11187 CDP Cover 11/5/04 8:53 am Page 1

CARBON DISCLOSURE PROJECT

Climate Change and Shareholder Value In 2004

On 1st November 2003, the Carbon Disclosure Project (CDP) issued
a second information request to the FT500 Global Index companies.
95 institutional investors representing assets in excess of $10 trillion are
signatories to the request, which asked for disclosure of investment-
relevant information relating to the risks and opportunities presented
by climate change. Full details of the responses and reports can be
found at www.cdproject.net
Key Findings of CDP2 CDP Signatories
Contacts
Recent developments are creating a fresh sense of urgency: Abbey National, Aberdeen Asset Managers,
ABN AMRO Asset Management, ABP,
Carbon Disclosure Project • The mainstream investment community has woken up to the financial implications Acuity Investments, AMP Henderson Global
Carbon Disclosure Project Fiscal agent and sponsor liaison of climate change; signatories to CDP increased by over 250%. Analysts and fund Investors, Asahi Life Asset Management
Co., Ltd, ASN Bank, AXA, Baillie Gifford,
The Drill Hall Rockefeller Philanthropy Advisors managers are starting to see risks and opportunities take shape. Assessing climate Bank Sarasin & Cie AG, BNP Paribas Asset
change is now becoming part of smart financial management. Management, Calvert, Catholic
57A Farringdon Road 437 Madison Avenue Superannuation Fund (CSF), Central
• The social and economic costs of climate change began to emerge: in 2003 Finance Board of the Methodist Church,
London EC1M 3JB New York weather-related disasters cost $70 billion and a European heat wave killed 20,000 CERES, CI Mutual Funds, Commerzbank,
[email protected] NY 10022 people. The number of natural disasters recorded by reinsurance companies reached a Conneticut Retirement Plans and Trust
Fund, Cooperative Bank, Cooperative
www.cdproject.net historical peak. More extreme weather events should be expected in the future. Insurance Society, Credit Agricole Asset
Management, Credit Suisse Group, Daiwa
Telephone + (44) 1273 604 666 • Companies are likely to face increased pressure from financial market authorities, Securities Group Inc, Deutsche Asset
Fax + (44) 207 404 4491 fiduciaries, company officers and accounting bodies to deal with climate risk factors. Management UK, Development Bank of
Japan, Dexia Asset Management, Domini
'Generally Accepted Carbon Accounting Principles' – ‘GACAP’ – appear likely to emerge. Social Investments, Dresdner RCM Global
• Legislation designed to put a price on carbon accelerated in 2003/4 throughout Investors, Environment Agency Pension
James Cameron, Chair – [email protected] Fund UK, Ethical Funds, AP1, Fleet,
the OECD. The 2004 global carbon market could reach $480m (c400m). Weather,
Paul Dickinson, Coordinator – [email protected] + (44) 7958 772864 GHG and green power markets are converging to broaden risk management options.
Folksam Insurance Group, Fortis
Investments, Gartmore Investment
Paul Simpson, Project Manager – [email protected] + (44) 207 274 4249 Certain industrial sectors and commodity markets will experience greater volatility; Management plc, Henderson Global
Investors, Hermes Investment Management,
Jeremy Smith, Director – [email protected] + (44) 7798 830894 wholesale electricity prices will impact profitability; adaptation to this ‘new normalcy’ HSBC Holdings, HVB Group, ING
Daniel Turner, Project Assistant – [email protected] + (44) 7952 889443 will be required. Investment Management Europe, Insight
Investment, Interfaith Centre on Corporate
• More FT500 firms now see opportunities in the ‘clean tech’ sector. Investment in Responsibility, ISIS Asset Management plc,
CDP Advisory Board the sector has quadrupled to $2.5 billion over the past 2 years. Jupiter Asset Management, KBC Asset
Management, Legal & General, Local
Andrew Dlugolecki – Andlug Consulting Authority Pension Fund Forum, Lombard
What the CDP responses tell us: Odier Darier Hentsch et Cie, London
Bob Monks – Lens • Climate change and shareholder interest are becoming more closely intertwined. Pension Fund Authority, Meritas Financial
Inc, Merrill Lynch Investment Managers,
Colin Maltby – Carbon Disclosure Project 59% of firms responded to CDP2 (47% in CDP1). 45% of the FT500 believe climate Mitsubishi Securities, Morley Fund
Eckart Wintzen – Ex’tent change represents risk and/or opportunity. 65% of companies in high-impact sectors Management, Munich Re, Neuberger
Berman, Newton Investment Management
Eileen Claussen – Pew Center on Global Climate Change are now measuring and reporting emissions versus 51% in CDP1. Responses were up Limited, New York State Common
40% in the US utilities sector and 23% in the oil and gas industry. Twice as many Employees Retirement System, Ontario
Robert Napier – WWF Teachers Pension Plan, Pax World Funds,
banks now have a stake in the renewables sector. PGGM, Public Sector Superannuation
• Significant differences of opinion remain within the same sector on the importance Scheme / Commonwealth, Superannuation
Scheme, Rabobank Group, Railpen
of climate change to company business and competitiveness. Many companies remain Investments, Real Assets Investment
firmly ‘behind the curve’. Only one firm cited the CEO as being responsible for Management Inc, Robeco, Rockefeller & Co
Socially Responsive Group, SAM
managing the issue. Sustainable Asset Management, Sanlam
• Major ‘disconnects’ still exist between some company’s response status and what is Investment Management, Sanpaulo Wealth
known publicly about their actual climate change stance. Management, Societe Generale Asset
Innovest Strategic Value Advisors Management UK Ltd, Sogeposte, State
• Not all companies respond to shareholders. At least 12 companies failed to Street Global Advisors Limited, Storebrand
Martin Whittaker Managing Director +1 905 707 0876 x 218 [email protected] Investments, Swiss Re, Treasurer of the
respond to the CDP letter despite having over 10% of their outstanding common
Matthew Kiernan CEO +1 905 707 0876 x 204 [email protected] State of California, Treasurer of the State of
shares owned by signatories to the CDP letter. Maine, Treasurer of the State of Vermont,
Devin Crago Senior Analyst +1 212 421 2000 x 225 [email protected] • Total emissions from operations (not including product use and disposal) reported to Trillium Asset Management, Triodos Bank,
Tri-State Coalition for Responsible
Katharine Preston Senior Analyst +1 905 707 0876 x 242 [email protected] CDP equalled c. 2.9 billion tons of CO2 equivalent, approximately 13% of total global Investment, UBS Global Asset Management
Doug Morrow Analyst +1 905 707 0876 x 216 [email protected] emissions from fossil fuel combustion. (UK), Unicredit Group, Union Investment,
Universities Superannuation Scheme,
Hewson Baltzell President +1 212 421 2000 x 215 [email protected] VicSuper Proprietary Limited, Walden Asset
Based on the responses received by the CDP, we have created the Climate Management, Wells Fargo & Co.,
225 East Beaver Creek Drive 4 Times Square, 3rd Floor 4 Royal Mint Court No.1 Rue des Reservoirs Leadership Index, comprising the 50 ‘best in-class’ responses. West AM
Suite 300 New York London B 605
Richmond Hill, Ontario L4B 3P4 New York EC3N 4HU Joinville-le-Pont
Report written by: CDP sponsored by: Innovest Strategic Value Advisors
+1 905 707 0876 +1 212 420 2000 +44 20 7073 0470 Paris 94340 Martin Whittaker PhD MBA
+33 1 48 86 03 69 +1 905 707 0876 x 218

Innovest [email protected]

For the Carbon Disclosure Project (CDP)

Strategic Value Advisors Paul Dickinson
+44 7958 772864
[email protected]
11187 CDP Cover 11/5/04 8:53 am Page 2

Carbon Disclosure Pro j e c t Carbon Disclosure Pro j e c t

In addition to the support of the signatories CDP has been made

possible through the generous funding of: Esmée Fairbairn Foundation
UK, The Carbon Trust UK, Climate Initiatives Fund UK, The Funding
Network UK, Home Foundation Holland, The Nathan Cummings
Foundation USA, Network for Social Change UK, Rockefeller Brothers
Fund USA, Rufus Leonard UK, Turner Foundation USA, W. Alton Jones
Foundation USA, WWF UK.

Supported by

The Carbon Disclosure Project is financially One of the largest UK corporate brand
supported by the Carbon Trust, an and communications consultancies, Rufus
independent, government funded Leonard serve clients including Barclays,
organisation that helps UK business BBC, BT, Credit Suisse, Lloyds TSB and
and the public sector cut carbon emissions Shell. We were the first sponsor of CDP and
and capture the commercial potential of the project is housed in our offices.
low carbon technologies. www.rufusleonard.com
www.thecarbontrust.co.uk

The contents of this report may be used by anyone providing acknowledgement is given. The information herein has been obtained from sources which the
authors and publishers believe to be reliable, but the authors and publishers do not guarantee its accuracy or completeness. The authors and publishers
make no representation or warranty, express or implied, concerning the fairness, accuracy, or completeness of the information and opinions contained herein.
All opinions expressed herein are based on the authors and publishers judgement at the time of this report and are subject to change without notice due to
economic, political, industry and firm-specific factors. The authors and publishers and their affiliated companies, or their respective shareholders, directors, Our sincere thanks are extended to the following:
officers and/or employees, may have a position in the securities discussed herein. The securities mentioned in this document may not be eligible for sale in
The Association for Sustainable and Responsible Investment in Asia, www.asria.org
some states or countries, nor suitable for all types of investors; their value and the income they produce may fluctuate and/or be adversely affected by
exchange rates. © 2004 Innovest Strategic Value Advisors, Inc. All rights reserved. Brooklyn Bridge, www.tbli.org
The Institutional Investors Group on Climate Change, www.iigcc.org
Printed by Beacon Press using their environmental print technology. The printing inks are made using vegetable based oils. No film or processing
The Investor Network on Climate Risk, www.incr.com
chemicals were used. 95% of the cleaning solvents are recycled for further use and 84% of the waste associated with this product will be recycled.
The electricity was all generated from renewable sources. Beacon Press is a Carbon Neutral® company and is registered to environmental standards ISO The Development Bank of Japan, www.dbj.go.jp
14001 and EMAS. United Nations Environment Programme Finance Initiative, www.unepfi.net

105

Innovest Strategic Value Advisors May 2004 Innovest Strategic Value Advisors May 2004
11187 CDP 1-40 10/5/04 5:23 pm Page 1

Carbon Disclosure Project

Responses Status (CDP2)

No Response
71 (14%)

Declined to
Participate
Executive Summary 77 (15%)

Provided Answered
Hard numbers on the Information
33 (7%)
Questionnaire
293 (59%)
costs of climate change Questionnaire
Forthcoming
create mood of urgency 26 (5%)

The global expansion of the Carbon Disclosure Project (CDP) is firmly

under way. Signatories, from Africa, Asia, Europe and North America,
now represent over $10 trillion in assets – more than double last year’s
total. Responses from the FT500 Global Index companies are also up
sharply, from 47% to 59%. Moreover, survey data are more diversified by
industry, and more sophisticated in content, than previously. The total
emissions from operations reported to CDP across all sectors equalled
2,886,033,085 tonnes of CO2 equivalent (CO2e), or roughly 13% of all
emissions from fossil fuel combustion worldwide.
We believe that this escalation in scope and awareness – on behalf of both signatories and respondents –
can be traced to an increased sense of urgency with respect to climate risk and carbon finance in the global
business and investment community. This should not come as a surprise. Developments over the past 18
months have highlighted the social and economic costs of climate change and the risks and opportunities
being created worldwide by emissions reduction policies.

Why the CDP Matters: Key Developments Since CDP1

• Weather-related natural disasters caused about $70 billion damage during 2003 ($18.5 billion was
insured). For the first time, climate change was explicitly identified as being a factor. More extreme
weather events should be expected in the future, according to leading reinsurers.
• The effects of this will be felt in key sectors and commodity markets – notably, the power, energy,
insurance, transportation, heavy manufacturing and building/infrastructure industries, and the crude oil,
gasoline, grain, soy and wheat markets. The application – and bundling together – of weather derivatives,
catastrophe bonds and other environmental financial risk-hedging instruments is turning into a viable, but
underutilized, risk-management option for many firms.
• Mainstream pension trustees, analysts, bankers, insurers and fund managers have begun to appreciate
the implications of climate change and greenhouse gas (GHG) policies in financial terms. No longer can
fiduciaries claim to be unaware of what is at stake. Taking climate risks into account is now becoming part
of smart financial management. Failure to do so may well be tantamount to an abdication of fiduciary
responsibility. FT500 firms can expect to come under greater pressure from shareholders as a result.
• Carbon finance is now a reality. Legislation favouring a shift to a low carbon intensity economy is now a
fact of life for FT500 companies across the EU as well as in many parts of the US, Japan, Australia and
Canada. In January 2005, over 14,000 entities will begin trading carbon in what promises to be the
largest, most liquid carbon market in the world: the EU Emissions Trading Scheme (ETS). Approximately
29% of the FT500 companies contacted through the CDP are located in countries that are included in the
EU ETS. In the US, more than 20 states have passed or proposed legislation on CO2 emissions,
or have developed carbon registries, sequestration studies and similar measures.

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 2

Carbon Disclosure Project

• The future ‘cost of carbon’ is a major headache for energy-intensive FT500 companies. Two-thirds of EU
utilities expect wholesale electricity prices to rise by up to 20%. According to one report, higher electricity
prices across the EU will mean additional costs of almost c600 million ($720m) per year for the European
steel industry, c500m for the pulp and paper business, and c260m for the cement, lime and glass
industries. Our analysis indicates that even a 5% shift in energy prices could impact per share earnings
by as much as 15% in certain industries. Energy risk management and energy efficiency initiatives are
taking on a new strategic importance.
• Pressure is growing on financial market authorities, fiduciaries, company directors and officers, and
accounting bodies to incorporate climate risk factors into financial statements and offerings. This is likely to
result in greater pressure on firms to measure and disclose the risks they face. It now seems to be only a
matter of time before “generally accepted carbon accounting principles” (GACAP)– are adopted at national
and international levels. Climate litigation against major industrial emitters also looks increasingly likely.
• The global carbon market has doubled in size in each of the past two years and is projected to reach
$480 million in 2004. Emissions trading is an important element of the corporate risk management
equation, with more FT500 firms involved. Some 70 million tonnes of CO2e was traded during 2003
across all markets, against a total since 1996 of roughly 220 million tonnes. A hierarchy of credit quality
is emerging. Increased cash flow from carbon finance can boost internal rates of return (IRRs) by as
much as 15% for some projects.
• FT500 firms are major participants in the global clean technology sector. Non-hydro renewables are
expected to grow faster than any other primary energy source to 2030. Worldwide, the growth in
electricity from renewable energy is projected to rise by 9-10% annually. Over $2.5 billion has been
invested in “clean tech” ventures over the past two years – a near quadrupling of the market. Europe
aims to generate 50% of its energy needs from renewables by 2050. In the US, clean technology forms
the cornerstone of both leading presidential candidates’ environmental agendas.

What the CDP Responses Tell Us

CDP2 responses indicate that these trends have not gone ignored. More firms than last year consider
climate change to present risks and opportunities to their business. More are quantifying GHG emissions
and preparing to trade emissions. Corporate climate strategies are becoming more coherent and more
comprehensive. The concept of ‘GHG-Neutral’ products and companies is taking root. Many firms have
established multi-disciplinary teams to manage the climate risk file. The use of standardized measurement
systems, such as the WRI/WBCSD GHG Protocol, is up. The number of banks reporting an involvement in
renewable energy initiatives has more than doubled in the past year.
That said, worrying trends are also apparent. Certain greenhouse gas management tasks – approaches to
supply-chain questions, assessment of life-cycle emissions, the integration of carbon costs into management
accounting – are proving to be troublesome. The absence of greater regulatory certainty also appears to be
holding some companies back. Significant differences in opinion remain within the same sectors on the
importance of climate change to company business and competitiveness.
There are also many examples of “disconnects” between a company’s response status and what is known
publicly about its actual climate-change stance. Whether this is due to poor internal communications or a lack
of interest on the part of the responder is open to speculation. Perhaps most alarmingly, several companies
failed to respond to the CDP letter despite having a significant proportion of their outstanding common shares
(over 10%) owned by signatories to the CDP letter.
The concepts of corporate leadership, transparency and brand value underpin approaches to climate
change. These “soft” issues should not be taken lightly. Currently, some 85% of a company’s true market
value can be attributed to such “intangible value drivers”. Leaders are seizing the initiative across the spectrum
of activities that shape a company’s true value and competitive potential as the shift to a low-carbon economy
proceeds. To reflect this, we have created the Climate Leadership Index (CLI), comprising the 50 ‘best in class’
responses to the CDP.
2

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 3

Carbon Disclosure Project

Table of Contents
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

I. Background To The CDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

II. Introducing the “Climate Leadership Index” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

III. Why the CDP Matters: Climate Risk and Carbon Finance in 2004 . . . . . . . . . . . . . . . . . . . .8
Latest climate data underscores economic and social impacts . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Major banks, institutional investors increase climate awareness . . . . . . . . . . . . . . . . . . . . . . . . .11
Weather, Catastrophe (CAT) bond markets continue to expand . . . . . . . . . . . . . . . . . . . . . . . . .12
Carbon regulations are now a fact of life across the OECD . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Accounting, financial market authorities focusing on environment . . . . . . . . . . . . . . . . . . . . . . . .17
Climate change litigation, trade regulation effects more discernable . . . . . . . . . . . . . . . . . . . . . .18
Environmental markets can enhance project returns, hedge risk . . . . . . . . . . . . . . . . . . . . . . . . .19
Wholesale power price volatility likely to rise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Clean technology markets get fresh attention from investors . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

IV. Analysis of CDP Responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

Response rates rise, geographical representation more diverse . . . . . . . . . . . . . . . . . . . . . . . . .24
Trends in FT500 climate risk awareness and management begin to appear . . . . . . . . . . . . . . . .28
Reported emissions data is generally more complete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Most improved company responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Not all GHG management factors show a neat improvement. . . . . . . . . . . . . . . . . . . . . . . . . . . .33
CDP responses send clear message to policy makers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Significant differences of opinion within FT500 still exist. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Disconnects between response position and actions ‘on the ground’. . . . . . . . . . . . . . . . . . . . .37
Climate leadership enhances brand value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Percentage of non-respondents common shares owned by signatories . . . . . . . . . . . . . . . . . . .39

V. Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Appendix A. Sector Analysis of Responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Automobile & Auto Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Banking and Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Chemicals - Speciality and Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Electric Utilities & Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
Insurance & Reinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
Food Products, Retailing, Beverages and Tobacco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
Metals and Mining (including Steel) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
Paper & Forest Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
Oil & Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
Matrices for Remaining Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
Appendix B. Methodology For Calculating Energy Price Sensitivity . . . . . . . . . . . . . . . . . . .90
Appendix C. Renewable Energy and Clean Technology: Global Market Overview . . . . . . . .91
Appendix D. The FT500 List of Companies with Response Status . . . . . . . . . . . . . . . . . . . .95
Appendix E. The CDP Questionnaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100
Appendix F. Contacts: CDP Signatories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102
3

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 4

Carbon Disclosure Project

I. Background to the CDP

The Carbon Disclosure Project (CDP) is a coordinating secretariat for
institutional investor collaboration regarding climate change. Its mission
is twofold: to inform investors regarding the significant risks and
opportunities presented by climate change; and to inform company
management regarding the serious concerns of shareholders regarding
the impact of these issues on company value.
Last year’s inaugural Carbon Disclosure Project Commenting on the launch of the first report in
(CDP1) gathered the support of 35 institutional February 2003 the Prime Minister Tony Blair neatly
investors representing some $4.5 trillion in managed summarised the aim of the CDP:
assets. The project culminated in the launch of the
first CDP report, authored by Innovest, at the "Congratulations on the success of the Carbon
London Guildhall in February 2003, featuring a Disclosure Project. It has some important messages
keynote address by the noted UK pension industry for all of us. Crucially, it illustrates how the answer to
authority, Sir Derek Higgs. A few weeks later, at reducing greenhouse gas emissions lies as much
Swiss Re’s North American headquarters, the former with companies and investors as it does with
US Secretary of State and current NYSE Board governments, international agencies and the public.
Member, Madeleine Albright, presented the report No industry can afford to ignore the issue. And
before the US financial community in New York. indeed the project demonstrates that many investors
have a very comprehensive view of their fiduciary
This year (CDP2), the globalization of the CDP has responsibilities to invest prudently, consistent with
taken a giant leap forward. The CDP letter now bears this Government's strong emphasis on improved
the names of 95 signatories, including some of the corporate and investor governance. I hope the
world’s largest pension funds and institutional money Project goes from strength to strength."
managers. The reasons for this success are many.
However, we can speculate that the convergence of
two agendas – the sustainable development and climate change issue on the one hand, and the more
established corporate governance agenda – was a major contributing factor. No longer can fiduciaries claim
to be unaware of what is at stake. Taking climate risks into account is now becoming part of smart financial
management. Failure to do so may well be tantamount to an abdication of fiduciary responsibility.

