S&P 500 companies up their game on climate: Report

Climate change and low-carbon solutions are impacting investors' portfolios.
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Facing rising global temperatures and potential supply-chain risks to vital resources like water and electricity, more S&P 500 corporations are actively working to reduce climate risks in their businesses and holding more of their executives accountable for energy efficiency and lowered carbon emissions, according to new data released Monday.

For example, corporate board level responsibility for climate change has soared to 95 percent in 2015 from 67 percent five years ago, according to a 2015 climate change report from the CDP, formerly the Carbon Disclosure Project. Among the other findings, S&P 500 companies actively working to reduce their greenhouse gas emissions have increased to 96 percent from 52 percent.

"We found a dramatic uptick with regard to companies actively managing climate change in their business," said Lance Pierce, president of CDP North America.

The report on greening corporations echoes shifts already underway in the financial sector. In response to investor demand, more financial products — everything from mutual funds to benchmark indexes — feature energy efficient corporations and those with a lower carbon footprint.

By the beginning of 2014, $6.57 trillion — or $1 of every $6 in U.S. assets under professional management — were invested in accordance with a sustainable mandate, according to the Forum for Sustainable and Responsible Investment is the U.S. America, however, still lags Europe, where 61 percent of institutional funds have some form of environmental or social mandate, according to the Global Sustainable Investment Alliance.

"There's a myth you have to sacrifice returns if you invest in a low-carbon alternative," Pierce said. "That's really starting to give way."

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Businesses respond

Beyond the board level, incentives for staff who help meet energy efficiency or carbon pollution reduction targets has risen to 83 percent from 49 percent over the past five years.

Additionally, companies actively working to reduce their greenhouse gas emissions have increased to 96 percent from 52 percent, according to the report.

For the 2015 report and analysis, CDP focused on responses from nearly 2,000 companies from 51 countries around the world. Collectively they represent 55 percent of the market capitalization of publicly listed companies globally.

Businesses from a wide swatch of sectors are making shifts in the face of rising global temperatures. Human-induced climate change already is being felt. Water is more scarce. There's more rain. Heat waves are growing in frequency and severity. Wildfires are intensifying.

The National Oceanic and Atmospheric Administration recently announced September was the hottest September on record, since the U.S. agency began tracking worldwide temperatures 136 years ago.

In the technology industry, for example, data centers consume an enormous amount of electricity.

Hoping to secure energy supplies in the future and reduce costs, Google is already estimating future energy prices — in a kind of "shadow price" model for carbon — and planning for those shifts now, according to the report.

At Apple, executives have already demonstrated data centers can run on renewable energy generated from solar, wind and micro-hydro sources, according to the CDP report.

Other consumer-facing businesses are changing, too. Estee Lauder Cos. is developing long-term strategies to integrate renewable energy and recyclable materials into its businesses.

Fight climate change to tackle poverty
Fight climate change to tackle poverty

It's worth noting that CDP's data features corporate efforts in the absence of mandated reduced emissions. "This change is being driven independent of a policy framework and not to comply with something," said CDP's Pierce. "It's a recognition of the future."

And that business and investment future includes managing and reducing climate-related risks.

"The momentum behind mitigating climate risk in portfolios appears to be building," according to an October BlackRock report on global warming's impact on portfolios.

Top global risks

While global insurance businesses have led the way in pricing natural disaster risks, climate vulnerabilities are touching many industries. "Climate change and its risks are going mainstream," according to the BlackRock report. "Long-term asset owners worry about extreme loss of capital."

According to BlackRock, four of the top 10 "most likely" global risks cited were weather-related: Extreme weather events, natural catastrophes, water crises and failure of climate change adaptation.

Looking ahead, many are looking to the United Nations Climate Change Conference in Paris, which begins at the end of the month. The group will aim to ratify a new emissions-reduction framework based on the current patchwork of country-specific pledges.

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