.
If a company does not have enough emis-sions certificates, this
can be compensat-ed for by purchasing emissions rights onthe
market. This brings about a price andvolume risk, as emissions
certificates aretraded on the stock exchange and pricestherefore
vary over time. Alongside theguideline for emissions reduction
targets,the price of emissions rights certificates isinfluenced by
other factors. In detail,these are the allocative mechanism,
the
Figure 3: Value Drivers affecting Profit and Loss Accounts6
Value
Growth
ROIC* Cost
Capital
Revenue
* ROIC – Return on Invested Capital
3 See Drukarczyk, J.: Unternehmensbewertung, Munich 2003, p.
129.
4 RAPPAPORT lists the following value drivers: revenue growth
rate, operating profit margins, profits tax rate, capital
expenditure on current assets, capital expendi-ture on fixed
assets, cost of capital and length of forecast period.
5 See Akalu, M: Measuring and Ranking Value Drivers: A
Shareholder Value Perspective, Working Paper, Rotterdam 2005, p.
1.
6 See Koller, T./Goedhart, M./Wessels, D.: Valuation – Measuring
and Managing the Value of Companies, 4th edition, New Jersey 2005,
p. 424.
7 The beta coefficient of a company reflects the business risk
in relation to the market risk.
-
ed CO2 intensity is then converted into amaximum revenue-related
CO2 risk. In theprocess, the product is formed from theCO2
intensity and the certificate price.
Corresponding assumptions are made forthe price trend of the
emissions certifi-cates. For phase III, i. e. for the EU
certifi-cate trading period from 2013 to 2020, theEuropean
Commission favours the fullauctioning of emissions rights for
electrici-ty producers. Experts forecast that CO2certificates will
be traded in the pricerange from 20 Euro to 65 Euro in thephase
after 2012.
Furthermore, freely allocated certificatesor reduction
obligations must be takeninto account. These results are
thenapplied to the company’s EBITDA mar-gin.15 This results in an
EBITDA-relatedCO2 risk. Finally, the ability to pass oncosts
resulting from the CO2 obligations tocustomers or suppliers is
examined. This“cost-shifting” depends on the marketposition of the
respective company, thelegal framework conditions and price
sen-sitivities. If all CO2 emissions costs thatarise within the
added value chain can bepassed on to customers, the prices riseby
the same percentage value.
The following calculation clarifies the pro-cedure described
using energy suppliersas an example.16 In the following, the
cal-culated CO2 intensity of European energysuppliers is 5,431g CO2
per Euro revenue(or in tonnes per Euro, 0.005431).17 The
Carbon Disclorsure Project 2008
30
market rules of the CO2 market, the trad-able quantity of
emissions certificates, thenumber of Clean Development or
JointImplementation projects, fuel prices andgeneral economic
growth and technologi-cal progress.8 The following table 2
con-trasts examples of positive and negativedrivers of the price of
CO2:9
Emissions regulation does not necessarilyhave negative effects
on profits and com-pany values. Positive effects result
frominnovations, participation in the develop-ment of new markets
and the ability topass on costs arising from emissions reg-ulation
to customers, for example.
Indicator approach: From CO2 Intensityto CO2 Risk
One approach for integrating the risk fromdamaging greenhouse
gas emissions into
the review process is to form indicators asa basis for this
process.
Until now, there has been no ubiquitousstandard for the CO2
intensity indicator.As a result, various definitions of this
indi-cator can be found in literature, such asthe ratio between kg
CO2 and kWh. Alter-
natively, direct greenhouse gas emissionscan be compared with
the fixed assets ofa company.11 In the following demonstra-tions,
the “CO2 intensity” indicator12 is theratio of the total volume of
CO2 emissionsover the lifetime13 of a project or productto the
corresponding revenue.
The formation of indicators for reviewingpurposes can be divided
into five steps.
As a first step, the CO2 intensity of a com-pany is calculated.
Secondly, the calculat-
8 See Gatzen, C: The Economics of Power Storage – Theory and
Empirical Analysis for Central Europe, Dissertation, Schriften des
Energiewirtschaftlichen Institutsan der Universität zu Köln, Munich
2008, p. 156
9 See Labatt S./White, R.: Carbon Finance – The Financial
Implications of Climate Change, New Jersey 2007, p. 208.
10 The “spark spread” is the difference between the prices of
electricity and gas; the “dark spread” describes the difference
between the price of electricity and coal.
11 For more information, see also the following descriptions in
the section “Objectifiable, quantifiable indicators for
review”.
12 Many different definitions are used for the CO2 intensity
indicator in previous literature. A kg CO2-kWh ratio is also
possible.
13 Due to the problems in calculating emissions during a product
or project lifetime, periodical emissions are sometimes also
used.
14 Diagram of the CO2 risk determination process on the basis of
Société Généralé (June 2007).
15 The EBITDA margin is the ratio of EBITDA to revenue.
16 Example according to Lucas-Leclin, V./Nahal, S./Lannegrace,
M.-G./Ouaknine, Y.: CREAM-ing Carbon Risk exposure, Equity research
report, Société Générale, 2007.
17 The CREAM-ing Carbon Risk exposure report assesses different
industries according to their CO2 risks. Energy suppliers, however,
differ with regard to their powerplant portfolios and therefore
also their CO2 risk. This should be taken into account accordingly
during corporate review.
Figure 4: CO2 Risk Determination Process14
CO2 IntensityRevenue related
CO2 risk
Freely allocated
certificates
EBITDACO2 risk
Ability of cost shifting
Bullish Signals “+”
Colder winter and warmer summer than expected
Increasing “spark spreads” and “dark spreads”10
Low supply of emissions rights from the NAP
Political action to reduce GHGs in phase III after2012
Implementation of GHG regulation in the USA andintroduction of a
cap and trade emission tradingsystem
Bearish Signals “-”
Warmer winter and colder summer than expected
Decreasing “spark spreads” and “dark spreads”
Poor checks on emissions by governments
Lack of political will to extend the Kyoto specifica-tions and
reduce greenhouse gas emissions
USA renunciates from multilateral climate protec-tion
agreements, emissions checks and a legalframework for a
market-based emission tradingsystem
Table 2: Examples of positive and negative drivers of the price
of CO2
-
CO2 Risks and Valuation
31
market price of CO2 certificates is expect-ed to amount to 23
Euro per tonne. Usingthe result of the CO2 intensity and the
cer-tificate price, a revenue-related, industry-specific CO2 risk
of 12.5 % can be calcu-lated. If we assume that 90 % of
emissionscertificates are allocated free of charge,the adjusted CO2
certificate price amountsto 2.30 Euro per tonne. The
revenue-relat-ed CO2 risk is therefore reduced to 1.25 %.The EBITDA
margin is used to relate theCO2 risk to financial performance
indic