Distribution of Signatories by Geography Distribution of Signatories by Geography

(CDP2) (CDP1)
South Africa 1 (1%)
United States
Asia Pacific 4 (4%) (inc. Canada)
Japan 5 (5%) 6 (17%)

United States
(inc. Canada)
26 (26%) European European
59 (64%) 29 (83%)

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 5

Carbon Disclosure Project

CDP signatories now represent over $10 trillion in assets, an amount roughly equal in current dollar terms to
the 2003 US Gross Domestic Product. Significantly, the regional centre of gravity of the supporting institutions
has begun to shift. Non-European signatories now represent some 36% of signatory assets – up from 17%
in CDP1.

While support for the CDP itself has grown, the basic format of the project remains unchanged. Letters to the
FT 500 companies were issued on November 1, 2003. As the chart below indicates, the response rate now
stands at 59%, up from 47% in CDP1. More responses were still being received as this report went to press.
CDP is able to accept corporate responses at any time ([email protected]). A detailed breakdown of all
responses, along geographical, industrial and content-related lines is provided in Appendix A of this report.

Responses Status (CDP2) Responses Status (CDP1) final adjusted figures

No Response
71 (14%) No Response
Declined to 134 (27%)
Participate
77 (15%)
Provided Answered Answered
Information Questionnaire Questionnaire
293 (59%) Declined to 235 (47%)
33 (7%) Participate
Questionnaire 90 (18%)
Forthcoming
26 (5%) Provided
Information 41 (8%)

This year’s report will be officially launched in London on May 19, with a keynote address by Sir John Bond,
Chair of the HSBC Group and in Hong Kong by Tessa Tennant, Chair ASrIA. On May 21 in New York City,
with Alan Brown, Chief Investment Officer of State Street Global Advisors. Other launches will follow in
Hamburg and Melbourne June 2, Tokyo June 3 as well as Paris and Toronto.

Looking further ahead, we hope the dialogue that the CDP has helped to establish between corporations and
their owners on the subject of climate change will grow. A third information request is planned.

Note on the development of the questionnaire:

The CDP secretariat first began developing a questionnaire in 2001 in consultation with numerous investors,
corporations and consultants. Having concluded the first iteration of the project CDP consulted with these
parties to develop a more robust questionnaire leading to the 1st November 2003 information request.

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 6

Carbon Disclosure Project

II. Introducing the “Climate Leadership Index”

In this year’s CDP, every response in every industrial sector has been assessed and categorised. Based
entirely on the responses received by the Carbon Disclosure Project, we have constructed a Climate
Leadership Index (CLI), comprising the 50 “best in class” responses.

Twelve high-impact sectors were selected based on their relative carbon intensity and financial sensitivity to
climate-related impacts. From these sectors, companies deemed to have above-average responses were chosen
as candidates for inclusion in the CLI. From this pool of above-average candidates, a shortlist of companies that
provided the best responses was chosen. The companies in the CLI were selected on the basis of:

• Breadth of climate-change issues addressed (see 6-factor matrix below)

• Depth, completeness, and sophistication of the responses
• Innovest’s assessment of the companies’ climate-change strategies, demonstrated
risk-management capability, and strategic positioning vis a vis “next-generation” opportunities.

HOW HAVE THE RESPONSES BEEN EVALUATED?

The 6 factors used to evaluate company CDP responses are based on the questions submitted to the FT500
on behalf of the signatories. These are:

1. Strategic Awareness: the extent to which a firm considers climate risks and opportunities to be
relevant to its business
2. Management Accountability/Responsibility: whether and how a company has allocated
responsibility for the management of climate-related issues
3. Emissions Management and Reporting: the progress a company has made in quantifying and
disclosing/reporting its emissions profile, including the use of third-party verification
4. Emissions Trading: the extent to which a firm has considered emissions trading in its risk
management response
5. Programmes in Place: quality and nature of any emissions reduction programmes, including energy
efficiency, that a firm has implemented
6. Establishment of Targets: have formal GHG emissions/reduction targets been set with a timeline?

Almost by definition, each of the companies in the index appears to be among the sector leaders in its
responses to the climate-change challenge. Not surprisingly, some industry sectors have more “best in class”
respondents than others. Several caveats are, inevitably, in order:

1. The analysis is based on self-reported, non-verified responses.

2. The analysis is focused more heavily on carbon management structures and capabilities than on either
company-specific levels of risk exposure, marginal abatement costs or actual emissions reductions.
3. The choice of 50 as the cut-off point for inclusion in the Climate Leadership Index was an
arbitrary one. As with any effort made to “draw the line” at a particular point, a number of
well-qualified firms have been excluded.

Despite these limitations it is hoped that the publication of the Climate Leadership Index will acknowledge the
progress and achievements of today’s strong performers, as well as create significant incentives for others to
match or supplant them in the future.

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 7

Carbon Disclosure Project

The 50 companies selected comprise the 2004 Climate Leadership Index:

Sector Companies

Metals & Mining Alcoa

Anglo American
BHP Billiton
Rio Tinto
Nippon Steel
Integrated Oil & Gas BG
BP
ChevronTexaco
RD/Shell
Suncor Energy
Insurance & Reinsurance Aviva
Munich Re
Prudential UK
Swiss Re
Electric Power N. America AEP
Entergy
FPL
PSEG
Electric Power International Endesa
Iberdrola
Kansai
Scottish Power
Diversified Financials Citigroup
ING
State Street
Banks Abbey National
ABN AMRO
HBOS
HSBC
National Australia Bank
RBC
UBS
Westpac
Chemicals Air Products
BASF
Dow
Dupont
Auto BMW
DaimlerChrysler
Ford
Volkswagen
Food, Beverages, Food Retail Cadbury Schweppes
Heineken
Imperial Tobacco
Unilever
Paper and Forest Products International Paper
Stora Enso
Transportation BAA
Mitsui
UPS

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 8

Carbon Disclosure Project

III. Why the CDP Matters:

Climate Risk and Carbon Finance in 2004
The CDP’s simple request for disclosure allows investors an easy way
to signal their wishes, and gives companies an easy way to understand
and achieve the benchmark. In two short years it has created a global
virtuous circle and helped accelerate positive action.
To place the CDP responses into proper context, we summarise here some of the critical developments affecting
the themes of climate change and carbon finance that have occurred since the launch of last year’s CDP report.

The following are excerpts These include:

from CDP signatory investors • Greater concern on the part of business, government leaders and
and financial services institutions over the impacts of climate change, and increased
responders: determination to do something about it;

• Increasing concern within the global financial community regarding climate

“In global warming, we are risk and emissions management;
facing an enormous risk to
the U.S. economy and to • Regulatory and other policy actions being taken to mitigate the threat of
retirement funds that Wall climate change through emissions constraints;
Street has so far chosen to
ignore…. investors need to • Responses from financial market authorities, accounting oversight bodies
pay more attention to and the legal profession;
corporate practices that
affect long-term value” • The evolution (and convergence) of the carbon, green certificate, weather
derivatives and CAT bond markets;
Phil Angelides
California State Treasurer • Increased momentum in the global clean technology and renewables
November 2003 markets.

Latest climate data underscores economic and social impacts

“About 20% of (global) Recent reports have reaffirmed the extent of the social and economic costs of
GDP is affected by climate climate change and established clear links with global security risks.
risk….(climate change) is
more important than interest • Along with 2002 and 1998, 2003 was reported to be one of the warmest
rate risk or the foreign years on record. The World Meteorological Office highlighted record
exchange risk” extremes in weather all over the world and linked them to climate change.

AXA • A Pentagon-commissioned study concluded that under extreme

CDP2 Response scenarios, climate change could result in a global catastrophe costing
millions of lives in wars and natural disasters1.

• In the UK, the government’s chief scientist stated that climate change
1 The Observer,
posed a bigger threat than terrorism2.
Sunday, February 22, 2004
2 www.news.bbc.co.uk/2/hi/science/
nature/3381425.stm

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 9

Carbon Disclosure Project

“We view climate change as • The US National Hurricane Centre in Miami “….extreme events
a key long-term investment reported the first hurricane ever seen in the which can be traced to
theme which receives south Atlantic, which swirled off the coast of climate change will have
insufficient attention” Brazil in March 20043. increasingly grave
consequences in the
ABN AMRO Equities Research • The former head of the Canadian national future. We must reckon
November 2003 weather service, who now heads the with new types of
Canadian Foundation for Climate and weather risks and
Atmospheric Sciences, reported that climate greater loss potentials.”
“There is growing demand change in the Arctic could trigger a collapse
from customers to invest in in major ocean circulation patterns by the Munich Re
sustainable projects and end of the century. TOPICS geo 2003
companies."
• The World Health Organization stated that
ING an estimated 150,000 deaths and 5.5 million Disability Adjusted Life Years
CDP2 Response were caused in the year 2000 due to climate change. In December, the
WHO blamed climate change for 2.4% of all cases of diarrhoea and 2%
of all cases of malaria worldwide4.
“As a financial institution (we
are) affected by …risks from • The UN’s World Food Programme has warned that erratic weather patterns
GHG emissions." are threatening the lives of up to 16 million people in the Horn of Africa5.

Deutsche Bank • Weather-related natural disasters caused about $70 billion damage
CDP2 Response ($18.5 billion insured) during 2003. After adjusting for inflation, economic
losses since the 1960s have increased by a factor of about six, and
insured losses by a factor of 10.
“As a result (of climate
change), the insurance • According to Munich Re, the heatwave that hit central and eastern
industry could be destabilized, Europe last summer killed at least 20,000 people and caused economic
impacting the banking losses far exceeding $10 billion. Swiss Re recorded a total of 142 natural
industry and economic catastrophes in the world last year – the highest number since reporting
development generally." of this kind began in 1970.

Standard Chartered • Both Swiss Re and Munich Re cite climate change as being a driving
CDP2 Response force behind these alarming trends. Both believe that more extreme
weather should be expected in the future, and that adaptation – the
process of adjusting to this “new normalcy” – will be required.

• The spectre of abrupt climate change and, in particular, the lack of

adequate adaptation plans for this phenomenon, have also been raised
by credible sources6. The US National Academy of Sciences states:
“Denying the likelihood or downplaying the relevance of abrupt [climate
change] events could be costly.”

Although individual weather impacts cannot be explicitly attributed to human

3 www.abc.net.au/news/ induced (anthropogenic) climate change, the aggregate trend is completely
newsitems/s1075194.htm
4 www.who.int/mediacentre/ clear: climate change will have widespread social and economic implications.
releases/2003/pr91/en/
5 FT, October 29, 2002
The chart below presents a qualitative description of how economic losses in
6 US National Academy of Sciences, different industry sectors may be distributed.
‘Abrupt Climate Change: Inevitable
Surprises’ (2002)

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 10

Carbon Disclosure Project

IMPACT OF CLIMATE CHANGE ON LOSSES IN DIFFERENT BUSINESS SEGMENTS*

Flood, Storm Surge Severe Weather, Flash Flood, Hail Heatwave, Drought, Forest Fire Cold Weather, Frost

Short Term Long Term Short Term Long Term Short Term Long Term Short Term Long Term

Property
Engineering
Marine
Agriculture
Aviation
Contingency Risks
Health
Life

Key Negative Effects Insignificant Positive Effects

LOW MEDIUM HIGH INSIGNIFICANT LOW MEDIUM

Source: ‘The Economy of Climate’, Topics 2003, Munich Re

* Note: Table shows effects of climate change on classes of insurance in short term (5-10 yrs) and long term (10-30 yrs).
It assumes no adaptation is forthcoming within each business segment.

“The challenge of climate Individual companies, sectors and even some commodity markets will need to
change is to accurately prepare themselves for the impacts – both positive and negative – of this change:
interpret increasingly
detailed climate projections • Warmer than average weather pushed up benchmark contracts for crude
in terms of their impact on oil, gasoline pump prices, and futures for grain, soy and wheat. Soybeans
the broad range of sectors rose above $10 a bushel for the first time in 15 years as insufficient rain in
that we support” South America threatened to damage crops7. Summer weather could
have as decisive a role to play in determining crude oil prices as instability
Barclays Bank in the Middle East.
CDP2 Response
• Hurricanes and extreme storms directly impact insurance, hotel and
leisure, and oil and gas stocks. Temperature fluctuations can boost or
"In a carbon-constrained reduce sales in the food, beverage, brewing, retail clothing and
marketplace, GHG emissions entertainment industries. Citigroup Smith Barney reported that warmer
will become financial than average weather across the US during spring 2004 contributed to
liabilities on many better-than-expected sales results for Pepsi and Coca-Cola. Hot
companies' balance sheets." summer weather in western Europe helped Interbrew achieve organic
volume growth of +3.4%, EBITDA of +7.6% and EBIT of +13.2%8.
Westpac
CDP2 Response • Macroeconomic disturbances caused by climate change may be felt by
both established and emerging market investors. Pressures to the public
purse for spending on adaptation measures such as flood controls,
protection of fragile ecosystems, fortification of coastal zones, development
of alternative water supplies and new building codes may affect government
fiscal policy. Political support for action to curb greenhouse gas emissions
will grow, and lead inexorably towards industry-led emissions cuts. General
societal concern may lead to changes in consumer spending habits,
advocacy and political lobbying.
7 Bloomberg News, March 19, 2004
8 Dow Jones Newswires, March 3, 2004

10

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 11

Carbon Disclosure Project

“your investments will have Major banks, institutional investors increase climate awareness
a decisive impact on trends New data on the impact of climate change and developments in the
in future greenhouse gas greenhouse gas regulatory agenda have created a fresh sense of urgency
emissions, and on our among mainstream pension fund trustees, equities analysts, bankers, insurers
ability to adapt… you can and portfolio managers that action on climate risk management is warranted.
encourage corporations to Investors with exposure to high-impact sectors in regions where GHG
voluntarily reveal information regulations are imminent are beginning to realize the importance of considering
about how their operations the potential impacts:
affect, and are affected by,
climate change.” • In Europe, major banks including UBS Warburg, Deutsche Bank,
Dresdner Kleinwort Wasserstein, ABN Amro and JP Morgan Chase
U.N. Secretary General issued detailed quantitative reports analysing the impact on European
Kofi Annan industry of the forthcoming EU Emissions Trading Scheme (ETS), due to
Investor Summit on Climate take effect from January 2005. The German bank West LB estimated the
Risk, New York City, Market Value at Risk for the world’s equity markets to be between $192
November 2003 billion and $916 billion9.

• Abbey National’s board-approved objective since 2002 has been to

“assess how we can affect, and be affected by, climate change”. In 2003,
ABN Amro undertook a comprehensive study of the commercial risks
and opportunities the bank faced over climate change. National Australia
West LB estimated the Bank Group Economics have specifically developed watching briefs in
Market Value at Risk regard to climate change and carbon finance. The credit risk committee
for the world’s equity of the board is undertaking specific sector research and “seeking
markets to be between confirmation from” their asset managers UBS Global Asset
$192 billion and $916 billion Management, CSFB and SSGA that they are taking carbon risks into
account during portfolio selection. Westpac has begun analyzing the
greenhouse gas risk profile of customers in its debt portfolio, and plans to
incorporate GHG emissions and “climate change risk” more broadly into
its risk assessment policies and practices pertaining to investment, credit,
business and insurance activities.

• Barclays Bank, Deutsche Bank, Fortis, ABN Amro, Bank of Ireland,

Goldman Sachs, CDC Ixis and other banks are reported to be setting up
or expanding environmental financial products desks to trade and finance
carbon-, renewables- and weather-related products10.

