Investors & Climate Change – Leading Institutions and their Growing Networks are Urging Expanded Corporate Disclosure

June 28 2021

by Hank Boerner – Chair & Chief Strategist – G&A Institute

What about the steadily-rising investor expectations for the corporate sectors’ climate change actions and expanded ESG disclosures?

We are able to more closely examine the rising expectations of leading asset owners/key fiduciaries and their asset managers to understand the investors’ views on the ESG / sustainability disclosure practices of issuers they provide capital to.

This includes keeping close watch on individual institutions and especially the collaborations of investment organizations they participate in.

For example, this news out of London: Some 168 investors hailing from 28 countries are now collaborating to urge companies with “high environmental impact” to use CDP’s system to disclose their environmental data.

And note:  The companies being targeted by investors represent US$28 trillion in market cap and emit an estimated 4,700 megatonnes (Mt) of carbon dioxide equivalent…every year.

The investor collaboration is part of CDP’s 2021 Non-Disclosure Campaign, created to put pressure on companies that have not disclosed their carbon emissions through CDP or have discontinued the practice. Beyond carbon concerns,

CDP and its collaborating investors and investor groups are also zeroing in on companies with forest or water security concerns. (Note that some firms disclose to CDP on one theme of concern to the investor but not others – some companies report on climate change but not on water or forestry issues.)

Targeted companies for investor action in the U.S. included at the “top of the As” are such firms as Apple, Amazon, Aramark, Abbott Laboratories, Activision Blizzard, Albemarle Corp, and Alliant Energy. In Switzerland, Alcon; in Sweden, Alfa Laval Corporate AB; in Canada, Allied Properties REIT; in Brazil, Ambev S.A.; in the U.K., Arrow Global Group. The complete list is available here for your searching.

The bold name asset management firms joining the CDP campaign for greater corporate disclosure this year include HSBC Global Asset Management, Legal and General Investment Management, Nuveen, and Schroders.

Investors supporting the campaign include asset managers and separate activist investor collaborations that are part of The Investor Agenda, which has produced a comprehensive framework recently for these investors (HSBC Global Asset Management, Legal and General Investment Management, Nuveen.)

This effort was founded by seven partners including Ceres, CDP, UN PRI, and UNEP Finance Initiative. In the United States, National Association of Plan Advisors, The Forum for Sustainable and Responsible Investing  (U.S. SIF) and Interfaith Center on Corporate Responsibility (ICCR) have joined the effort.

The approach is to set out “expectations” in four areas:

  • corporate engagement,
  • investment (managing climate risk in portfolio),
  • enhancing investor disclosure, and
  • policy advocacy (urging actions to drive to the 1.5C pathway). Part of this is an urging of governments to take action to address climate change, moving toward this year’s COP 26 gathering in Glasgow.

The CDP Non-Disclosure campaign is now in its fifth year, enjoying a 39% year-on-year growth in investor participation since the start in 2017, with investor participation up more than 50% since 2020.

This effort is part of a broad movement of investor participants and investor alliances aiming to drive change in the companies they provide capital to, as governments, investors and corporations adopt goals to be part of the societal move to achieve “Net Zero” by the year 2050.

These alliances include the Glasgow Financial Alliance for Net Zero (GFANZ), gathering signatories to set science-based targets (SBTs).

Members of GFANZ include 43 banks participating in the Net Zero Banking Alliance (NZBA). The United Nations convened the NZBA to aim for a carbon-neutral investment portfolio by mid-century and will leverage the CDP campaign to target specific companies not disclosing their environmental data.

The opportunity for corporate managements to respond to the CDP disclosure campaign and be eligible for scoring and inclusion in CDP reports is at hand; the CDP disclosure system is open until July 28, 2021.

Here at G&A Institute, our team is assisting our corporate clients in responding to this year’s disclosure request from CDP.

For corporate managers: If your firm received the CDP request for disclosure for 2021 and you have questions about responding, or about your responses in development, the G&A Institute team is available to discuss. Contact us at info@ga-institute.com.

The details of the CDP campaign and the broad investor network focused on climate change actions and disclosure is our Top Story selection for you here.

TOP STORIES

A record 168 investors with US$17 trillion of assets urge 1300+ firms to disclose environmental data (Source: CDP

And more on the ESG disclosure front:

House-Approved Legislation Would Mandate ESG Disclosures (Source: National Association of Plan Advisors)

What’s the plan? Corporate polluters lag on setting climate goals (Source: Reuters)

A U.S. Corporate Leader Shares His Thoughts on Sustainability – EDF’s Fred Krupp Interviews Tom Linebarger of Diesel-Maker Cummins Inc.

By Hank Boerner – Chair, G&A Institute

Fred Krupp is head of the two-million-member Environmental Defense Fund (EDF), a leading global not-for-profit that creates “transformational solutions” to address environmental problems by linking economics, law, science and innovative private-sector partnerships.  Since the mid-1980s he has been a very vocal thought leader, activist, and champion for change on various climate change issues, striving to use the power of the marketplace to protect the global environment.

Krupp has worked with many business leaders over the years and today characterizes Tom Linebarger – the Chair and CEO of Cummins, Inc. (leaders in diesel engine manufacturing) – as one of the forward-thinkers on sustainability and environmental innovation.  Krupp interviewed the CEO for Forbes, our Top Story for this issue.

Cummins Inc. has publicly committed to set science-based targets for reducing GHG emission across the company’s supply chain, which would help to address stakeholder concerns and help contribute to the future well-being of communities in which the company operates.

Cummins’ innovation efforts will also help to make a difference in terms of the company’s products (such as vehicle and stationary engines), its facilities and the supply chain.  Diesel power is central to the progress of the economy, says Linebarger, moving vast amounts of products and supplying power just about everywhere — and is a factor in driving wealth creation.  While doing this, the Cummins’ products also impact the environment and so the intense focus on corporate sustainability for the company.

Here are some welcome words for us in the Trump/Pruitt era of tearing up environmental rules and regulations and denying the impacts of climate change:  “Regulations play an important role in protecting the environment, and we’ve worked to make sure we’re a positive contributor to the effort,” the CEO explains.

Cummins also pushes industry peers and its suppliers to support tough, clear, science-based, enforceable regulations that are good for the industry.

Also, welcome to other champions of corporate sustainability – this making the business case statement:

“There’s no question that our focus on environmental innovation and leadership has caused our company to grow, to become more profitable, and to increase our appeal with big companies that would like to partner with us because of our leading technologies.”

Cummins (NYSE: CMI) is headquartered in Columbus, Indiana; the company designs manufactures, sells and services diesel and natural gas power engines; and, alternative-fueled electrical generates sets, “emission solutions”, and components for electronics and fuel systems. The company has 58,600 employees and serves customers in 190 countries – sales are US$20 billion (2017).

Disclosure:  The G&A Institute team members were instrumental in 2000 in assisting diesel power and vehicle manufacturers in organizing the Diesel Technology Forum, a not-for-profit advocacy dedicated to raising awareness about the importance of clean diesel engines, fuels and technologies.  Cummins was instrumental in the concept of and the founding of DTF and over the years since has been active in advancing the mission. Our former colleague Allen R. Schaeffer is the organization’s Executive Director.

You’ll want to read and share our Top Story this week with very encouraging comments about sustainability from a respected U.S. corporate sector leader.

Top Stories

Cummins CEO Says Innovation, Sustainability, And Regulations Are Good For Business
(Thursday – April 19, 2018) Source: Forbes – As head of the largest independent maker of diesel engines and related products in the world, Tom has set lofty environmental goals for Cummins, including cutting energy intensity from company facilities by a third by 2020.