Hundreds of asset owners to pressure 15,000 corporates to disclose hard numbers

Net Zero Investor was told this morning that a record 746 financial institutions - holding over US$136 trillion in assets - plan to call on more than 15,000 companies across the globe this week to disclose data on their environmental impact. 

The request is in the form of a Letter to the Boards of these companies, and aims to "highlight the urgent need for the business community to engage on environmental reporting," according to a copy seen by NZI.

In addition to data on climate change, deforestation, water security and biodiversity, the letter is also requesting disclosure on plastic through CDP’s 2023 questionnaire.

CDP, the global non-profit which runs the world’s environmental disclosure system is coordinating this annual disclosure request on behalf of financial institutions across 40 countries – ranging from asset managers and asset owners to banks and insurance companies.

This includes Canada Pension Plan Investment Board (CPPIB), the European Investment Bank (EIB), Aviva, New York State Common Retirement Fund and Storebrand.

Disclosures

In 2022, a record-breaking 18,700+ companies, including listed companies worth US$60.8 trillion, disclosed their environmental data through CDP. 

This total comprised 5,155 companies who responded to the Letter to the Board, key suppliers who responded to CDP’s questions per request from corporations, and companies who chose to disclose voluntarily through CDP.

In 2022, CDP standardized Task Force on Climate-Related Financial Disclosures (TCFD) aligned disclosures from public companies worth half of market capitalization. In addition to investors, CDP also facilitates similar at scale engagement for corporate customers with their supply chain.

CDP’s disclosure mechanism is now being used by banks and private market investors to drive similar best practice climate disclosures and management beyond public markets to private companies and SMEs.

Demand for transparency

The demand for corporate environmental transparency is clearly growing. 

This year’s letter sees a nearly 10% increase in the number of financial institutions requesting disclosure through CDP, emphasizing the value of corporate environmental disclosure in enhancing assessment of investment and lending portfolios, and forecasting. 

Moreover, the increase in engagement reflects a recognition that climate change and irreversible loss of nature and habitats poses indisputable challenges to businesses and investment activities.

“Despite suggestions that investors are deprioritizing ESG considerations, this year’s Letter to the Board shows the complete opposite," said Paul Dickinson, Founder Chair of CDP.

"Capital markets understand the necessity for comprehensive corporate environmental data in informing investment and lending decisions across markets. This, coupled with a record 18,700 disclosures last year – a 38% increase, demonstrates corporate ambition on meeting the mid-century goals of the Paris Agreement," Dickinson shared.

“What is more, regulation is coming. Disclosure is already mandatory or soon to become so in most major economies including the UK, EU, Brazil, Japan, and the US." 

He added that "companies still lagging behind are simply out of touch with market reality and are overestimating their own resilience. 

High-impact companies

Despite the growth in disclosure and incoming regulation, too many high-impact companies still do not disclose their environmental data and are facing renewed calls to act on the request – they include Berkshire Hathaway, Exxon Mobil, Saudi Aramco and Tesla.

Richard Manley, Chief Sustainability Officer, Managing Director and Head of Sustainable Investing, Canada Pension Plan Investment Board, said: “Consistent, decision-useful information is critical for investors to evaluate and assess the potential impacts of climate-related risks and opportunities on a company’s performance which is why we’ve supported the CDP since its inception in 2006." 

Manely added that "se also commend CDP’s decision to incorporate the ISSB’s Climate-related Disclosures Standards into its disclosure platform. We believe this will further support the momentum towards globally recognized sustainability-related disclosure standards that are important to informing capital allocation decisions by investors. This will also enable companies’ transition planning by providing valuable data inputs to tools like our Abatement Capacity Assessment Framework.”

This year, CDP will support companies to disclose on plastics for the first time, a significant step in its plan to scale disclosure on more environmental topics. 

In 2023, companies will also be able to disclose their activities under the EU Taxonomy, through a set of pilot questions. 

This follows the announcement made at COP27 that CDP will incorporate the ISSB climate disclosure standard into its global disclosure system from 2024, ensuring rapid accelerated early adoption of the standard across the global economy.

Dickinson said: “While the boost in capital market support and year-on-year increase in disclosure is hugely encouraging, the focus mostly remains narrowly on climate. I urge all companies and financial institutions to actively engage with this year’s disclosure on climate change, forests, water and plastics." 

He concluded that "addressing the climate crisis and forging an unwavering path toward 1.5C requires purposeful data-backed action on nature and environmental degradation.”