• At a meeting at the UN in November, addressed by the Secretary General,

Kofi Annan, over $1 trillion worth of managed assets gathered for the first
US institutional investor summit on climate risk. Key sponsors, presenters
and attendees included CalPERS, Goldman Sachs, Bank of America,
Lazard Asset Management, Lehman Brothers and INVESCO, as well as
13 US state treasurers. This event marked the launch of the Investor
Network on Climate Risk (INCR), whose members include Treasurer’s
of the states of California, Oregon, Maryland, Maine, Connecticut,
Vermont, New Mexico and Comptrollers of the State of New York and
New York City.
9 ‘Carbonomics’, West LB Equity
Markets, July 2003
(www.research.westlb.com/sri/pdf/cli
mate_change_e.pdf)
10 Environmental Finance, April 2004

11

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 12

Carbon Disclosure Project

“prudent fiduciaries • The UK’s Institutional Investor Group on Climate Change (IIGCC), whose
simply cannot afford to be membership includes Merrill Lynch Investment Managers, BNP Paribas,
uninformed about the level Credit Agricole, Henderson Global Investors, Schroder Investment
of risk exposure – and, Management and USS, held its first conference, also in November, in
possibly, the opportunities – London, on the theme of “Managing the risks and profiting from the shift
in their companies or to a lower carbon economy”.
investment portfolios”.
• In the US, 13 public pension fund leaders collectively managing assets of
James Martin nearly $800 billion called on the Securities and Exchange Commission
Former Chief Investment (SEC) to “eliminate any doubt” that publicly traded companies should be
Officer at TIAA-CREF disclosing the financial risks of global warming in their securities filings.

• Also in the US, state, city and other institutional shareholders, collectively
representing more than $250 billion in assets, have filed 30 climate risk-
related shareholder resolutions with 23 companies during the 2004 proxy
season. At the Exxon Mobil annual meeting in May 2003 a resolution
calling for a report on climate-change risks received 22.2 % of the vote.

• The United Nations Environment Programme Finance Initiative, whose

climate change working group includes Dresdner Bank, Citigroup, UBS
and Abbey National, issued a number of reports and publications on
climate risk and carbon finance, including the related Goldman Sachs
Energy Environmental and Social Index. The World Economic Forum
launched the Global Greenhouse Gas (GHG) Register to promote
corporate GHG emission transparency.

Weather, Catastrophe (CAT) bond markets continue to expand

Investors and companies alike are finding that these new markets offer valuable
risk hedging and diversification benefits. As climate change-induced weather
extremes exert greater impact on company performance, the utilization of such
products is expected to grow.

• Activity in the weather markets has risen considerably in recent years and
this looks set to expand as exchange-based trading increases. Although
details are sketchy, an estimated 2,500 weather-linked transactions were
completed during 2002 with an average value in the range of $1 million.
Efforts are under way to increase the appeal of these products outside of
the energy sector. Weather-linked bonds that embed derivatives may
allow a wider range of investors to take part11. Recently, ABN Amro was
reported to be marketing a $300 million weather bond linked to a portfolio
of weather risks12.
11 Environmental Finance, March 2004
12 Ibid • CAT bond issues have been increasing every year since 199713. CAT
13 The CAT bond, begun in 1996, is
essentially a means by which capital bonds also offer attractive returns – spreads over three-month LIBOR
markets investors provide natural
catastrophe protection to the (re-) typically in the region 400-1,500 basis points – and are not well-correlated
insurance industry. In essence, with other asset classes, thereby offering the potential to reduce portfolio
investors are paid interest by the bond
issuers on the understanding that risk. In 2003, there were between $1.7 and $2.3 billion in new and
should a catastrophe occur, the bond
will be "triggered" and some or all of outstanding CAT bond issues, up just over 50% from 2002. January 2004
the capital invested is paid to the saw the world’s first CAT bond issued by a utility, Electricité de France.
bond sponsor — an insurer, reinsurer
or corporation — to cover losses.

12

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 13

Carbon Disclosure Project

“If we do not begin to take The c190 million five-year bond is indexed to wind speeds across France,
action on climate change and was structured and marketed by CDC IXIS Capital Markets and
now, more substantial, more Swiss Re. US wind-related transactions were the largest category of
disruptive and more securitized perils since 1996.
expensive change will be
needed later .” • Several FT500 companies, notably ABN Amro, Goldman Sachs,
Deutsche Bank, Barclays and Swiss Re, are involved in these markets,
Professor Sir David King, whether as a banker, insurer, broker, participant or adviser. Many electric
Chief Scientific Advisor to utility firms are also believed to be active in the weather markets.
the UK Government
Carbon regulations are now a fact of life across the OECD
Political commitment to tackling climate risk is now firmly entrenched. Legislation
encouraging the transition to low carbon intensity fuels has become a fact of
life for FT500 firms across the EU as well as in many parts of the US, Japan,
Australia and Canada (see map on page 14). Future deep cuts in emissions
appear inevitable. The Climate Group, a not-for-profit organization heading a
new coalition of the world’s leading reducers of greenhouse gas emissions
including, amoung others; UK Government, German Government, California EPA,
Connecticut Clean Energy Fund, The State of Victoria, BP, HSBC, Lafarge, Shell
In January 2005, over Renewables, Swiss Re and the Greater London Assembly, was officially launched
14,000 entities will begin on April 27 by the British Prime Minister Tony Blair14.
trading carbon in what
promises to be the • As of March 1, 2004, 120 countries had ratified the Kyoto treaty on
largest, most liquid reducing GHG emissions, representing 44.2% of Annexe 1 (developed
carbon market in country) emissions. Russian ratification remains the critical blockage.
the world At the ninth Conference of Parties to the UNFCCC (COP 9), positive
developments were noted on CDM (Clean Development Mechanism)
project activity and technology transfer, as well as early discussions about
post-2012 scenarios15. Attention is starting to turn towards long-term
climate policies that will achieve a gradual transition to an essentially
emission-free economy16.

• In June 2003, the EU Emissions Trading Scheme (ETS), the largest visible
mechanism being deployed by the EU to achieve the targets set out in
the Kyoto agreement, became part of European law. In January 2005,
over 14,000 entities will begin trading carbon in what promises to be
the largest, most liquid carbon market in the world. More emissions
reductions will also need to be achieved through reduced emissions from
domestic and low- to medium-scale business users. The policy devices
adopted to achieve these reductions are not clear and may lead to
unforeseen risks and opportunities.

• National Allocation Plans (NAPs) effectively set out each member state’s
emissions reduction approach. At the time of writing, nine of the 25 EU
countries had submitted final NAPs: Austria, Denmark, Finland, Germany,
Ireland, Luxembourg, the Netherlands, Sweden and the United Kingdom.
Draft national allocation plans have been developed by Latvia, Portugal,
14 See: www.theclimategroup.org
15 J. Pershing, WRI, Environmental Slovenia, Belgium, Lithuania, Italy and Estonia.
Finance 2004, Toronto, March 2004
16 www.european-climate-
forum.net/pdf/science_paper.pdf

13

Innovest Strategic Value Advisors May 2004

 EU
11187 CDP 1-40

Canada Regulatory Landscape

Regulatory Landscape - Parliament approves emissions trading scheme (ETS) covering 14,000 installations across China
- Climate Change Plan for Canada established 3-pronged 25 Member States (including Accession Countries). Scheduled to begin operating 2005. Regulatory Landscape
approach for 'Large Final Emitters'; Targets for reductions, - Linking Directive (LD) published 7/03. Connects project-based mechanisms (JI and CDM) - China has ratified Kyoto, but has no current reduction
emissions trading and technology approaches.
10/5/04

with EU ETS. Helps 'international-ise' the carbon market. obligations due to its status as a developing country.
- Government establishes carbon price limit of C$15/t - No sinks, no nuclear, no large hydro projects to qualify; no grid-connected renewable Market-based Mitigation Programs
subject to various conditions energy projects as JI. - China has cooperation plans with many countries,
- New Prime Minister now reviewing effectiveness of Plan - Amendments to LD proposed 2/04. Posits, inter alia, future role for forestry, earlier import including Canada, Australia and the US, to encourage
Market-based Mitigation Programs of CDM and J1 offsets independent of Kyoto entering into force. renewable technology production. China has
- Negotiated covenants establish emission intensity targets
5:23 pm

Market-based Mitigation Programs proposed a 5.5% Renewables Portfolio Standard policy

Carbon Disclosure Project

for industrial emitters (in place by 1/1/08). - Member States to submit NAPs by March 31 2004. UK NAP widely seen as setting General Trend in Corporate Awareness
- Cap and trade system to be established by 2008/9; free 'benchmark' for others. - Limited activity, however China committed to increasing
permit allocation equal to ca. 85% forecast 2010 emissions General Trend in Corporate Awareness wind power production from 400 million watts in early

Innovest Strategic Value Advisors

General Trend in Corporate Awareness - Firms are typically highly aware of regulatory developments domestically and 2003 to 1.4 billion watts in 2005, partially through CDM
Page 14

- High among key industry leaders, but majority of firms internationally. Many are now focused on cost-effective reduction strategies. mechanisms.
adopting 'wait and see' stance pending Government review
- Major concerns over capital flight, esp. oil sands, still
present Japan
Regulatory Landscape
- Ratified Kyoto Protocol. National emissions reduction
United States commitment of 6% below 1990 levels.
Regulatory Landscape - New CC policy programme adopted March 02.
- Primary driving force remains at State level, and firms with - 2004 key review year for policy framework
international regulatory exposure. Market-based Mitigation Programs
- Over 15 States have GHG mitigation measures or green - Tax on coal @ yen230 in '03, y460 in '05, y700 in '07
power targets in place or under development - Still at experimental stage in terms of emission

14
- Kerry campaign commits to bringing US back into Kyoto trading.
negotiations General Trend in Corporate Awareness
Market-based Mitigation Programs - Keidanren's voluntary reduction plan runs 2002-4,
- Industry-led initiatives dominate: Chicago Climate covers 35 sectors
Exchange (CCX), Climate Leaders - Corporate preparedness strong in cases, limited in
- Congressional support for GHG measures is strengthening many others; voluntary measures key thus far.
General Trend in Corporate Awareness - RPS (Renewable Portfolio Standard) envisages 12 bn
- Vast disparities in levels of awareness kWh by 2010. Japanese firms major players in GHG
- Leading firms united around voluntary approach but markets
pressing behind scenes for cap and trade approach

Australia
S. America Regulatory Landscape
Regulatory Landscape - Australia has signed but not ratified Kyoto Protocol.
- 8 of 12 South American states have ratified Kyoto (exempt from Africa Government nevertheless committed to Kyoto goals
immediate reduction obligations) Regulatory Landscape ($300 million has been allocated for renewable energy
- Chile is considering an emissions trading bill that could potentially - Largely in favour of Kyoto Protocol, however signatories exempt from immediate initiatives).
be linked to an international market in GHG reductions under Kyoto obligation requirements. Market-based Mitigation Programs
Market-based Mitigation Programs Market-based Mitigation Programs - On July 1, 2003, an agreement was reached between
- Clean Development Mechanism (CDM) project development is - Africa is the region least represented in current CDM investment portfolios. It is LogicaCMG and New South Wales Independent
advancing rapidly, however barriers include lack of capital and estimated the region is responsible for less than 7% of global GHG emissions. Pricing and Regulatory Tribunal to launch the world's
perception of major market risk The European Commission has funded two projects with the aim of supporting first GHG trading registry.
General Trend in Corporate Awareness CDM implementation in Africa General Trend in Corporate Awareness
- Domestic firms working within early-stage national government General Trend in Corporate Awareness - Relatively highly aware. Around 190 power stations
programs. Increasing project collaboration with IFC (International - Limited activity, however some international firms, particularly from Europe, have already run on renewable energy.
Finance Corporation) developed relationships with African private sector.

May 2004
Source: Evolution Markets/Trexler Energy & Climate Services
11187 CDP 1-40 10/5/04 5:23 pm Page 15

Carbon Disclosure Project

Implementing the Emissions Trading Directive

EU Parliament National Allocation Plans

Approves EU ETS; - Phase 2
Linking Directive
Proposed Review of ETS by EC
Kyoto Project Mechanisms National Allocation
included (under revision) Plans - Phase 3

Member
Status/
National Allocation
EU Ratify Emissions Trading: Phase 1 Emissions Trading: Phase 2
Plans by 31/3/04
Kyoto c40 per ton penalty for non compliance c100 per ton penalty for non compliance

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: P. Vis, ‘Implementing the Emissions Trading Directive’, European Commission, March 2004

• The market price of carbon will be influenced by factors such as NAP

methodologies, Russian ratification of Kyoto, use of Kyoto project-based
flexible mechanisms (Joint Implementation and Clean Development
Mechanism – JI and CDM), the effects of EU Accession Country
participation, fossil fuel prices, GDP growth and weather conditions.
JP Morgan estimates CO2 prices could fall “substantially” with JI and
CDM projects in the market. It predicts prices in the range of c10 per
tonne of CO2 to 2008, rising to over c20 into 2010. Whereas McKinsey,
a consultancy, predicts that prices within the ETS will be more or less
halved between 2007-12 if “full hot air”-based projects are included (i.e.
c5-15 per tonne of CO2, compared with c15-25 under a no-hot-air
scenario). DrKW, ABN Amro, Citigroup and UBS Warburg have also
made predictions regarding carbon prices.

Source: CO2e.com

15

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 16

Carbon Disclosure Project

SARBANES OXLEY • In the U.S, more than 20 states have passed or proposed legislation
CHANGES DISCLOSURE, on CO2 emissions, or have developed carbon registries, sequestration
ACCOUNTABILITY RULES studies and similar measures. Congressional support for the McCain
The scope and quality of Lieberman Bill, which calls for a domestic cap and trade system and
environmental liability mandatory GHG emissions cuts, grew considerably in 2003. Attention is
reporting has changed under now focused on the November 2004 presidential election. The Democrat
the new disclosure rules candidate, John Kerry, has called for a cap and trade emissions reduction
determined by Sarbanes programme, and has promised to “reinsert the US into international
Oxley adopted in early 2002. climate change negotiations”17.
Company directors and
officers will now have to • Elsewhere, the political scene was quieter, although preparations for
personally sign off on domestic emissions trading, carbon taxes and other measures began to
financial reporting. Closer firm up. The Japanese environment ministry entered into pilot phase of
scrutiny of environmental greenhouse gas emissions trading projects during the first half of 2004.
disclosure will almost In Canada, the federal government announced a $1 billion investment
certainly result. CEOs and plan towards the implementation of the Climate Change Plan for Canada.
CFOs will also have to Negotiations with “Large Final Emitters” (i.e. industry) continued; targets
evaluate the effectiveness of based on emissions intensity will be set with a regulatory or financial
rules and procedures for backstop. A cap and trade system is expected to be in place by 2008.
disclosing material
information and delegate • Approximately 29% of the FT500 companies contacted through CDP
specific responsibility for are located in countries that are included in the EU ETS. Of those
identifying and documenting companies, we estimate approximately 32% have facilities covered by the
emerging trends in ETS. Much of the burden for GHG reductions is placed on the power
environmental regulation. sector. However, compliance costs will be felt in other sectors. Anglo
Sarbanes Oxley also goes American, a metals and mining firm, reports that possible compliance
beyond GAAP in terms of costs per annum for its operations in the period to 2012 could amount to
“fair presentation” of financial 1% of 2003 operating profit, and that, in the period to 2010, sales
condition, which now revenue could be hit, mainly as a result of lower coal sales to the EU
includes interpreted as (although these would be offset by the possibility of increased sales of
“disclosure of financial platinum group metals for use in fuel cells).
information that is informative
and reasonably reflects the • Heightened volatility and market uncertainty can be expected in certain
underlying transaction and key sectors, notably power, energy, insurance, transportation, heavy
events and the inclusion of manufacturing and building/infrastructure. Company shares are beginning to
any additional disclosure move on account of climate change news. The German energy giants RWE
necessary to provide and E.ON saw their stocks rise 5.2% and 3.5%, respectively, due to the
investors with a materially German economy minister’s comments on the German National Allocation
accurate and complete Plan. Utilities and coal firms doing business in Japan have experienced
picture of an issuer’s financial share price changes on account of climate policy developments.
condition, results of
operations and cash flows.” • In the US, it is clear many firms believe that mandatory national CO2
emissions targets are inevitable. AEP stated: “The United States will
Source: Innovest/Sarbanes
Oxley Act 2002, Section 906 eventually impose caps on carbon dioxide emissions, despite pulling out
three years ago from Kyoto Protocol.” Scottish Power states that “in
the US, it seems clear that, even in the absence of a firm commitment
at federal level to a climate change control programme, a variety of
instruments aimed at CO2 reduction will continue to be brought forward”.
17 See www.johnkerry.com/issues/
energy/plan.html

16

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 17

Carbon Disclosure Project

This conviction has led many firms to take voluntary action through, for
example, membership of the Chicago Climate Exchange or the EPA
Climate Leaders’ programme. Of the FT500 companies contacted, 48%
are based in the US and many non-US-based firms have substantial
operations in the country.

FT500 companies that have joined Chicago Climate Exchange – Ford Motor Company, Dupont, Bayer,
American Electric Power, Motorola, Waste Management, International Paper, Stora Enso North America,
IBM, Baxter, ST Microelectronics.

FT500 companies that have joined EPA Climate Leaders – 3M, Alcan, Alcoa, American Electric Power,
Bank of America, Baxter, BP, Caterpillar, Eastman Kodak, Exelon, FPL Group, Gap, General Motors, IBM,
International Paper, Johnson and Johnson, Lafarge, Lockheed Martin, Pfizer, Praxair, PSEG, Raytheon,
Roche Group, ST Microelectronics, Staples, Sun Microsystems, Target, Unilever, United Technologies.

Accounting, financial market authorities focusing on

environment
Pressure is growing on financial market authorities, fiduciaries, company
directors and officers, and accounting bodies to incorporate climate risk
factors into best practice.

Awareness of environmental • In the UK, the Department of Trade and Industry’s Innovation and Growth
risks and the benefits of Team for the Environmental Goods and Services sector recommended
environmental good practice that “Government make it clear that awareness of environmental risks and
is part of the duty of pension the benefits of environmental good practice is part of the duty of pension
fund trustees fund trustees, where these impact on long-term investment returns”18. The
terms of reference for the Operating and Financial Review (OFR) Working
Group on Materiality include the development of broad principles and
practical guidance on how directors can assess whether an item is
material to their company and hence whether it must be included in an
OFR. This will include the company’s impact on the environment19.

