5 December 2013: Property is leading the corporate sector
However, most carbon reduction targets set by ASX200 companies are weak and short term, the report said.
Commonwealth Property Office Fund signed a memorandum of understanding with the City of Sydney to reduce greenhouse gas emissions – Scope 1, 2 and 3 – in Sydney CBD buildings by 70 per cent by 2030, based on 2006 levels.
Charter Hall is a BBP founding member and has committed to reducing scope 1 and 2 emissions by the same amount.
The report found that governments could play a vital role in setting expectations for long-term target setting and legislating requirements for reducing carbon emissions, with the 70 per cent reduction target of the two property groups part of the City of Sydney’s 2030 carbon reduction target.
“Many of the notable Australian and international examples of corporate carbon reduction targets reported through CDP in 2013 suggest that governments – city, state, national and regional – can and are playing an important role in setting expectations for companies to set and achieve long term targets to reduce their carbon emissions, which in turn should reduce the level of climate change risks that investors are exposed to through their investments,” CDP director Australia and New Zealand James Day said.
He told The Fifth Estate the City of Sydney had the “most notable and long term carbon reduction targets” in the country, and was hugely influential in shifting some of the corporate players to adopt long-term carbon reduction strategies.
Aside from these key property groups, the report found that most carbon reduction targets currently set by ASX200 and NZX50 companies were short term in nature.
The average target completion year for all emission reduction targets reported by ASX200 and NZX50 companies was only 2014. Just four ASX200 companies – Charter Hall, Commonwealth Property Office Fund, Qantas Airways and Sims Metal Management – reported absolute emission reduction targets with a target year of 2016 or beyond.
The report also marked the release of two indices – the Climate Performance Leadership Index and the Climate Disclosure Leadership Index.
On the performance index, which identified six ASX 200 companies with a robust climate strategy and approach to reducing emissions, two property groups made the cut: Commonwealth Property Office Fund, which is enjoying its fourth year on the list, and Dexus, which this year debuted as a leader.
Compared to peers CPLI leaders:
- establish board-level oversight on climate planning along with monetary incentives for emission reductions
- provide substantive detail on how climate change is integrated into risk management and corporate strategic planning
- set Scope 1 and 2 reduction targets
- disclose evidence of Scope 1 and 2 emission reduction activities that delivered significant results (greater than four per cent reductions year over year)
- provide independent third party assurance of emissions
Three companies – Mirvac Group, CFS Retail Property Trust and Insurance Australia Group – fell out of the CPLI in 2013.
On the disclosure index, which listed the 21 most climate transparent companies, five property players – Commonwealth Property Office Fund, CFS Retail Property Trust, Dexus, Investa Office Fund and Westfield Group – made the cut.
Five companies – Mirvac Group, Spotless Group, Stockland, Transurban Group, and Virgin Australia Holdings – fell out of the CDLI in 2013.
The report said companies usually needed to continue to maintain and improve their disclosures even at the highest levels to ensure inclusion in the CDLI.
The importance of transparency around carbon investments was highlighted by CDP chief executive Paul Simpson in his CEO foreword.
“For investors, the risk of stranded assets has been brought to the fore by the work of Carbon Tracker,” Mr Simpson said. “They calculate around 80 per cent of coal, oil and gas reserves are unburnable, if governments are to meet global commitments to keep the temperature rise below 2°C. This has serious implications for institutional investors’ portfolios and valuations of companies with fossil fuel reserves.”
CDP’s analysis is based on the climate and energy data reported by 112 responding companies listed on the ASX200 and NZX50. Companies responding to CDP 2013 represent 89 per cent of the total market capitalisation of the ASX200.
The information in the report was collected by CDP at the request of 722 institutional investors representing US$87 trillion in invested capital.
Other key findings included:
- ASX200 companies reported almost as many high impact risks associated with regulatory uncertainty as they did from carbon pricing
- Only five per cent of ASX200 responding companies rated the risks associated with carbon pricing as high in 2013
- The proportion of ASX200 companies reporting risks from carbon pricing continued to fall in 2013
- Big emitters in the ASX200 are responding to market demands for verified climate data
- Companies are yet to report emissions from the most relevant parts of their value chains, particularly around Scope 3 emissions
Read the full report.