Linking Climate Engagement to Financial Performance: An Investor’s Perspective analyzes the CDP disclosure scores of 702 companies covered in CDP’s Global 500 climate change reports from 2008 to 2012. Using peer-to-peer comparisons, companies were ranked by industry and split into quintiles by their CDP disclosure score, then examined against various metrics of financial profitability. The analysis shows that industry leaders in the first quintile based on their relative CDP scores provide a higher return on equity (+5.2 percent), more stable cash flow generation (+18.1 percent) and higher dividend growth (+1.6 percent).
The study — along with the CDP’s annual carbon performance and disclosure ratings for the S&P 500 — was released today at the New York Stock Exchange. The two complementary reports show that CDP leaders that incorporate environmental factors into their business strategies are mitigating climate related risks, finding opportunities to strengthen their businesses and delivering higher profitability than their industry peers, the authors say.
S&P 500 companies’ CDP disclosure and performance scores are listed in full in the CDP S&P 500 Climate Change report.
Sustainable Insight Capital Management CEO Kevin Parker says the analysis is one of the most extensive studies to date linking corporate profitability and climate change engagement.
Marc Fox, CDP advisor and co-author of the SICM report, says the two organizations hope the study facilitates broader uptake by investors and corporate investor relations linking engagement on climate change and corporate profitability.
In contrast to the CDP-SICM report, a study published late last week by the UN Global Compact and Accenture found the majority (63 percent) of CEOs struggle to quantify the business value of sustainability. The poll of 1,000 CEOs found the failure to make a link between sustainability and business value is the fastest rising barrier over the past decade.