• In the US, the implications of the Sarbanes Oxley Act (made law in 2002)
vis a vis environmental risk disclosure, became clearer (see page 16). In
Canada, the Canadian Institute of Chartered Accountants makes explicit
mention of environmental risk issues in its guidance on the Management’s
Discussion and Analysis section of company accounts20. The International
Financial Reporting Interpretations Committee (IFRIC), part of the IASB, is
seeking a change to accounting standards so that EU companies can
account for the changes in value of GHG emissions allowances in their
18 www.eif.org.uk/news/
IGT_Summary.pdf
income statements21.
19 www.dti.gov.uk/cld/ofrwgcon.pdf
20 Julie Desjardins and Alan Willis,
on behalf of CICA, at ‘Best Practices • The Financial Services Authority (FSA), the UK’s financial regulator, is
for Canadian Pension Funds and
Institutional Investors: a report on the
being pressured by activist groups with respect to shortcomings in listing
Climate Change and Investment Risk particulars mostly related to the disclosure of risks to coal mining firm
Workshop’, Canadian Social
Investment Organization, March 11, Xstrata’s business from efforts to tackle climate change22.
2004, in Toronto
21 www.pointcarbon.com/article.php
?articleID=2911&categoryID=259
22 www.environmental-
finance.com/2003/0302feb/news.htm

17

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 18

Carbon Disclosure Project

This shift in perspective • Opinions that actuarial data may become flawed are being voiced:
was captured recently in a “Actuaries base long-term financial assumptions on the links between
research note by German economic variables, such as investment return, interest rates, inflation and
bank West LB Panmure salary increases, which have historically been stable. It is possible climate
(July 2003): change will ‘unbundle’ these variables, leading to greater unpredictability
of pension and insurance costs.”23.
“This litigation could be a
catalyst or a trigger for Climate change litigation, trade regulation effects more
markets to really look at discernable
climate change issues, not As national and regional climate regulation regimes take shape, we anticipate
only with respect to the that the threat of climate litigation against major industrial emitters will rise.
expected costs of litigation,
but also in terms of a general • The beginning of public law challenges in 2002, with the collaboration of
economic assessment… US cities, NGOs and citizens against the US export credit bodies24, was
Before September 11, followed by 12 US states, American Samoa, cities and prominent NGOs
nobody really thought about challenging the failure of the US Environmental Protection Agency to
the risks or effects of regulate greenhouse gas emissions under the Clean Air Act25.
terrorist attacks on equity
market valuations, but • Over the past year or so, the public law relevance of climate change has
afterwards, the threats of been accepted by US courts26. A Californian appeals judge has rejected
terrorism were more the idea that “injury to all is injury to none” where “global environmental
perceived and dominant, and impact is threatened by a federal statutory wrong”27, and the Inuit
this led the markets to price Circumpolar Conference has announced its development of a case
in the effect. Climate change against the US in the Inter-American Commission for Human Rights28. Of
litigation will similarly arouse potentially greater direct impact on companies is the possibility of legal
the interest of the markets cases in which damages and monetary compensation are claimed. Legal
and raise the perception of commentators in both the US and UK have already suggested that these
the topic.” actions could succeed29, although establishing legal responsibility for
climate change by specific actors will be challenging. As reported by
InsideEPA.com, “environmentalists and state attorney-generals are honing
potential legal strategies to file tort suits against companies over their
23 www.the-actuary.org.uk/monthsissues alleged contributions to global warming”30. On this front, environmentalists
_frames/articles/03_05_05.asp
24 www.climatelawsuit.org/ launched an international and collaborative effort to enforce the law to
2002-08-26_Complaint.pdf
25 Commonwealth of Massachusetts, et
combat climate change31, and began to estimate the contribution of
al., Petitioners v. Environmental specific companies to temperature increases, starting with Exxon Mobil32.
Protection Agency, Respondent, and
Alliance of Automobile Manufacturers, Meanwhile, tort lawyers’ letters were received by the directors of selected
et al., Intervenors, US Court of
Appeals, DC Circuit, Case No. 03-
Australian companies identified as major emitters and facilitators of
1361 (consolidated with 03-1362, 03- greenhouse gas emissions, warning them of the financial risks they
1363, 03-1364, 03-1365, 03-1366, 03-
1367 and 03-1368). faced33.
www.ago.state.ma.us/press_rel/202
petition2.asp?searchStr=1
26 Border Power Plant Working Group v. • Arcelor, one of Europe’s largest steel makers, filed a legal challenge
Dept. of Energy, et al., No. 02-CV-
513-EIG (POR), Order dated May 2, against the EU ETS in early 2004. Although the case has little likelihood of
2003 (US District Court for the
Southern District of California); Mid
success, commentators believe that it may spark other cases against the
States Coalition for Progress v. ETS and the National Allocation Plans themselves.
Surface Transp. Bd., 2003 US App.
LEXIS 20245 (US App., 2003)
27 Judge Gould in Covington v Jefferson
County, US Court of Appeals, 9th
• 2003 also saw more legally significant developments of climate change
Circuit, February 5, 2004. Full court science, which will help climate change victims in seeking compensation.
judgment here:
www.ca9.uscourts.gov/ca9/newopinio For the first time, human influence on a climate variable other than
ns.nsf/D0B2D3557486B9D488256E31
005D99FA/$file/0236000.pdf?openele
temperature – sea-level pressure – has been found34. Three studies found
ment

18

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 19

Carbon Disclosure Project

If the Kyoto Protocol is not human influence on regional temperature increases during the 20th
ratified, there may be an century (all covering the US)35. A means of calculating how human
increasing likelihood that activities have increased the risk of extreme events has been published.36
courts will see it as their And the “Ad hoc group (of climate scientists) for the modelling and
role to intervene to fill the assessment of contributions of climate change (MATCH)” have made
vacuum left by policymakers. progress with efforts to assess methods for calculating the contribution of
different emission sources to climate change and the various impacts37.

• If the Kyoto Protocol is not ratified, there may be an increasing likelihood

Governments will be major that courts will see it as their role to intervene to fill the vacuum left by
buyers of GHG offsets. policymakers. Activist will primarily seek to ensure their actions are not
struck out. If they succeed to this point, it would lead to extensive scope
for cross-examination of executives and allow lawyers to trawl through
corporate databases. Following the lead of successful tobacco litigation,
Several European claimants lawyers would be looking for evidence that defendants knew
governments are making about their products’ role in causing climate change, but were arguing
plans to become against the connection, and were doing nothing, or actively opposing
purchasers during 2004. government action. Corporations can expect to face defence costs, lost
management time and risks to corporate reputation.

• Countries most dependent on fossil fuels are expected to attempt to use

28 The full ICC resolution is here: trade rules to challenge domestic regulations that make it more costly for
www.inuit.org/index.asp?lang=eng&nu
m=244. Press coverage here: BBC - their products to compete with lower carbon alternatives. Loose talk of
www.bbc.co.uk/radio4/today/listenaga
in/zthursday_20031211.shtml;
challenging international emissions trading in the World Trade Organization
Reuters - (WTO) has not been acted on. Progress on structured negotiations
www.reuters.com/newsArticle.jhtml?ty
pe=topNews&storyID=3973966 around priority environmental goods and services could lead to rapid
29 ‘Warming up to a not-so-radical idea:
tort-based climate change litigation’,
consolidation of multilateral agreements. This could provide an opening
Grossman, D., 28 Colum. J. Envtl. L. for the WTO to help build global markets for climate change solution
1; Richard Lord, QC, ‘Climate Change
– A common law perspective’, products and services, via the removal of barriers to trade and investment
presented at a Climate Change
Litigation seminar at Brick Court
in the low carbon technology sectors.
Chambers on February 11, 2004,
chaired by Sir Sydney Kentridge QC
30 Clean Air Report via InsideEPA.com, Environmental markets can enhance project returns, hedge risk
February 26, 2004.
Issue: Vol. 15, No. 5. The emerging GHG, weather and green power commodity markets are
31 The Climate Justice Programme: providing clear opportunities for firms to boost cash flow, hedge risk, raise
www.climatelaw.org.
32 www.exxonclimatefootprint.com capital, smooth earnings volatility, diversify investment holdings, generate new
33 www.cana.net.au/index.php?
site_var=333 business and gain competitive advantage.
34 Detection of human influence on sea-
level pressure, Gillett, N.P., Zwiers,
F.W., Weaver, A.J., and Stott, P.A., • The global carbon market has doubled in size in each of the past 2 years.
Nature, March 20, 2003
35 ‘Toward Regional-Scale Climate Some 70 million tonnes of CO2e was traded during 2003 across all
Change Detection’, Zwiers & Zhang, markets, against a total since 1996 of roughly 220 million tonnes38. A
(March 2003, Journal of Climate);
‘Attribution of regional-scale hierarchy of credit quality is emerging, with prices ranging from $2 to $16
temperature changes to
anthropogenic and natural causes’, mtCO2e, depending on contract type. Carbon funds were announced by
Stott, P.A., (July 2003, Geophysical the Development Bank of Japan, the Japan Bank for International
Research Letters); ‘Detection of a
Human Influence on North American Cooperation, German bank KfW, CDC IXIS, Rabobank and EBRD.
Climate’, Karoly et al., (November
2003, Science)
36 Liability for climate change: will it ever • Energy exchanges, including the London-based International Petroleum
be possible to sue anyone for
damaging the climate? Allen, M., 892 Exchange, the New York Mercantile Exchange, the European Energy
Nature, Vol 421, February 27, 2003
37 www.match-info.net. Exchange and the Chicago Climate Exchange, are now competing for
38 World Bank Prototype Carbon Fund the privilege of listing ETS and other emissions contracts.
Annual Report: State and Trends of
the Carbon Market 2003.

19

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 20

Carbon Disclosure Project

GHG Trading Volumes... ......and Prices

180 Carbon Prices*
UK Market Other Denmark (Feb 04)
160 UK Auction North America Cerupt
PCF New South Wales AAUs c10
140 High AAUs
Other JI EU ETS Quality
Assets
EUAs
120 Other CDM Erupt c8
JI ERUs
MtCO2e

100
c6
80

60 c4 Key
Small CDM CERs VER - Verified Emissions Reductions
Risky CER - Certified Emissions Reductions
40 Assets VERs ERU - Emissions Reduction Units
c2 AAU - Assigned Amount Units
20 EUA - EU. Allowances (under ETS)

0
1996 1997 1998 1999 2000 2001 2002 2003F Types of Tradeable Carbon Offset Contract

Source: Point Carbon Source: CO2e.com/ Carbon Finance conference, Toronto, March 2004

John Browne, • Governments will be major buyers of GHG offsets. Over 50% of project-
Group CEO, BP 26 based offset purchases during 2003 were made by the Dutch government
November 2003: and the World Bank’s Prototype Carbon Fund. Several European
governments are making plans to become purchasers during 2004. The
“I don't think we're likely Danish government recently announced plans for a $125 million allocation
to see the sudden to carbon offsets from JI and CDM projects39.
emergence of a single
global trading system – • Advanced carbon finance engineering techniques can provide a valuable
that would be comparable source of additional cash flow in project settings. The early indications are
to the emergence of a that increased cash flow from carbon finance can boost internal rates of
single global currency - return (IRRs) by as much as 2% for renewables and energy efficiency
but I do think there would projects, and up to 15% for methane-capture projects40. The International
be value in the Finance Corporation (IFC) reported positive carbon impacts on projects in
development of the renewables in the region 3-6%41.
existing European
emissions trading scheme
as a "strong" currency - Technology IRR Increase @ $4/tCO2e
with its strength reflecting Hydro, Wind, Geothermal 0.5% – 2.5%
the rigour with which it is
applied. A strong Crop/Forest Residues 3% - 7%
currency of that sort Municipal Solid Waste 5% - 15%
would enable all the many Source: World Bank Carbon Finance Business
different fragmented
activities and efforts to • Revenue from the trading of renewables obligation certificates (ROCs) –
reduce emissions which also known as renewable energy certificates (RECs) or green tags – can
are underway across the represent a substantial proportion of the revenues flowing to renewables
globe to be valued on a developers, and can be a key factor in the decision of bankers and
common basis.” investors to finance new projects42. In the UK ROCs market, the buy-out
39 Environmental Finance, October 2003
40 V. Bishop, World Bank Carbon
price for the year (April 1 to March 31, 2005) has been set at
Finance Business, Environmental £31.39/mwh43.
Finance Conf, Toronto, March 2004
41 CDM & Project Finance: Issues and
Opportunities, IFC, Carbon Finance
2004, Toronto, March 2004

20

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 21

Carbon Disclosure Project

Two-thirds of EU utility • A triple-market convergence of weather securities, GHG offsets and

companies expect wholesale energy (including RECs) has begun to emerge. Integration of contracts
power prices to rise by up from these previously separate areas of activity now seems inevitable.
to 20%
• Looking ahead, significant obstacles to greater market expansion still
remain in place44. Poor clarity around the establishment of title to offsets,
In the metals and mining uncertainties in the performance of offset vendors over what are often
sector a 5%increase in long-term forward contracts, and vendor credit risk (the majority of credit
energy costs could vendors are not investment-grade entities) are major deterrents to large
reduce share price by carbon buyers. Contractual issues, project risk management and
approximately 10% accounting, taxation and disclosure issues are also factors of increasing
relevance.

Wholesale power price volatility likely to rise

Responses confirm that FT500 firms are concerned that attaching a cost to
emissions of CO2 will raise energy costs. Indeed, climate policy developments
will have important consequences for power generation costs, fuel choices,
wholesale power prices and the profitability of many industrial companies.

• Two-thirds of EU utility companies expect wholesale power prices (WPPs)

to rise by up to 20% (a fifth expect increases of 20-40%) due to the ETS.
Utilities analysts at brokerages ABN AMRO, DKW, Citigroup, Deutsche
Bank and UBS Warburg all predict dislocations in European utilities
sector due to the EU ETS.

• Attaching a cost to the emission of CO2 fundamentally transforms the

cost hierarchy of the available fuel alternatives for generating electricty.
Spot wholesale prices are predicted to rise across the board by an
amount broadly equal to the additional cost of emitting CO2 by
marginal generators45.

• The impacts of this on energy-intensive industrial companies could be

significant. Higher electricity prices across the EU will reportedly mean
additional costs of almost c600m ($720m) per year for the European steel
industry, c500m/yr for the pulp and paper business, and c260m/yr for the
42 Under these systems, electricity cement, lime and glass industry46.
suppliers are generally are required
under the terms of a renewable
portfolio standard (RPS) or equivalent • For companies that require large amounts of energy, this poses a direct
to source a proportion of their power
portfolio from green sources. threat to earnings and share valuation (see chart on page 22). We
Compliance may be achieved by estimate that in the metals and mining sector, for example, a 5% increase
the purchase of these certificates.
43 London (Platts)-11Mar2004/745 am in energy costs could reduce share price by approximately 10%. In the
EST/1245 GMT In March 2004)
44 See, for example, refer to IETA work UK, policymakers expect the extra carbon costs will result in a 6%
and to Evelyn Walker (TransCanada increase in industrial power prices, based on a carbon price of c5/tonne.
Pipeline) pres to Carbon Finance
2004, Toronto.
45 WWF PowerSwitch! Impacts of
Climate Policy on the Global Power
Sector (www.panda.org)
46 Source: Carbon Finance, Feb 2004.
These numbers are reportedly based
on a c10/t CO2e cost and a jump in
marginal power prices of c7/MWh,
figures that are well below the
predictions made by investment
banks.

21

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 22

Carbon Disclosure Project

Effect of increase in energy cost on stock price

at various assumed levels of energy cost as a % of operating expense
Metals and Mining Sector
Assumed energy cost as a % of operating expense: 5% 10% 15% 20% 25% 30%
0%
According to industry experts
-5% interviewed by Innovest, energy costs
in the Metals & Mining sector typically
-10% range from 20% to 30% of operating
Decrease in Stock Price

-15%

-20%

-25%

-30%

-35%

-40%

-45%

-50%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Increase in Energy Price
Source: Innovest (see Appendix B for methodology)

More than $2.5 billion has Clean technology markets get fresh attention from investors
been invested in cleantech The development of low carbon technologies is a key pillar of FT500
ventures over the past respondents’ climate risk management strategies. The fundamental growth
two years prospects for this industry continue to impress (see Appendix C: Renewable
Energy and Clean Technology Market Overview). Over the past 18 months,
momentum in the public and private clean technology markets has picked up:

• More than $2.5 billion has been invested in cleantech ventures over the
past two years – a near quadrupling of the market47. Energy related
investments, historically low, are now particularly fast-growing, up 80%
between 2002 and 200348. Equity market financings in clean technology
over 2003/4 exceeded $350 million in North America. Global wind power
installed capacity grew by 26% to 39,000 MW in 2003, an increase worth
some $9.7 billion (c8 billion)49.

• Pension funds are becoming key players in this market. The “Green Wave”
environmental investment initiative in California calls on pension fund giants
CalPERS and CalSTRS to commit $1.5 billion to clean technology
investments. The Clean Energy States Alliance (CESA) expects to have
about $3.5 billion collectively for clean energy tech over the next decade.

• Concerns over energy security and power market volatility, consumer

demand for clean technology goods and services, advancing renewables
technology, plus recent events –such as the US/Canada power blackout
of August 2003, the war in Iraq and the passage of the US Energy Bill –
47 See www.cleantechventure.org are making these markets increasingly attractive. Rising fossil fuel prices
48 Ibid
49 AWEA, EWEA/Environmental Finance,
or another oil supply crunch could cause substantial upward momentum.
April 2004

22

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 23

Carbon Disclosure Project

• In recent months, 14 deals in US markets totalling over $250 million, and four in the Canadian markets
totalling some C$113 million have been consummated. Of the two initial public offerings in Canada since
January 2004, one, CO2 Solution Inc, is explicitly based on carbon sequestration.

