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September 20, 2006

More Companies Concerned About Financial Implications of Climate Change

Climate change has become a major concern among leading US financial institutions and companies, according to a recent report by the Carbon Disclosure Project, a coalition of global investors with more than $31.5 trillion in assets.

“The findings of CDP4 confirm that awareness of the risks and opportunities posed by climate change has risen dramatically among investors and the companies they own,” said James Cameron, Chairman of the CDP.  “But awareness alone will not drive the changes in investment and corporate strategy needed if disastrous climate change is to be avoided, for that investors will have to put the CDP data to work.”

In February, CDP requested information on corporate risks and opportunities associated with climate change from more than 2,000 companies globally including the world’s 500 largest publicly-owned companies.  One thing is clear, more companies are willing to participate in the studies:

• CDP4 generated highest-ever response rate, with 72 percent, or 360 of the FT500 companies responding, up from 47 percent of the companies that responded when CDP first surveyed the FT500 in 2003.
• CDP4 saw a dramatic increase in the response rate from US companies, with 58 percent answering the questions, up from 42 percent in 2005.
• US companies that responded for the first time to CDP’s request for information include American Express, Boeing, Home Depot, Disney and Wal-Mart.
• US companies appearing in the CDP4’s Climate Leadership Index, which identifies best in class responses, include Chevron, Citigroup, Ford, FPL Group, GE and Marsh and McLennan.
• 87 percent of responding companies indicated climate change represented “commercial risks and/or opportunities.”
• 47 percent of companies that consider climate change to present commercial risks and/or opportunities to their business have implemented a greenhouse gas (GHG) reduction program.

Findings include:

• GHG regulation creates winners and losers. The best positioned company in the Innovest GHG regulatory model could have windfall revenues yielding $298 million or 10.6 percent of 2005 earnings (EBITDA). The worst could lose 25 percent of its EBITDA due to regulatory compliance costs.
• GHG reduction is less costly than expected. At a fixed marginal abatement cost of $25 per tonne, many companies could reduce their “business as usual” 2012 emissions to 10 percent below 2005 levels for less than one percent of their reported 2005 earnings.
• In North America “clean tech” has become the fifth largest venture capital investment category, trailing only Biotechnology, Software, Medical and Telecommunications. It is estimated that the clean energy market will grow from $39.9 billion currently to $167.2 billion by 2015.

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