Open disclosure of companies' climate change impacts is undoubtedly of interest to investors – hence the broad-based support for the Carbon Disclosure Project. However, the investment impacts of climate change varies hugely from company to company:
- For some companies, climate change is an issue of minor investment relevance - such companies should have a clearly (if simply) articulated position on the subject which they should be prepared to issue to the CDP and to any investors that ask
- For others, climate change is a complex, material and ultimately investable issue. These companies should consider the CDP as one (but not their only) means of communicating to investors.
Do investors use CDP data?
The data collected from companies by CDP is distributed to investors in many different forms:
- Directly to asset managers: CDP data is used by asset managers as a basis for engagement activities – the absence of a response or inadequate performance is often a trigger for companies to contact with companies. In theory it is also used directly by asset managers for investment decision-making. In practice, however, we suspect that few asset managers have analysis processes sophisticated enough to do this.
- To SRI research providers: CDP is used by SRI research providers as the basis for research that they publish to their asset manager clients. Over recent years, investment research teams from banks such as Citi, Cheuvreux and Goldman Sachs etc. have used CDP data to inform research reports
- Via Bloomberg to the broadest investment community: Where the data is reported to be receiving >100 hits per day
- To FTSE for use in the CDP Carbon Strategy Indices (All Share & 350): Available but not currently licensed for use by any fund managers
So should companies complete the CDP data request?
Our advice to companies, therefore, remains the same as it is for all investor-related information requests: take control of your whole sustainability reporting agenda, define the terms on which all social and environmental issues are communicated and target this communication directly at your largest investors and target investtors.
Once this core objective has been completed, however, there are two strong arguments for prioritising CDP data completion over other more generic investor initiatives:- The widespread
asset manager buy-in and data dissemination that the initiative enjoys
- The organisation's specialism in a subject of generally high investment relevance