Recent Energy Technology Financings - US

Name Segment Offering Amount Bookrunner/Manager Date

Plug Power Power Tech/ Fuel Cell Public Offering US$58.5 m Citigroup, Stephens 13/11/03
Millennium Cell Hydrogen Gen./ Fuel Cell Private Placement US$10 m Unknown 20/1/04
Energy Conversion Advanced Industrial Private Placement US$25 m Nolan Securities 7/11/03
Devices Technology
Mechanical Tech. Fuel Cell/ Instruments Private Placement US10-26 m Fletcher International 27/1/04
UQM Technologies Power Tech/ Fuel Cell Public Offering US$2.4 m I-Bankers Securities 16/10/04
Headwaters Inc. Advanced Technology Public Offering US$86.3 m Morgan Stanley 23/12/03
Arotech Corp Power Tech Private Placement US$18.5 m Unknown 8/1/04
IMPCO Catalysts/ Emissions Control Private Placement US$9.6 m Adams, Harkness, Hill 22/12/03
Evergreen Solar Solar/PV Private Equity US$29.5 m Syndicate led by Perseus 15/5/03
American Power Tech Public Offering US$51.1 m Needham, William Blair, 3/11/03
Superconductor RBC Capital Markets
WCA Waste Corp. Waste Management IPO US$97.8 m Freidman, Billings, Ramsay 9/3/04
Ultra Clean Holdings Advanced Technology IPO US$100.1 m CSFB 22/4/04

Recent Energy Technology Financings - CANADA

Name Segment Offering Amount Bookrunner/Manager Date

Hydrogenics PEM fuel cells, testing PO C$60 m Citigroup, with NBF and 3/2/04
TD Securities
Stuart Energy Systems Hydrogen fuel cells PO C$21 m NBF, with CIBC WM and RBC 12/2/04
Carmanah Solar/LED systems Private Placement C$6 m Canaccord Capital 3/2/04
Railpower Technologies Power technology Private Placement C$12.5 m NBF, Paradigm 6/11/03
Canadian Hydro Power Generation PO C$30 m First Energy with Acumen
Developers and Canaccord 11/7/03
Xantrex Advanced power tech IPO C$67 m RBC, CIBC WM, UBS Filed
10/2/04
CO2 Solution Inc Carbon sequestration IPO C$4 - $1.5 CTI Capital Filed
26/1/04

23

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 24

Carbon Disclosure Project

IV. Analysis of CDP Responses

For the FT500 companies, the need for a climate risk management strategy is clear:

• Policymakers require it
• Shareholders are asking for it
• Competitors are necessitating it
• The market expects it
• Society demands it

The results of this year’s survey reflect an increased sense of urgency with respect to climate risk and carbon
finance among the FT500 compared with last year. CDP responses are more numerous, more diversified by
geography and industry, and more sophisticated in content than previously.

We estimate that, on aggregate, the total emissions reported to CDP2 across all sectors was 2,886,033,085
tonnes CO2e. This corresponds to roughly 13% of all emissions from fossil fuel combustion worldwide.

Response rates rise, geographical representation more diverse

This year, of the 500 companies contacted, 293 (59%) completed the questionnaire (in CDP1, this number
was 235, or 47%); 33 (7%) referred CDP to other corporate literature or responded with a short letter (CDP1:
41, 8 %); 77 (15%) declined to respond (CDP1: 90, 18%), and 71 (14%) did not reply (CDP1: 134, 27%). At
the time of writing, 26 companies (5%) report that the questionnaire is forthcoming.

In terms of geographical representation (defined by location of company headquarters), the FT500 comprises
150 companies from Europe, 240 from U.S., 21 from Canada, 47 from Japan, 42 from Rest of World.

As was the case last year, the majority of respondents were from European-based firms. However, the
percentage of non-European respondents – notably US based firms – increased appreciably.

Geographical Location of FT500 Headquarters

Asia Pacific 31 (6%)

Middle East 6 (1%)
Japan 47 (9%)

USA 240
Europe (49%)
150 (30%)

Latin America 5 (1%)

Canada 21 (4%)

24

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 25

Carbon Disclosure Project

Response Rate by Geography (CDP1) Final Adjusted Figures

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
USA Canada Europe Japan Latin America Middle East Asia Pacific
238 17 155 50 8 3 29
No Response 81 3 15 13 6 3 13
Declined To Participate 61 3 17 4 0 0 5
Provided Information 25 4 10 2 0 0 0
Answered Questionnaire 71 7 113 31 2 0 11

Response Rate by Geography (CDP2)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
USA Canada Europe Japan Latin America Middle East Asia Pacific
240 21 150 47 5 6 31
No Response 45 0 6 0 2 6 12
Declined To Participate 56 4 7 8 0 0 2
Provided Information 25 4 2 0 0 0 2
Questionnaire Forthcoming 13 2 8 1 1 0 1
Answered Questionnaire 101 11 127 38 2 0 14

25

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 26

Carbon Disclosure Project

Not surprisingly, response rates were higher once again among firms in carbon-intensive industries, although
companies in the communications equipment, electrical equipment, beverages and tobacco, and computers
and peripherals sectors also appear to be more aware of the issues involved than might be expected, which
shows companies increasingly identifying risks and opportunities from their product life cycles and supply
chains. Broadly speaking, companies from a wider cross-section of industries appear to be more engaged on
the issue than last year.

High Impact Sectors: Breakdown of Responses (CDP2)

Answered Quest. Quest. Forthcoming Inf. Provided Decl. To Participate No Response
100%

80%

60%

40%

20%

0%
Automobile & Auto Parts

Banking & Diversified Financials

Chemicals

Food Manufacturing

Electric Utilities

Insurance/Reinsurance

Integrated Oil & Gas

Metals & Mining

Transportation
Paper & Forest Products

26

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 27

Carbon Disclosure Project

Medium Impact Sectors: Breakdown of Responses (CDP2)

Answered Quest. Quest. Forthcoming Inf. Provided Decl. To Participate No Response
100%

80%

60%

40%

20%

0%
Computers & Peripherals

Semiconductors

Retail

Communications Equipment

& Instruments

& Supplies
Electronic Equipment

Healthcare Equipment

Software
Telecommunications

Beverages & Tobacco

In terms of the content of these responses, we note the following:

• Of the 16 transportation companies (includes Air Freight and Couriers, Airlines, Surface Transport, and
Trading Companies and Distributors), eight responded with quantitative data. In CDP1, five out of 12
responded with measured data. This represents an improvement in response rate of 8%.

• Of the 11 auto companies contacted this year, seven provided quantitative information. In CDP1, six of
the 11 responded quantitatively. This represents an improvement of 9%.

• Of 11 chemical companies, seven provided what we consider to be high quality data. Last year, we
received such data from five out of nine companies. This represents an improvement of 8%.

• Of 18 international electric utilities firms, 14 presented data in their responses (although two redirected
CDP to an environmental report). In CDP1, 11 out of 12 firms provided emissions data. This represents a
decrease in response rate of 14%.

• Of 11 North American electric utilities, nine provided quantitative responses. In CDP1, five out of 12
respondents reported emissions data. This corresponds to a 40% increase.

• Of 23 integrated oil and gas companies, 16 provided emissions data this year. In CDP1, nine out of 19
companies supplied emissions data. This represents an improvement of 23%.

• Of eight metals and mining firms, five reported emissions both this year and last.

27

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 28

Carbon Disclosure Project

Trends in FT500 climate risk awareness and management begin to appear

A comparison of responses with last year highlights revealing trends in corporate climate risk awareness and
management. In terms of the quality of responses, we found there was a general improvement in the depth of
content and the level of awareness of the issues at stake.

• In general, leading companies that had a firm grip on the relevant risks and opportunities in CDP1 hold
those same perceptions in CDP2. Many firms have set reduction targets over five years or further and
seem convinced that achieving these goals is a strategic imperative. Less impressively, we note that
many firms either provided short responses that lacked sufficient data, or simply restated their response
from last year. Many companies – generally those with fewer ticks in boxes in the sectoral guidance notes
in Appendix A – remain behind the curve or unwilling to disclose their activities to the CDP and in other
published corporate literature.

• The percentage of FT500 companies that consider climate change to present risks and opportunities to
their business grew, from 39% to 45%. The majority of this increase came from the banking, electric
utility, integrated oil and gas, pharmaceuticals and food sectors. Evidence of concrete actions being taken
to respond to climate risks and opportunities is more widespread. More firms are also quantifying GHG
emissions. Last year, 51% of respondents in high-impact sectors reported they were measuring and
reporting GHG emissions. This year, that number has grown to 65%.

• For those firms providing high-quality information, corporate climate strategies appear to have become
more coherent and more comprehensive. Many firms have established multi-disciplinary teams to
manage the climate risk file. Anglo American has formed a Carbon Working Group that brings together
information and expertise from across the enterprise. PetroCanada’s Global Climate Change Team is an
internal cross-functional body with representatives from all business segments of the corporation,
established in 1998. ABN Amro has formed a cross-functional Climate Change Working Group
comprising representatives from the Financial Markets, Group Risk Management, Consumer and
Commercial Clients, Equities, Integrated Energy, Project Finance, Environment and Social Risk
Management and Corporate Communications business units. Shell has created an Environmental
Products Trading Business (EPTB) with sole responsibility in the Group for emissions trading and
managing the overall Group approach to the various markets. Other firms with particularly strong
multifunctional climate-risk management teams include Rio Tinto, Alcoa and ENI. The only company
that identifies the CEO as having primary responsibility for climate change was BP.

Reported emissions data is generally more complete

• Measurement systems are becoming more rigorous, with greater uptake of standardized measurement
systems such as the WSI/WBCSD GHG Protocol, the World Economic Forum GHG Registry and the
California Climate Registry (see chart below). For example, Suncor’s GHG management system will
follow international standards such as the ISO 14001 and the GHG Protocol Initiative. Others, such as
ChevronTexaco, which uses the SANGEA™ Energy and Emissions Estimating System developed from
the American Petroleum Institute Compendium of Greenhouse Gas Emissions Estimation Methodologies
for the Oil and Gas Industry (API Compendium), have developed their own measurement tools.

• Signs of progress are also evident in other sectors. For example, the number of banks reporting an
involvement in renewable energy initiatives more than doubled compared with last year (see chart
on page 29).

28

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 29

Carbon Disclosure Project

50 The CDCF will finance small and High Impact Sectors: Reporting and Trading
medium-sized projects to reduce
greenhouse gas emissions, in 70%
particular in poorer developing 2002/3
countries. In return, participants in the
fund will receive certified emission 60% 2003/4
rights for greenhouse gases. It is
% of Respondents in
High Impact Sectors

intended that such projects will in 50%

future be recognized as “Clean
Development Mechanisms” (CDMs)
under the terms of the Kyoto Protocol. 40%

30%

20%

10%

0%
Last year, 51% of Reported GHG Data Confirmed Interest/Participation
respondents in high-impact in Emissions Trading
sectors reported they
were measuring and Banking and Renewables
reporting GHG emissions.
% of Banking Sector
This year, that number Responders that Noted
hasgrown to 65% Engagement in Renewable
2003 Energy Projects

% of Banking Sector
Responders that Flagged
Renewable Energy as
an Opportunity

2002

0% 5% 10% 15% 20% 25% 30% 35%

This type of trend analysis is explored on a sector-by-sector basis in Appendix A of the report.

• As the environmental commodity markets expand, interest and engagement in emissions trading activity
across the FT500 firms also appears to be growing; of the 129 respondents in high-impact sectors last
year, 43% reported involvement of some sort in emissions trading. This year, 54% of firms say they are
involved in such trading, including the following cross-section of companies:

- BASF is participating in the World Bank’s Community Development Carbon Fund (CDCF)50 , a pilot
project to test the mechanisms of the Kyoto Protocol for global climate protection. BASF has agreed
to provide $2.5 million over a period of about 15-17 years.

- Mitsui participates in the World Bank's Prototype Carbon Fund (PCF), with investment of $6 million.
They expect that Emission Reduction Units equivalent to about 1.2 million tonnes of CO2e will be
distributed as a dividend. Electrabel has also invested $5 million in the PCF.

- Sanpaolo IMI Group companies Banca OPI and its subsidiary Finopi are collaborating with various
international partners to structure a dedicated climate-related fund to invest in GHG credits in the new
emissions trading markets.

29

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 30

Carbon Disclosure Project

- Statoil is developing a “Carbon Treasury” as the single operational interface with the emissions
trading market. The treasury will be overseen by the Senior Vice President Group Finance. Its offshore
installations paid about $114 million in CO2 tax in 2003 and it expects participation in the EU ETS will
allow it to cut these costs by approximately 30%.

- BHP Billiton is developing relationships with counterparts in the European emissions trading market
and expects, in the medium term, to consider opportunities to staple carbon credits to the sale of its
greenhouse gas intensive products (e.g. coal) into Europe and Japan.

- ABN Amro has developed in-house models to analyze the EU emissions trading regime, and
examine demand and price scenarios and market supply dynamics, in an effort to enhance its
capability to meet client needs.

- RWE reports emission trades in the UK and Denmark and via a European Pre-Compliance trade.

- A subsidiary of Kansai Electric has made an investment in Natsource Japan, a CO2 broker, in the
hopes of gaining trading know-how and new consulting business.

- Shell has created an Environmental Products Trading Business (EPTB) to coordinate the
company’s engagement in emissions trading and to manage its approach to the various markets.
The EPTB has engaged in early-stage trading via the UK Emissions Trading System, while individual
business units are expected to estimate the cost of CO2 abatement opportunities in all refineries.

- Scottish & Southern Energy has partnered with external consultants to assess the impact of the EU
ETS on its business, and is analyzing the optimum carbon management of its power generation
portfolio.

- Mitsubishi Estate has joined the trial implementation of Japan’s domestic emissions trading scheme.

- Dexia launched in the first quarter of 2004 a financial engineering solution that allows the bank to
support GHG-reducing investments by local authorities by “upgrading” the future financial value of the
emission quotas generated by these projects.

• The potential for greater energy price volatility has meant that energy risk management and energy
efficiency initiatives are taking on a new strategic importance for many firms. Responses indicate that

- Dupont has estimated fuel savings versus “business as usual” at more than $2 billion since 1990 due
to energy conservation. Additional savings were realized due to improved product yield and reduced
waste disposal costs.

- Exxon Mobil reports that changes introduced via its Global Energy Management System are
reducing energy costs by over $100 million per year.

- BP reports gains of $650 million in net present value due to various efforts to increase operational
efficiency, apply technological innovation and improve energy management.

- Alcoa’s Energy Efficiency Network has identified $55 million in energy savings in its North American
operations. To date, Alcoa has captured $16 million of these savings and expects most of the rest to
be achieved by 2007.

30

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 31

Carbon Disclosure Project

- Bank of America’s energy team managed a $4.7 million energy capital pool which resulted in 23
million kwh of energy saved across its real-estate portfolio.

- Johnson & Johnson estimates that $30 million in annualized operational savings can be achieved
through projects to reduce CO2 emissions

- BAA’s target to reduce CO2 emissions from energy use by 15% by 2010 is expected to result in a
net reduction in energy costs of £4.6 million.

- Danone anticipates its latest energy savings will translate to about c20 million per year.

- Imperial Tobacco’s target for energy conservation opportunities offer estimated savings of £2 million
per annum with a two to four-year payback period.

• The information and telecommunications business has been particularly active with respect to energy and
fuel consumption, particularly in developing country settings.

- Ericsson notes that “virtual communication” through ICT solutions is cheaper and emits much less
fossil carbon dioxide than physical travel and transportation. Expanding the use of ICT in the
developing world is being viewed as a way to bridge the global poverty divide while avoiding a
commensurate increase in fossil fuel consumption. The telecoms industry is actively pursuing this
agenda through the UN Global Compact and the Global e-sustainability initiative (www.gesi.org),
whose membership includes AT&T, BT, Deutsche Telekom, Ericsson, Telefonica and Vodafone.

• The development of low-carbon technologies continued to be a major focus for many multinationals as
part of their climate change strategy

- In Europe, Robeco, the fund management arm of Rabobank, created what it calls the world’s first
clean technology-oriented private equity fund of funds late in 2003.

- Santander Central Hispano has financed more than 35 wind farms over the past five years,
involving a committed investment of over c250 million. The power from these wind farms
represents a saving in CO2 emissions to the environment of 2,270,000 tonnes per year.

- BNP Paribas is also paying particular attention to the development of renewable energy and, in
particular, to the financing of wind farms. In 2003, the bank participated in a project providing facilities
to RWE Innogy in order to help the company recapitalise its portfolio and acquire new wind farms in
Britain.

- RWE Innogy’s £400 million equity and debt financing of a new offshore wind farm was shifted off
balance sheet, a major innovation in that it reduces RWE’s gearing and provides for equity as well as
debt financing.

- Spain-based utility Endesa recently announced plans to invest about c1.3 billion ($1.6 billion) from
now until 2008 in 1,998 megawatts of renewable energy, of which 85mw will be generated from
mini-hydro projects, with the remainder coming from wind farms (Renewable Energy Today, EIN,
19/04/04).

31

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 32

Carbon Disclosure Project

- As part of the $24 million CO2 Capture Project, Suncor is working with a coalition of major energy
companies to support research into the viability of injecting waste carbon dioxide into underground
storage reservoirs.

- The Rio Tinto Foundation for a Sustainable Minerals Industry is investigating the Development of
advanced aluminium smelting cells with the aim of reducing electrical energy (and emissions) to
produce aluminium; enhanced bio-fixation of carbon dioxide, offering the potential to produce
renewable fuels from accelerated production of biomass; and the application of wind power at
remote mine locations.

On an individual company basis, there were several examples of firms showing a particularly impressive
improvement between CDP1 and CDP2:

Most improved company responses

• Chevron Texaco, a non-respondent last year, supplied a detailed, high-quality response this year that
described how, for example, the firm requires its businesses to integrate greenhouse gas emissions
analysis into the planning process for all major capital projects.

• PPG Industries, a chemical company, did not respond last year, but this year not only responded but
has joined the US Business Roundtable’s “Climate RESOLVE” initiative, with a reduction goal of 18% in
GHG intensity by 2012.

• Imperial Tobacco was not in the FT500 2002, but did mention in this year’s response that it was CDP1
that prompted the company to improve its reporting and disclosure. Imperial measures some of its supply
chain emissions and does work with the Social Responsibility in Tobacco Production programme to help
reduce emissions during the tobacco curing process.

• State Street did not respond last year, but this year has provided one of the most comprehensive
responses in the Diversified Financials sector and has also joined as a signatory to CDP.

• Santander Central Hispano has moved beyond its former focus on the energy efficiency of its
headquarters to a more well-rounded perspective on climate change which recognizes risks to the credit
quality of customers and the opportunities afforded through financing renewable energy projects.

• Standard Chartered provided a far more robust response this year compared with last. The company’s
perception of climate change risks in the context of the financial-services industry is greatly improved and
now ranks among leaders in the sector.

