By Lyn Drummond
14 September 2011 – Australian banks have rated highly in the latest Carbon Disclosure Global 500 Report with Westpac Banking Corporation ranked one of the top 10 companies in both the Carbon Disclosure Leadership Index and the Carbon Performance Leadership Index.
The announcement follows on last week’s win by Stockland of the world’s most sustainable property company in the Dow Jones Sustainability Index. See our story
The report found more than two-thirds of the 396 of the world’s largest companies surveyed are focusing on climate change as part of their business strategies – a 20 per cent increase since 2010. In general these companies also provided double the return to their investors compared with other companies.
The report, Accelerating Low Carbon Growth, written by global accountancy firm PwC on behalf of the Carbon Disclosure Project, also shows the number of companies reporting reduced greenhouse gas emissions is now 45 per cent, up from 19 per cent in 2010.
Westpac received a carbon disclosure score of 96 out of a possible 100 and an A rating (out of A-E scores) for carbon performance.
The National Australia Bank was rated at 91 (A). Both of these banks have been recognised in the Carbon Disclosure Leadership Index for four consecutive years (2008-11).
The Commonwealth Bank rated 89 (A), and Australia and New Zealand Banking Group 89 (B)
Other Australia businesses of sufficient size to be included in the report were:
BHP Billiton, 73 (B); Newcrest Mining 59 (E), QBE Insurance 47, (no CPL), Telstra Corporation, 70 (D), Westfarmers, 66 (B), Westfield Group, 74 (C), Woodside Petroleum, 68 (B), Woolworths Ltd, 80 (B).
Managing Director, FX, Commodites, Carbon & Energy and Equities, Westpac Institutional Bank, Paul Verschuer, said: “Managing the risks and opportunities posed by climate change will be a defining factor in achieving long term profitability for business in the 21st century.
“Westpac’s leadership in sustainability, our financial markets expertise and hand-on experience in reducing our own emissions by more than 40 per cent over 15 years, places us in an excellent position to deliver the practical solutions our clients need to transition to a carbon constrained economy” .
NAB’s Company Secretary and Chair, Group Climate Change and Environment Committee Michaela Healey said: “In 2010, we became the first major Australian bank to achieve carbon neutral certification from the Australian Government.
“Incorporating an internal carbon price to our business cases for energy efficiency and fuel switching projects in Australia has helped us to drive energy efficiency and emission reductions.
“We have also developed programs to encourage our employees and suppliers to reduce their environmental impact. This experience has enabled commercial opportunities for financing low carbon growth and for providing specialist environmental products and services for our customers.’’
The report found a correlation between higher stock market performance over time, and representation on CDP’s Carbon Performance Leadership Index and the Carbon Disclosure Leadership Index.
Companies with a strategic focus on climate change provided investors with approximately double the average total return of the Global 500 from January 2005 to May 2011.
CDP Director for Australia and New Zealand, James Day, said the results highlighted that despite all the debate in Canberra, emission reductions are being made in large companies throughout the world.
“This is the first time in the report’s 10 year history that the majority of responding companies have climate change actions embedded into their business strategies, as a result of growing board-level awareness of the link between energy efficiency and increased profitability,” Mr Day said in a statement.
“It’s no longer a question of whether something should be done. Emission reductions are being implemented now by the directors and executives of the biggest companies in the world.
“Companies are acting for a variety of reasons, ranging from the need to reduce risks and reduce costs, to identifying new business opportunities in the transition to a low carbon economy.’’
CEO of the Carbon Disclosure Project, Paul Simpson, said: “The improved financial performance of companies with high carbon performance is a clear indicator that it makes good business sense to manage and reduce carbon emissions.
“This is a win-win for business – the short return on investment many emissions reducing activities have, can help increase profitability. Companies yet to take action on climate change will have to work hard to remain competitive as we head towards an increasingly resourced constrained, low carbon economy.”
PwC partner, sustainability and climate change, Alan McGill, said: “Historical financial performance is being exposed by climate change as an outdated model to assess long term business profitability and growth, when you consider the much wider range of financial and non-financial risks associated with business today.
“Today’s investors have different information needs, which are leading to tougher verification regimes, more emphasis on executive and staffing responsibilities and incentives, and much more unforgiving examinations of the contribution of business to society. We are accelerating towards newer reporting models that better balance financial and non-financial performance.”
Rising oil prices, energy supply risks and growing recognition of the commercial returns on investments in emissions reduction activities contributed to the growth in importance of climate change as a boardroom issue the report says.
More than half (59 per cent ) of reported emissions reduction activities delivered payback in three years or less according to company submissions.
These included energy efficiency projects (building fabric, building services and processes), low carbon energy installations and staff behavioural change. Employee incentives to reduce emissions are now offered by 65 per cent of companies, compared with 49 per cent in 2010.
Other key report findings:
– 73 per cent of respondents reported emissions reduction targets, up from 65 per cent in 2010.
– The majority of respondents (93 per cent ) reported board or senior executive oversight for climate change (up from 85 per cent in 2010) demonstrating the importance of climate change as a management issue
– Over 30 new companies targeted by CDP’s Carbon Action request have now set reduction targets, implying growing recognition by companies of the commercial benefits of emissions target setting
– Utilities is the sector with the best average climate change performance
– Telecommunications is the only sector not represented in the CPLI this year; a surprising finding given expectation that this sector will support emissions reduction activities The energy sector lags others sectors with the lowest proportion of companies setting targets (55 per cent ) and under-representation in both the CDLI and CPLI
– Just 37 per cent of respondents currently verify their emissions to acceptable standards, despite the importance of providing investors with validated climate data
The CDP is non-profit, holding the world’s largest database of primary corporate climate change information. It has a newly-established presence in Australia and its flagship program, Investor CDP, acts on behalf of institutional investors.