• Burlington Northern Santa Fe, a non-respondent last year, provided details of emissions, management
approaches and low-carbon technologies being deployed.

32

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 33

Carbon Disclosure Project

Not all GHG management factors show a neat improvement

Approaches to supply chain For example, while Alcatel has implemented a system that requires its suppliers
questions are muddled, with to provide either an “eco-declaration” or an environmental questionnaire, the
little consensus on how to company concedes, “it is difficult… to consolidate the emissions of our suppliers
account for emissions while without serious risk of double counting.” And Sony, while analysing GHG
avoiding double-counting emissions for some of its more important supply chains, observes that, on the
whole, “accurate calculation of GHG emissions (from our supply chain) is difficult
since there is no unified standard for measurement or boundary.”

Ericsson recently extended its system boundary to include raw material

extraction, semi-manufactured construction and transport of fuel. The company
conducts an environmental assessment of its main suppliers (about 230) and,
based on this information, concludes that “our supply chain… is our second
Assessments of life-cycle most important source of CO2 equivalent emissions we have an indirect control
emissions throughout over”. In the construction materials sector, LaFarge measures CO2 emissions
product use and disposal generated by road transportation of its raw materials and finished products.
are under development FedEx has addressed GHG emissions from packaging suppliers’ production
and, in 1999, switched from the FedEx letter to the FedEx Envelope, which
reduced production-related GHG emissions by 12% annually. UPS has
developed a tool for its customers to approximate their emissions based on the
use of UPS ground service in the US. Food products company leaders are
examining their supply chains to determine sources of GHG emissions. Cadbury
Schweppes determined that manufacturing process produces 89% of its
emissions; the rest of its value chain accounting for 11%. Elsewhere, Rio Tinto
Exxon Mobil calculated that estimates that emissions from the third-party transport of its products included
operational emissions on 1.6 Mt CO2-e from Rio Tinto-arranged transport (CIF) and 4.0 Mt CO2-e from
average are about 15 tonnes transport arranged by others (e.g. customers).
of CO2 for every 100 tonnes
emitted by consumers Stressing the large number of products and services associated with its
business operations, GE observes that “making comprehensive emission
measurements (of our product use and disposal) is difficult …and relatively
uninformative given the rapidly changing nature of our business and our
customer needs.” The considerable divergence in terms of how companies
within the same sector are approaching this question suggests a climate of
great uncertainty and opportunity. In the Leisure Equipment and Products
sector, for example, Fujifilm measures the environmental impact of all of its
products using a product life-cycle approach (LCA), while Eastman Kodak Co.,
a close competitor, “has no current plans to measure the emissions associated
with the use or disposal of [its] products.” In autos, best practice on LCA has
evolved considerably recently. Leading auto companies, including BMW,
DaimlerChrysler, and Volkswagen, continue to perform LCA that provides
emissions associated with use and disposal of its vehicles. ENI estimates that
the emissions generated by the use of its petroleum products are approximately
equal to eight times its internal emissions. Similarly, Exxon Mobil calculated that
operational emissions on average are about 15 tonnes of CO2 for every 100
tonnes emitted by consumer use of petroleum products throughout the global
economy. BP estimates with some confidence that the total GHG emissions
arising from the use of its products is 1,298 million tonnes of CO2 (see Oil and
Gas sector analysis, Appendix A).

33

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 34

Carbon Disclosure Project

Several FT500 companies Rio Tinto comments that the most significant source of emissions associated
are openly grappling with with its products is from the combustion of coal and the conversion of iron ore
the problem of integrating to steel. In 2003, emissions from these sources were estimated at 318 Mt CO2e
carbon costs and other and 200 Mt CO2e respectively. Finally, and impressively, Nippon Steel
climate risks into measures the effectiveness of typical high-functional steel products to reduce
management accounting greenhouse gas emissions from an LCA viewpoint. According to the firm, the
reduction effects of high-functional steel products for automobiles, ships, rail
vehicles, construction, electric transformer, and power generation boilers are
estimated to be about 6.5 million tonnes of CO2 per year.

Responses indicate that Forest products company Weyerhauser believes that its activity in the carbon
planning over longer-term finance area will enable it to readily utilize financial tools in future when
horizons (five years or “generally accepted carbon accounting principles” are adopted at the national
more) is being hindered by and international level.
perceptions that rational
economic decisions can be Ricoh, a Japanese office equipment and manufacturing firm, has developed an
made only in the presence of “eco-balance” accounting system that translates the company's environmental
greater regulatory certainty burdens into hard figures. Despite consistent growth, the company has used
this approach to reduce its global CO2 emissions by over 10% between 1990
and 2002.

BHP Billiton informs us that carbon pricing sensitivity analysis is considered

in its investment decisions involving greenfield, brownfield and merger and
acquisition investments with emissions of more than 100,000 tonnes of CO2
equivalent per annum.

Repsol YPF states that internal reference prices for GHGs are applied to
decision making in all its global activities.

CDP responses send clear message to policymakers “If the political system turns
Responses indicate that planning over longer-term horizons (five years or out to be incapable of dealing
more) is being hindered by perceptions that rational economic decisions with it (climate change) ...the
can be made only in the presence of greater regulatory certainty. For same not need be the case for
example, British Sky Broadcasting, a leader in the global broadcasting the business community and
market, acknowledges that the most significant commercial risk associated the investment community…
with climate change stems from “the uncertainty regarding [national] ….You have responsibility as
government guidance”. fiduciaries...to analyze risk and
look for opportunities.”
Leaving aside the observation that multinationals routinely make vital
strategically relevant business decisions in the face of long-term market Former Vice President Al Gore,
uncertainty, the CDP responses send a clear message to policymakers, U.N. Investor Summit on
which concur with other similar studies on this topic51. In order to take Climate Risk
serious steps on climate change, multinational firms need governments to: November 2003

• establish clear emissions mitigation obligations

• foster multi-industry collaboration
• support the growth of emissions trading schemes
• help commercialize clean technologies
• bolster investor confidence in the corporate governance process
• clarify the listing disclosure requirements pertaining to carbon risks
34

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 35

Carbon Disclosure Project

Significant differences of opinion within FT500 still exist.

It is clear that many companies within the same sector do not agree on the importance of climate change on
their business and the competitive conditions in their particular industry. The following examples illustrate the
differences in companies’ opinions with respect to the relevance of climate change to their business:

Believe climate change Believe climate change

vs.
not relevant to business highly relevant
Chemicals
Bayer states that “the risks of so-called ‘climate Air Products and Chemicals not only recognize
change’ have neither been proved nor refuted… the potential impact but that understanding climate
Results by IPCC have periodically illustrated the change “is critical to managing commercial risks
possible risks of climate change, but they have also vs. and seizing upon new business opportunities that
revealed significant uncertainties in the estimates arise from responses to external climate-change
based on the models used”. However, the policy drivers”.
company does think precaution is best and does
monitor and work to reduce its emissions.

Food and Drug Retail

Carrefour “does not currently calculate all GHG Tesco is committed to reducing its emissions, and
emissions”. vs. is actively looking at using more renewable energy
while measuring and reporting its CO2 and HFC
emissions.

Food Products
Sara Lee has not tracked GHG emissions to date. Unilever: “CO2 emissions from our manufacturing
However “due to increased global awareness of the vs. operations are reported annually” and have been
topic, we have initiated a project designed to measured from worldwide operations since 1995.
quantify some of these gas emissions.”

Electrical Equipment/Manufacturing
Schneider Electric, one of the world's largest GE, a global leader in electrical equipment
manufacturers of equipment for electrical manufacturing, said: “[We] recently completed [our]
distribution and industrial control and automation, vs. first GHG inventory using the WRI/WBCSD protocol
said: “[Our]GHG emissions are insignificant... [Our) ... and calculated annual global emissions at 10.0
manufacturing processes do not especially release MMT CO2 equivalents.”
greenhouse gases.”

Healthcare Providers/Equipment
United Health Group, a $28 billion healthcare Baxter, a worldwide healthcare leader, “views
services provider, replied that “our mission is to climate change as one of the most significant
facilitate and advance health... As such, impacts vs. environmental challenges facing mankind today”,
from climate change would be indirect or non- and “uses the WBCSD GHG protocol … to
existent” calculate all GHG emissions”.

51 See, for example, the UNEP Finance Initiative study ‘Climate Change and the Global Financial Markets’, 2002 (www.unepfi.net)

35

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 36

Carbon Disclosure Project

Telecommunications
SK Telecom: “We are a telecom service provider, Deutsche Telekom says that measures against
therefore we wouldn't be affected by climate global climate change offer “interesting business
change.” opportunities” for innovative products and services.
vs. “We are also convinced that our
telecommunications services may contribute to a
substantial increase of the resources efficiency –
and especially the energy efficiency – of society.”

Banking
Nomura, a major Japanese bank: “We do not have Barclays, one of the EU’s largest financial services
any direct relations with greenhouse gas emissions groups, observed that “climate change represents
with our business, therefore we neither have both opportunities and risks… Opportunities in
commercial risk nor any opportunities.” respect of new products and services (for example,
our Environmental Services Team in UK Banking
vs. provides financial services to renewable energy
projects); and risks in respect of changing patterns
of consumer demand (tourism) or crop yields
(agriculture), or the curtailment of insurance cover
for properties in low-lying (flood risk) areas.”

Real Estate
Equity Office Property Trust, the US’s largest Mitsubishi Estate, the Japanese real estate
publicly held office building owner, answered that it developer, states: “GHG emission reduction
saw no risks from climate change or the policy measures taken by the government, based on
responses to climate change because “EOP is not climate change and the policy responses to it, will
a producer of energy or a product that is energy possibly influence the profit and losses as well as
intensive in its production”. vs. the investment behaviour of our company… We will
be able to have a competitive advantage among
other companies by managing ‘low GHG emission
buildings’, which will create business opportunities
for us.”

Insurance & Reinsurance

XL Capital, which is involved in insurance, Swiss Re: “The implications of climate change
reinsurance and financial products, states: “We pose potential risks and opportunities to Swiss Re’s
actively manage a significant investment portfolio, asset management [business], mainly in equity,
but do not envisage climate change as representing vs. venture capital and real estate investments.”
a risk to the value of these efforts over the period
we intend to hold them.”

Financial Services/Mortgages
Golden West, the holding firm of one of the US’s Abbey National: “Direct losses from damages and
largest home mortgage lenders, states: “We only remediation due to climate change (namely
make mortgage loans. We operate in the US only, vs. increasing risk of flood, storm and subsidence)….
and we emphasize recycling and energy efficiency impact the company’s buildings, mortgage portfolio
in all our operations.” and investments.”

36

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 37

Carbon Disclosure Project

Such differences of opinion support the view that climate change and carbon constraints will accentuate the
natural competitive conditions that exist in every industry, helping to create shareholder value for some firms,
while eroding it for others. A recent survey by PricewaterhouseCoopers supports this observation52; with nine
months to go to the launch of the EU ETS, only 45% of Europe’s major utilities surveyed by PWC have
implemented a climate change strategy, either partially or fully, and 22% have no strategy at all. This is despite
the fact that 54% of firms believe that emissions trading will enhance their shareholder value in the long term,
and 49% foresee a beneficial effect on long-term profitability.

Disconnects between response position and actions ‘on the ground’.

There are many examples of “disconnects” between a company’s response statements and what is known
publicly about its actual climate-change stance. These point to the challenges of establishing clear internal
lines of communication.

Of even greater concern, several companies failed to respond to the CDP letter, despite having a significant
proportion of their outstanding common shares owned by signatories to the CDP letter. The table on page 39
shows FT500 firms that did not respond or declined to participate and the corresponding share ownership by
CDP signatories shown in each company’s list of top 50 stock owners. This means that the actual share
ownership by all 95 signatories would generally be even greater than the figures stated.

Some of these firms are even known to be proactively engaged in reducing GHG emissions, developing low
carbon technologies or improving their business via the carbon markets. Notable examples include:

• Con Edison, the electric utility, is known to be taking proactive action on GHG reductions and energy
management.

• Marsh & McLennan, the insurance broker and underwriter. Through a team of dedicated carbon
professionals, this firm has been active in furthering industries’ understanding of the risks attached to
climate change and carbon trading for several years.

• Alcan has an excellent GHG management programme and provided a strong response last year. This
year, the merger with Pechiney caused a delayed reply as the two companies consolidated their
emissions data and aligned their individual climate change strategies.

In the vast majority of cases, CDP was not made aware of the reasons why a response was not forthcoming.
We can speculate that, in some cases, response failure was due to the size of the management challenge that
climate change poses within the modern-day multinational company and a general lack of communication within
the firm. It is worrying, however, that a major company would choose to ignore correspondence from institutional
shareholders requesting disclosure on a governance-related issue, given the present mood of the market.

Climate leadership enhances brand value

“The real competitive problem is laggards versus challengers, incumbents versus innovators, the inertial and
imitative versus the imaginative. …a company that cannot commit emotionally and intellectually to creating the
future, even in the absence of a financially indisputable business case, will almost certainly end up a follower.”

Gary Hamel and C.K. Prahalad

COMPETING FOR THE FUTURE53

52 ‘Emission critical: Connecting carbon and value strategies in utilities’, PricewaterhouseCoopers, March 2004
53 ‘Competing for the Future’, Gary Hamel, C.K. Prahalad, Harvard Business School Press, 1994

37

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 38

Carbon Disclosure Project

It is worrying that a major The deeper issue at stake here is, we believe, the notion of corporate leadership
company would choose to and brand value. To what extent does a company wish to be known as a leader
ignore correspondence from in tackling what has been called the greatest environmental challenge of the
institutional shareholders 21st century? Are a company’s directors, officers and employees content with
requesting disclosure on a being swept along, reacting to climate challenges only when compelled by
governance-related issue others to do so? Or would they prefer to seize the initiative and press for
solutions in a proactive, prudent and, ultimately, profitable fashion? The
answers to these questions define leadership on the climate-risk issue.

Brand value is often cited a reason why companies should be proactive. There
is little doubt that brand value is having an increasingly significant influence over
the market’s overall valuation of a firm’s future earnings power. Few dispute that
a firm’s position on climate change can have a direct impact on its brand. The
Deutsche Bank stated: obvious example is Exxon Mobil, whose opposition to the Kyoto Protocol, for
“Being handed a reputation example, led to boycotts in Europe. While the impact on EXM’s share price
as environmental enemy appears to have been insignificant, future risks may be greater. Writing on this
number one, for such a big issue, Deutsche Bank stated: “Being handed a reputation as environmental
customer-facing business, enemy number one, for such a big customer-facing business, has to be
has to be considered a considered a brand risk.”54
brand risk.”
For some firms, political uncertainty around GHG mitigation has been used as
a springboard to create future competitive advantage: BP, in the case of GHG
emissions reduction; Intel, in respect of its chip technology (see box on
page 40); Swiss Re, with its GHG risk solutions business unit; Dupont and
Shell, in the area of emissions trading, spring readily to mind. Others include
Mitsui, BASF, Volkswagen, Cadbury Schweppes, Unilever, Heineken,
Stora Enso, Westpac, Barclays, Anglo American, Nippon Steel, and BAA.

Regulatory uncertainty has not prevented these firms from participating in

emissions trading systems (some even helped to develop them) or investing
in revolutionary low-carbon technologies or cutting GHG emissions or
becoming ‘GHG-Neutral’. The value these firms will create is multidimensional.
It resides partly in staking out dominant positions in markets for new high-
margin products, partly in driving out inefficiency and waste in operations, in
their capacity to shape regulations and new industry standards and it is also
present in their attractiveness to the next generation of business leaders and
the quality of their relationships with stakeholders. But it also resides in the
intrinsic value of corporate leadership and the type of company these
organizations want to be.

54 http://a520.g.akamai.net/7/520/1534/release1.0/www.greenpeace.org/multimedia/download/1/135843/0 /deutschebank.pdf

38

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 39

Carbon Disclosure Project

Percentage of non-respondents common shares owned by signatories

% of Total % of Total % of Total
Companies that failed Common Companies that failed Common Companies that failed Common
or declined to respond Shares Held or declined to respond Shares Held or declined to respond Shares Held
by Signatories* by Signatories* by Signatories*
Honeywell International Inc 15.5 Newmont Mining Corp. 5.8 Kroger 4.4
Sears Roebuck And Co. 15.4 Dominion Resources 5.8 Fifth Third Bancorp 4.4
Six Continents PLC 14.8 Linear Technology 5.8 Maxim Integrated Pdcts 4.4
Boeing Company 13.9 Aetna Inc 5.7 Paychex Inc 4.3
Hartford Financial Services 12.5 AT & T Wireless Services 5.7 Amgen Inc 4.3
Conagra 12.5 Electronic Arts Inc 5.6 US Bancorp Delaware 4.2
Target Corp. 11.7 Caterpillar Inc 5.6 Kohls Corp. 4.1
Morgan Stanley 11.2 Alltel 5.5 Oracle Corp. 4.1
Marsh & McLennan 10.9 Tenet Healthcare Corp. 5.5 HCA Inc 4.1
Wellpoint Health Network 10.7 Chubb Corp. 5.4 Schwab Charles Corp. 3.9
Mellon Financial Corp. 10.2 Cardinal Health 5.4 Suntrust Banks Inc 3.8
Masco 10.0 Wrigley William Junior 5.4 Loews Corp. 3.8
Bellsouth Corp. 9.6 Apollo Group Inc 5.4 Campbell Soup Company 3.6
Nextel Communications Inc 9.3 Home Depot Inc 5.4 Carnival 3.5
Electronic Data Systems 9.1 Sun Microsystems Inc 5.3 Stryker 3.5
Raytheon Company 9.0 Forest Laboratories 5.3 Goldman Sachs Group Inc 3.5
Cendant Corp. 8.7 Harley-Davidson 5.3 America Movil 2.9
Omnicom Group Inc 8.5 Bank One Corp 5.2 Fanuc Limited 2.7
Federal Home Loan M’gage 8.0 Medimmune Inc 5.2 Amazon Inc 2.7
Illinois Tool Works 7.4 Safeway Inc 5.1 Interactive Corp 2.5
Guidant Corp. 7.0 Analog Devices Inc 5.0 Generali 2.5
Newell Rubbermaid Inc 7.0 Liberty Media Corp. 5.0 Sun Hung Kai Properties 2.5
Washington Mutual Inc 6.8 MBNA Corp. 4.9 Kookmin Bank 2.3
Comcast Corp. 6.6 Interbrew 4.9 Bridgestone Corp 2.2
Bed Bath And Beyond Inc 6.6 McKesson Corporation 4.9 Danske Bank A/S 2.2
Devon Energy Corp. 6.5 Canadian National Rail 4.9 Cheung Kong Holdings 2.0
Prudential Financial Inc 6.5 Southtrust Corp. 4.9 BCE Inc 1.9
Sysco Corp. 6.5 Marathon Oil Corp. 4.8 Kddi Corp. 1.9
TJX Companies Inc 6.4 Union Pacific Corp. 4.8 Hutchison Whampoa 1.7
Biomet Inc 6.4 Xilinx Inc 4.8 United Overseas Bank 1.7
CVS Corp. 6.4 Bank Of New York 4.7 Genentech Inc 1.6
Costco Wholesale Corp. 6.3 Intuit Inc 4.7 H. K. Electric Holdings 1.5
Keycorp 6.2 Progressive Corp. Ohio 4.6 Comp. Vale Do Rio Doce 1.5
Gilead Sciences 6.1 Yahoo Inc 4.6 T-Online AG 1.5
General Dynamics 6.1 Marriott International Inc 4.6 China Mobile (Hong Kong) 1.4
Aflac Incorporated 6.0 Consolidated Edison Inc 4.6 KT Corp 1.4
Avon Products Inc 6.0 Automatic Data Process’g 4.5 United Micro Electronics 1.2
Clorox Co 5.9 Walgreen Company 4.4 AP Moller-Maersk 1.1
SBC Communications Inc 5.8 Burlington Resources Inc 4.4 Gucci Group NV 1.0
* Total common shares held by CDP signatories who are top 50 shareholders in these companies

39

Innovest Strategic Value Advisors May 2004

11187 CDP 1-40 10/5/04 5:23 pm Page 40

Carbon Disclosure Project

Microsoft vs Intel
Comparing the CDP responses of the two companies Microsoft and Intel illustrates the differences in thinking
on climate leadership. Although the two firms are in separate but connected segments of the same industry,
Microsoft in software, Intel in hardware and chip manufacturing, both can affect the life cycle impacts of
computer systems around the world. Indeed, the operating systems of hundreds of millions of computers
rely on Microsoft products. In it’s CDP response Microsoft does not mention any steps that it is taking
towards configuring its software in order to minimise energy consumption of computers. The firm’s response
to the CDP question ‘Do you measure the emissions associated with both the use and disposal of your
products and services’ is:

“Due to the categories of products and services we produce, Microsoft does not quantify emissions and has
no current plans to do so.”

The stance contrasts starkly with the pioneering attitude of Intel, who recognise that the chips they make
(that Microsoft software frequently operates), produce serious emissions:

“Intel provides Instantly Available PC (IAPC) technology that reduces the power use to < 5 watts when the
PC is in “sleep mode”. If all PCs in the US operate with Intel IAPC, the US EPA estimates that over 10 years
IAPC would save the following over the Energy Star standard: 75 Million Metric Tons of CO2 eliminated”

40

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 41

Carbon Disclosure Project

V. Appendices
A. Sector Analysis of Responses

B. Methodology For Calculating Energy Price Sensitivity

C. Renewable Energy and Clean Technology:

Global Market Overview

D. The FT500 List of Companies

with Response Status

E. CDP Questionnaire

F. Contacts:
• CDP Signatory Contacts
• CDP Team
• CDP Advisory Board
• Innovest Strategic Value Advisors

41

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 42

Carbon Disclosure Project

APPENDIX A.
Sector Analysis of Responses
In this year’s report, we have attempted to document and characterize
every response in every industrial sector. The tables in this appendix
therefore represent the responder’s performance across each of the
primary elements of the CDP questionnaire.
For a smaller number of “high risk” sectors, we have provided a more detailed analysis in the form of a brief
reminder of the potential impacts of climate change, the inclusion of commentary on best practice taken from
CDP responses, and guidance notes for investors. These sectors are:

• Automobile and Auto Parts Key:

• Banking and Diversified Financials Answered questionnaire AQ
• Chemicals (Specialty & Commodity) Provided environmental report or
• Food Manufacturing, Retailing, Beverages & Tobacco other relevant information IN
• Electric Utilities Questionnaire forthcoming at time
• Insurance and Reinsurance of printing QF
• Integrated Oil and Gas Declined to participate DP
• Metals and Mining (including Steel) No response NR
• Paper and Forest Products If a company has no check marks this is because their
• Transportation response was not sufficiently detailed to warrant any.

In other, lower-impact sectors we provide a breakdown of company response status in six categories of GHG
strategy, based on the CDP question categories:

1. Strategic Awareness: the extent to which a firm considers climate risks and opportunities to be relevant
to its business.
2. Management Accountability/Responsibility: whether and how a company has allocated responsibility
for the management of climate-related issues.
3. Emissions Management and Reporting: the progress a company has made in quantifying and
disclosing/reporting its emissions profile, including the use of third-party verification.
4. Emissions Trading: the extent to which a firm has considered emissions trading in its risk-management
response.
5. Programmes in Place: quality and nature of any emissions reduction programmes, including energy
efficiency, that a firm has implemented.
6. Establishment of Targets: have formal GHG emissions/reduction targets been set with a timeline?

Beginning this year, and where the available data make it possible, we have also added a trend analysis for
certain sectors in which we track the GHG emissions trajectories of FT500 companies. The purpose of this
additional section is to monitor the progress of FT500 companies in making the shift towards a less GHG-
intensive economy and, in doing so, provide some measure of progress. This year, data quality limitations
have restricted this trend analysis to the Automotive, Electric Utilities, and Integrated Oil and Gas sectors.

Finally, as in 2003, we note there are high-risk sectors that are not included here because of a lack of
adequate representation on the FT500 list. The cement, lime, water utilities and waste management sectors
are perhaps the most obvious.

42

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 43

Carbon Disclosure Project

Automobile & Auto Parts

(a) Impacts of Climate Change

• Material increases in operating costs due to higher fossil fuel prices

• Indirect exposure to GHG emissions regulation
• Direct exposure to emission regulations on personal and commercial vehicles
• Competitive emphasis on low-emissions, high-efficiency engine technology
• More public policy support for hydrogen economy-related R&D
• Competition from sustainable pubic transport initiatives, particularly in cities
• Opportunities for next-generation, zero-emission vehicles, particularly in developing world markets

(b) Analysis of CDP Responses

AUTOMOBILE AND AUTO PARTS

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Manufacturing Vehicle CO2 Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Energy Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

BMW ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
DaimlerChrysler AG ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Ford Motor Company ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
General Motors Corp. ✔ ✔ ✔ ✔ ✔ ✔ ✔
Harley-Davidson NR NR NR NR NR NR NR NR NR
Automobiles

Honda Motor
Company Limited ✔ ✔ ✔ ✔ ✔ ✔ ✔
Nissan Motor
Company Limited QF QF QF QF QF QF QF QF QF
Peugeot SA ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Renault ✔ ✔ ✔ ✔ ✔ ✔ ✔
Toyota Motor Corp. ✔ ✔ ✔ ✔ ✔
Volkswagen AG ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Auto Parts

Bridgestone Corp. DP DP DP DP DP DP DP DP DP
Denso Corp. ✔ ✔ ✔ ✔ ✔ N/A ✔

(c) Guidance for Investors

• Carbon constraints will first and foremost raise the competitive stakes surrounding vehicle fuel
economy. The race is on among auto manufacturers to continue to improve the fuel efficiency of their
vehicles, both for competitive purposes, and to keep in line with regulations in the regions in which they
operate. German car manufacturers have committed to reducing average fuel consumption of new
vehicles by 25% by 2005, thus reducing CO2 emissions by 25%. BMW reached this target in 2003.
Under the auspices of the ACEA, European car manufacturers – including Renault and Volkswagen –
have agreed to reduce the CO2 emissions of new vehicles to 140 g/km by 2008. Renault is also
working on new motors and power train technologies, as well as lightening materials to decrease fuel
consumption. DaimlerChrysler will have on-road experience with more than 100 fuel-cell vehicles by
the end of 2004, and it has already put Natural Gas Technology vehicles on the market.

• Auto manufacturers vary greatly in the GHG intensity of their operations (see trend analysis on page 45).

43

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 44

Carbon Disclosure Project

• More manufacturers are publicly disclosing the CO2 emissions of every car and engine they
produce, including, in their CDP responses, BMW and Ford. Ford describes how it is participating in the
Revisions Working Group, preparing the next edition of the GHG Protocol. Ford has committed to 2% of
energy supply from renewable energy in the US. Volkswagen is working to develop alternative fuels that
will not require changes in the combustion engine, such as “SynFuel” (ex: natural gas) and “SunFuel”
(biomass) both being developed through partnership arrangements.

• Advanced vehicle technology R&D continues apace. All of the auto majors are active in clean
engine/fuel technology development. Related developments over 2003/4 include Ford’s Escape Hybrid,
which is due on the market in mid-2004 and, in the luxury class, its new Jaguar which has much improved
fuel economy. Ford also has a hybrid fuel-cell vehicle in third-stage generation, but it is not yet
commercially available. GM continues to focus on Gasoline Direct Injection, Displacement on Demand
engines, Continuously Variable Transmissions, hybrid propulsion systems and lightweight materials for
mass reduction. GM expects to produce the first hybrid pickup truck in North America, as well as a hybrid
propulsion system for urban transit buses. BMW’s initiatives include “Valvetronic” (a fully variable valve
train), second-generation High Pressure Diesel Injection, six-speed automatic transmissions, and tyres with
reduced rolling resistance. BMW’s long-term goal is to focus on hydrogen vehicles. However, no details
were provided on projects or status of developments. DaimlerChrysler continues with its long-term, c1
billion programme to bring fuel-cell vehicles to market. (Fuel-cell buses underwent field tests in 2003.)

• Reducing emissions and reducing costs can go hand in hand. As we reported last year, although
CO2 emissions linked to vehicle manufacturing account for less than 10% of the CO2 produced during
the entire life of a vehicle, manufacturers’ own carbon emissions will directly translate into increased
operating costs. These costs will take two forms: direct carbon charges or increased fuel/energy costs.
This year’s responses indicate that companies have been proactively addressing this issue. BMW reports
that the cost of reducing one tonne of CO2 will range from c100 to c1,000. Ford’s plant fuel switching
project at one site will save more than $400,000 per year and result in over 12,000 tonnes of avoided
CO2 emissions. Volkswagen’s energy savings initiatives saved one plant c1.3 million each year by
reducing ambient temperature by one degree.

Effect of increase in energy cost on stock price

at various assumed levels of energy cost as a % of operating expense
Automobile Sector
Assumed energy cost as a % of operating expense: 5% 10% 15% 20% 25% 30%
0%

-5%

-10%
Decrease in Stock Price

-15%

-20%

-25%

-30%

-35%

-40%

-45%

-50%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Increase in Energy Price

44

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 11/5/04 12:18 pm Page 45

Carbon Disclosure Project

• Regional manufacturing plant distribution will be a key determinant of exposure. Within the Annexe
1 group, manufacturers with major plants in Ontario and Germany appear to be best off (the former
because of exemptions; the latter because of the German emissions pooling arrangement). Firms with
greater non-Annexe 1 manufacturing operations will clearly have lower regulatory hurdles to surmount.

• Involvement in emissions trading activities has increased over the past year. VW, which considers
its Czech power plant at Mlada Boleslav to be one of the most important AIJ (activity implemented jointly)
projects worldwide, and Ford, which has participated in the UK Emissions Trading Scheme and in the
design phase of the US Chicago Climate Exchange, appear to be leading the way. Ford’s involvement in
the Chicago Climate Exchange, commits the company to reduce US GHG emissions by 4% by 2006.
DaimlerChrysler, which has 13 facilities affected by the EU’s Emissions Trading Directive, is “preparing
internally” for participation.

• Carbon-consciousness provides opportunities for strategic partnerships. Responses indicate that

strategic positioning (via R&D, public/private partnerships) around hydrogen-based transportation systems
remains particularly important. DaimlerChrysler’s partnerships with Ballard (fuel cells) and Choren
(biofuels), both continuing in 2003, are expected to make significant contributions to the long-term
competitive advantage of the firm. Volkswagen is also working with Choren in collaboration with DC on
SunFuel technologies. GM and Ford’s aluminium recycling agreements with Alcan are expected to do
likewise. Ford now has an equity stake in Ballard, and Volkswagen has been teaming up with Shell on
synthesis gas projects.

(d) CDP Trend Analysis

The charts below illustrate the changes over the past year in the top auto firms’ (reported GHG emissions
per vehicle produced).

CDP Trend Analysis

2001 Data 2002 Data
2

1.8

1.6

1.4
CO2e tons/unit production

1.2

0.8

0.6

0.4

0.2

0
DCX GM Ford BMW Toyota VW Honda Renault

45

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 46

Carbon Disclosure Project

Banking and Finance

(a) Impacts of Climate Change

• Uneven and unpredictable impacts on global markets

• Hidden carbon liabilities change industry dynamics and impair market value of assets
• Impaired credit quality of GHG-intensive borrowers
• Compounding risk across entire portfolio of converging activities
• Physical damage, increased energy and insurance costs to real-estate portfolios
• Liability concerns over disregard for carbon risks
• Opportunities in financing infrastructure development re. adaptation
• Opportunities in $500bn-plus GHG emissions trading markets
• Opportunities in clean technology markets

(b) Analysis of CDP Responses

BANKING
Strategy to Prepare for
Responsibility Quantified GHG Reporting
Considers Climate Emissions Trading Regimes Emission Reduction
Allocated for Formal GHG
Change to Present Programs in Place
Management of Evidence Use of Third Reduction Targets
Risks and/or (including energy
Climate Change Monitoring of Early Emissions Data Party Reporting Set With Timeline
Opportunities efficiency)
Related Issues Developments Engagement Disclosed Protocol/Verification

Al Rajhi Banking
& Investments NR NR NR NR NR NR NR NR
Australia and New
Zealand Banking Group ✔ ✔ ✔ ✔ ✔ ✔
BOC Hong Kong
Holdings Limited NR NR NR NR NR NR NR NR
Commonwealth
Bank of Australia IN IN IN IN IN IN IN IN
DBS Group Holdings
Kookmin Bank NR NR NR NR NR NR NR NR
Banks - Asia

Malayan Banking Berhad ✔

Mitsubishi Tokyo
Financial Group ✔ ✔ ✔
Mizuho Financial Group DP DP DP DP DP DP DP DP
National Australia
Bank Limited ✔ ✔ ✔ ✔ ✔ ✔ ✔
Saudi American Bank NR NR NR NR NR NR NR NR
Sumitomo Mitsui
Financial Group DP DP DP DP DP DP DP DP
United Overseas
Bank Limited ✔
Westpac Banking Corp. ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
ABN Amro Holding NV ✔ ✔ ✔ ✔ ✔ ✔
Banca Intesa QF QF QF QF QF QF QF QF
Banco Popular Espanol NR NR NR NR NR NR NR NR
Banks - Europe

BBV Argentaria ✔ ✔ ✔
BNP Paribas ✔ ✔ ✔ ✔
Credit Agricole ✔ ✔ ✔
Credit Suisse Group ✔ ✔ ✔ ✔ ✔
Danske Bank A/S DP DP DP DP DP DP DP DP
Deutsche Bank AG ✔ ✔ ✔ ✔ ✔ ✔

46

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 47

Carbon Disclosure Project

BANKING (continued)
Strategy to Prepare for
Responsibility Quantified GHG Reporting
Considers Climate Emissions Trading Regimes Emission Reduction
Allocated for Formal GHG
Change to Present Programs in Place
Management of Evidence Use of Third Reduction Targets
Risks and/or (including energy
Climate Change Monitoring of Early Emissions Data Party Reporting Set With Timeline
Opportunities efficiency)
Related Issues Developments Engagement Disclosed Protocol/Verification

Dexia ✔ ✔ ✔ ✔
KBC Bankverzekerings
Holdings ✔ ✔ ✔
Nordea AB ✔ ✔ ✔ ✔ ✔
Banks - Europe

SAN PAOLO IMI SPA ✔ ✔ ✔ ✔ ✔ ✔

Santander Central
Hispano ✔ ✔ ✔ ✔ ✔
Societe Generale ✔ ✔
Svenska Handelsbanken ✔ ✔ ✔
UBS AG ✔ ✔ ✔ ✔ ✔ ✔ ✔
Unicredito Italiano Spa ✔ ✔ ✔ ✔ ✔
Bank Of America Corp. ✔ ✔ ✔ ✔
Bank Of Montreal Quebec ✔
Bank Of New York NR NR NR NR NR NR NR NR
Bank One Corp. DP DP DP DP DP DP DP DP
BB & T ✔
Canadian Imperial
Bank Of Commerce ✔ ✔ ✔
Federal Home
Loan Mortgage DP DP DP DP DP DP DP DP
Federal National
Mortgage Association IN IN IN IN IN IN IN IN
Fifth Third Bancorp NR NR NR NR NR NR NR NR
Banks - North America

Golden West Financial ✔

Keycorp DP DP DP DP DP DP DP DP
Mellon Financial Corp. DP DP DP DP DP DP DP DP
National City Corp.
PNC Financial
Services Corp. ✔
Royal Bank Of Canada ✔ ✔ ✔ ✔ ✔ ✔ ✔
ScotiaBank ✔ ✔ ✔ ✔
Southtrust Corp. DP DP DP DP DP DP DP DP
Suntrust Banks Inc DP DP DP DP DP DP DP DP
Toronto Dominion Bank IN IN IN IN IN IN IN IN
US Bancorp Delaware NR NR NR NR NR NR NR NR
WACHOVIA CORP ✔
Washington Mutual Inc DP DP DP DP DP DP DP DP
Wells Fargo And Co
Abbey National PLC ✔ ✔ ✔ ✔ ✔ ✔ ✔
Allied Irish Banks PLC
Bank Of Ireland QF QF QF QF QF QF QF QF
Banks - UK and Ireland

Barclays PLC ✔ ✔ ✔ ✔ ✔ ✔ ✔
Hbos PLC ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
HSBC Holdings PLC ✔ ✔ ✔ ✔ ✔ ✔ ✔
Lloyds TSB Group PLC ✔ ✔ ✔ ✔ ✔ ✔
Royal Bank Of Scotland
Group PLC ✔ ✔ ✔ ✔ ✔ ✔ ✔
Standard Chartered PLC ✔ ✔ ✔ ✔ ✔ ✔

47

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 48

Carbon Disclosure Project

DIVERSIFIED FINANCIALS
Considers Responsibility Quantified GHG Reporting
Emission Reduction
Climate Change Allocated for Strategy to Prepare Formal GHG
Programs in Place
to Present Management of for Emissions Use of Third Reduction Targets
(including energy
Risks and/or Climate Change Trading Regimes Emissions Data Party Reporting Set With Timeline
efficiency)
Opportunities Related Issues Disclosed Protocol/Verification

American Express
Company NR NR NR NR NR NR NR
Citigroup Inc ✔ ✔ ✔ ✔
Fortis ✔ ✔ ✔
Franklin Resources QF QF QF QF QF QF QF
Goldman Sachs
Group Inc NR NR NR NR NR NR NR
ING Groep NV ✔ ✔ ✔ ✔
JP Morgan Chase
And Company QF QF QF QF QF QF QF
Lehman Brothers Holdings
Inc. (Peabody Energy) IN IN IN IN IN IN IN
MBNA Corp. NR NR NR NR NR NR NR
Merrill Lynch
And Company Inc ✔ ✔ ✔ ✔ ✔
Morgan Stanley DP DP DP DP DP DP DP
Nomura Company Limited
Power Financial Corp. DP DP DP DP DP DP DP
Principal Financial Group IN IN IN IN IN IN IN
Schwab Charles Corp. NR NR NR NR NR NR NR
SLM Corp. QF QF QF QF QF QF QF
State Street Corp. ✔ ✔ ✔ ✔ ✔

(c) Guidance for Investors

• Banks getting their own house in order remain good strategic bets. Our opinion from last year holds:
those banks with the most sophisticated internal GHG management systems are overwhelmingly those
with the best overall risk-management approach to climate change. Further, there is a clear correlation
between those banks that demonstrate the best understanding of climate-change risks and
opportunities, and those that are most prepared to offer new climate-related services to clients. ABN
AMRO, HSBC, Barclays, HBOS, Lloyds TSB, RBC, ANZ, Abbey National, Deutsche Bank, UBS and
Westpac – all identified above as leaders in client service in emissions trading – can be singled out as
having leading climate-change strategies.

• Macroeconomic risks loom larger across the spectrum of banking activities. Firms acknowledge
that climate risks may affect their business. As this report details, climate change has the potential to
cause major disruptions to a range of sectors, from tourism and agriculture to power generation and real
estate. This year, several firms acknowledged this new commercial reality by highlighting the risks to their
clients and showing how losses could impact the credit quality of clients and the value of equity
investments. ABN AMRO conducted extensive interviews with corporate clients to analyze the climate
impacts that face the company’s cross-sector client base. In Asia, Malayan Bank noted that its local
experiences in the late 1990s with the effects of El Nino (causing Pacific warming) and the pollution haze
issue had reinforced concerns over the economic costs of climate change. In Australia, Westpac has
joined a coalition of companies to undertake a planning exercise – mapping the economic effects of
climate change across a number of key industries; National Australia Bank is undertaking specific
analysis of the aluminium, automobile and mining sectors to better understand climate-related credit risks.

48

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 49

Carbon Disclosure Project

• Credit risk and insurance losses are the focal points of management concern. Increased risk from
credit impairment was raised as a key issue by a number of banks, including Scotiabank, Standard
Chartered, HBOS, ABN AMRO and ANZ. Westpac, in particular, has commenced analyzing the
greenhouse-gas risk profiles of customers in its debt portfolio. RBC reports that is has developed a
strategy for incorporating “carbon risk” into the risk assessment of borrowers in high-risk sectors. For
banks with insurance businesses, many have flagged increasing claims due to weather damage as a
major potential risk.

• Structured finance market for renewable energy takes off. Many banks have undertaken a serious
assessment of climate-related market opportunities. The majority have clearly identified renewable energy
projects as offering the greatest risk/return profiles in the short term. Deal making is predominantly in
Europe, where renewable portfolio standards are proliferating at the most rapid pace, but some North
American firms are exploring financing opportunities as well. As lead arranger on a number of syndicated
renewable energy projects, Dexia reports that its outstanding in the renewable energy sector is now
worth more than c200 million, or about 10% of the c2 billion total of syndicated renewable energy
funding. Santander Central Hispano has financed more than 35 wind farms over the past five years with
a committed investment of over c250 million. RBC’s alternative energy portfolio includes more than 20
wind farms and its $50 million alternative energy technology venture fund. HBOS’s Project Finance Power
team reports arranging finance for multi-million-pound renewable energy projects in the UK and overseas.
Scotiabank sees its positioning as a leading corporate banker to the power industry as offering
tremendous opportunities to help its clients finance hydro, wind farm and biomass energy generation
facilities. Barclays, ABN AMRO, BNP Paribas and ANZ also report providing financial services to
renewable energy projects, primarily via structured finance deals.

• Innovative new funds are emerging to capture opportunities. Dexia is developing its Dexia FondElec
Energy Efficiency & Emissions Reduction Fund, which was created by the ERDB and is designed to
finance the reduction of energy consumption and GHG emissions in central and eastern Europe over the
next 10 years. Sanpaolo IMI says it is working on the structuring of funds dedicated to emissions
credits, financing infrastructure adaptation and energy efficiency projects. ABN AMRO also notes that it
sees opportunities to establish funds that specialize in low-carbon investments.

• Emissions trading markets offer new client service opportunities; market development remains
critical. Virtually every leading bank has recognized the future opportunities afforded by emissions trading
(ET) market development. ABN AMRO has examined market supply, demand and price scenarios using
in-house analytical models. It claims to have responded to client interest in the cross-border supply of
contingent compliance units. Canada-based CIBC is monitoring the development of these markets with a
view to offering emissions-trading services to clients. RBC – also based in Canada – has taken its efforts
a step further by not only monitoring developments but also by collaborating with the International
Emissions Trading Association on initiatives to develop the framework for a Canadian carbon market. In
Australia, ANZ is reviewing the progress of various ET schemes; Westpac has established an
Environmental Markets Group with a focus on carbon credit opportunities and Australia’s renewable
energy certificate market. Sanpaolo IMI reports that it is working towards structuring dedicated climate-
related funds to invest in GHG credits. Others, such as Abbey National and UBS have extensively
examined the markets in the past, and await sufficient ET market development before rolling out
dedicated business units.

49

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 50

Carbon Disclosure Project

(d) CDP Trend Analysis

To understand how CDP respondents from the banking sector are positioning themselves on the issue of
renewable energy financing, we have examined the proportion of CDP respondents with concrete initiatives in
clean energy financing this year versus last.

Banking and Renewables

% of Banking Sector
Responders that Noted
Engagement in Renewable
2003 Energy Projects

% of Banking Sector
Responders that Flagged
Renewable Energy as
an Opportunity

2002

0% 5% 10% 15% 20% 25% 30% 35%

Chemicals – Specialty and Commodity

(a) Impacts of Climate Change

• Material increases in operating costs due to higher energy prices

• Exposure to national GHG emissions regulations
• Unplanned/premature capital outlays
• Altered market dynamics for agriculture products
• Higher transportation and distribution costs
• Heightened demand for clean technology-related specialty chemicals
• Increasing demand for technologies that reduce emissions for users/customers
(ex. certain types of inhalers)

50

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 51

Carbon Disclosure Project

(b) Analysis of CDP Responses

CHEMICALS
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Air Products
and Chemicals ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Air Liquide ✔ ✔ ✔ ✔ ✔ ✔
BASF ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Bayer ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Dow ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
DuPont ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
PPG Industries ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Praxair ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Reliance Industries NR NR NR NR NR NR NR NR NR
Saudi Basic Industries NR NR NR NR NR NR NR NR NR
ShinEtsu ✔ ✔ ✔ ✔ ✔ ✔ ✔

(c) Guidance For Investors

• The hallmarks of a good climate change strategy are identifiable. Dow Chemical maintains its
leading four-pronged climate-change strategy, which covers technology, business integration, new
products and stakeholder involvement. Implementation is spearheaded by a multidisciplinary Climate
Change Opportunity Management Team. This year’s leader, Air Products, is developing a range of
innovative energy technologies and has begun capitalizing on business opportunities as a low carbon
technology provider.

• More firms are measuring emissions using standardized GHG measurement systems (such as the
GHG Protocol developed by WBCSD/WRI) for their own emissions. Leaders, such as Air Products,
BASF, DuPont and Praxair measure emissions under both Scope 1 (direct) and Scope 2 (from imported
electricity). Reductions of these emissions continue to translate into savings in operating costs.

• Energy intensity continues to be is a key risk driver. Last year, BASF, the German chemicals giant,
estimated that every c0.01 increase per kilowatt hour resulted in additional costs of about c58 million for
some manufacturing sites. To illustrate this point, refer to the chart below, in which we have estimated the
effect on stock valuation of CDP-responding chemical companies to increases in energy costs as a
percentage of operating expense. Interviews with industry experts revealed that energy costs in the
chemical sector typically ranged from 5% to 25% of operating expense. All else being equal, even at a
5% assumed increase in energy costs, the downward pressure on stock price can range anywhere from
3% to 20%. As illustrated by the chart below, at higher assumed increases in energy costs, the range
of negative stock-price impacts is even further amplified. This analysis is intended to be indicative of
energy sensitivity in the sector and is dependent on a) any energy cost increases being permanent, and
b) market conditions in which costs cannot be readily passed on to consumers. For methodology, see
Appendix B.

51

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 52

Carbon Disclosure Project

Effect of increase in energy cost on stock price

at various assumed levels of energy cost as a % of operating expense
Chemical Sector
Assumed energy cost as a % of operating expense: 5% 10% 15% 20% 25% 30%
0%
According to industry experts
-5% interviewed by Innovest, energy costs
in the Chemical sector typically
-10% range from 5% to 25% of operating
Decrease in Stock Price

-15%

-20%

-25%

-30%

-35%

-40%

-45%

-50%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Increase in Energy Price

• As a result, energy efficiency is at a premium. Nearly all firms that submitted responses were spending
capital on more energy-efficient equipment, or fuel switching, whose savings translate to a reduction in
operating costs over time. Air Products was able to reduce global power consumption by 26mw in 2002
and 29mw in 2003. This is the equivalent to the annual power consumed by 56,000 average US homes
and approximately 300,000 tonnes of CO2 emissions. Dow’s energy-efficiency target, when reached in
2005, will mean the reduction of 290 trillion BTUs – equivalent to California’s annual residential electricity
use. DuPont has estimated its fuel savings at more than $2 billion since 1990 due to conservation and
improved product yield.

• Most firms are working to meet emissions targets through improved efficiency, which often
involves fuel switching. Air Products is involved in Gas-to-Liquid (GTL) and Liquefied Natural Gas
(LNG) technologies that are expected to grow only as the natural gas market continues to expand. Dow
is now generating 75% of its power through cogeneration, which has helped to increase its energy
efficiency to nearly 80%. PPG installed a $242 million, 425mw cogeneration plant that is twice as fuel-
efficient as previous plants.

• New market opportunities are being pursued with enhanced vigour. Air Products is working with
organizations to develop and promote the commercialization of hydrogen as a fuel in portable, stationary
and transportation fuel markets. It is also aiding in technology development for the CO2 Capture Project,
which seeks to develop new technologies to reduce the cost of capturing CO2 from combustion sources
and storing it underground. The company has also invested in a new specialty gases manufacturing plant
that produces longer-living and lower-power consumption solutions for lighting applications (energy
efficient light emitting diodes). Dow signed an agreement with GM to install GM Fuel Cells at a Dow
operating plant in Texas. This will provide 2% of the plant’s required electricity – the same as for 25,000
homes in one year. The firm is also working on performance plastics and engineered fibre board made
from renewable resources. PPG is developing specialty commercial and residential glass that it says will
keep out more solar heat than glass produced by its competitors.

52

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 53

Carbon Disclosure Project

• Leading firms are getting involved in the carbon finance markets. BASF is now a participant in the
World Bank’s Community Development Carbon fund, which is investing $2.5 million over 15 to 17 years
to finance GHG reduction projects that can be recognized as CDMs under Kyoto. DuPont, a pioneer of
the emissions trading markets, became a charter member of the Chicago Climate Exchange and
participated in its first auction of CO2 emissions.

Electric Utilities & Power

(a) Impacts of Climate Change

• High exposure to GHG emissions regulations

• Transmission efficiency may be affected by climate change
• Material increases in operating costs; coal to gas switching may be required
• Potential climate-change related damage to facilities; higher maintenance costs
• Premature retirement of physical stock not fully depreciated
• Changing seasonal electricity demand patterns
• Pressure to increase end-user rates
• More emphasis on renewable/clean power; Renewable Portfolio Standard requirements

53

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 54

Carbon Disclosure Project

(b) Analysis of CDP Responses

ELECTRIC POWER INDUSTRY

Strategy to Prepare for
Responsibility Quantified GHG Reporting
Considers Climate Emissions Trading Regimes Emission
Allocated for Formal GHG
Change to Present Reduction
Management of Evidence Use of Third Reduction Targets
Risks and/or Programs
Climate Change Monitoring of Early Emissions Data Party Reporting Set With Timeline
Opportunities in Place
Related Issues Developments Engagement Disclosed Protocol/Verification

American Electric Power ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

Consolidated Edison NR NR NR NR NR NR NR NR
Dominion Resources DP DP DP DP DP DP DP DP
Electric Utilities - N. America

Duke Energy ✔ ✔ ✔ ✔ ✔ ✔
Entergy ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Exelon ✔ ✔ ✔ ✔ ✔ ✔
FirstEnergy ✔ ✔ ✔ ✔ ✔ ✔
FPL Group ✔ ✔ ✔ ✔ ✔ ✔ ✔
Progress Energy ✔ ✔ ✔ ✔ ✔
Public Service
Enterprise Group ✔ ✔ ✔ ✔ ✔ ✔ ✔
Southern Company ✔ ✔ ✔ ✔ ✔ ✔
Chubu Electric
Power Company ✔ ✔ ✔ ✔
CLP Holdings Ltd ✔ ✔ ✔ ✔ ✔
E On AG ✔ ✔ ✔ ✔
Electrabel ✔ ✔ ✔ ✔ ✔ ✔
Endesa ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
ENEL ✔ ✔ ✔ ✔ ✔ ✔ ✔
Energie Baden-
Wuerttemberg ✔ ✔ ✔ ✔ ✔
Electric Utilities - International

Hong Kong Electric

Holdings Limited NR NR NR NR NR NR NR NR
Iberdrola ✔ ✔ ✔ ✔ ✔
Kansai Electric
Power Company ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Korea Electric Power NR NR NR NR NR NR NR NR
National Grid
Transco PLC ✔ ✔ ✔ ✔ ✔ ✔
RWE ✔ ✔ ✔ ✔ ✔ ✔ ✔
Saudi Electricity NR NR NR NR NR NR NR NR
Scottish & Southern
Energy ✔ ✔ ✔ ✔ ✔ ✔ ✔
Scottish Power ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Tohoku Electric
Power Company ✔ ✔ ✔ ✔ ✔ ✔
Tokyo Electric
Power Company ✔ ✔ ✔ ✔ ✔ ✔

54

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 55

Carbon Disclosure Project

(c) Guidance for Analysts

Electric Utilities vary in terms of absolute emissions and emissions intensity:

N. America: 2000 CO2 Emissions (tons) and 2000 CO2 Emissions Rate (lbs/Fossil MWh) by Company
2001 CO2 tons Fossil CO2 Rate lb/MWh
200,000,000 2500

180,000,000

160,000,000 2000

140,000,000

120,000,000 1500

100,000,000

80,000,000 1000

60,000,000

40,000,000 500

20,000,000

0
AEP
SO
XEL
TXU
CIN
EIX
CNP
AES
PGN

AEE

DUK
ETR
FPL

FE

DTE
PPL
CMS
CEG
TE
PNW

PEG
EXC
CNP
Average

D
AYE

Source: Natural Resources Defense Council and Innovest

NOTE: Data include emissions of regulated and unregulated plants

International: 2001-2003 Self-Reported CO2 Emissions Intensity (grams/kWh) by Company

Self-Reported Emissions Intensity (grams CO2/kWh)
Tohoku Electric
Scottish Power - UK Division
Scottish Power - Pacificorp
Scottish & Southern Energy 2003
RWE - UK 2002
2001
RWE - Germany
Kansai Electric
Iberdrola
Energie Baden-Wuerttemberg
ENEL

Endesa
Electrabel
E.On

CLP Holdings
Chubu Electric
0 100 200 300 400 500 600 700 800 900 1000
Energie Scottish Scottish Scottish
RWE -
Chubu CLP Electrabel Baden- Kansai RWE - & Power - Power - Tohoku
E.On Endesa ENEL Iberdrola Germany
Electric Holdings Wuertte Electric UK Southern Pacificorp UK Electric
mberg Energy Division
2003 509 410 358 122 230 747 726 400 916 460 425
2002 439 407 270 500 550 260 242 240 352 925 510 429
2001 500 500 534 250 140 250 403 880 510

Source: Innovest/company reports

55

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 56

Carbon Disclosure Project

• Given the exposure of the sector to emissions restrictions and the length of the planning cycle in
the power business, management strategy remains critical. The central dilemma remains for utilities
operators: take action to curtail emissions now, under an uncertain regulatory environment, or risk trying
to catch up later, when the market value of carbon credits may be higher. We continue to hold the
opinion that well-positioned firms will be those that have been taking action for several years now.
Entergy has established a corporate-wide carbon inventory and has committed to achieve 2000 CO2
emission levels by 2005 through internal reductions (higher nuclear utilization) and external offset projects.
To date, it has invested $22 million in projects with estimated CO2 reductions of 2.2 million tonnes by
2005. Kansai Electric Power is taking action in collaboration with Japan’s Federation of Electric Power
Companies, which has collectively set a reduction target of 0.34 kg of CO2 per year by 2010. Iberdrola
has created a task force responsible for defining the company’s policies and strategies regarding climate
change and emissions trading. This cross-functional group reports directly to the CEO and focuses on a
variety of technical, regulatory, and economic aspects of climate change. E.ON has established an
Emission Trading Supervisory Group at the corporate level and special task forces at the subsidiary level
(supervised by a board member) to assist in the management of emissions trading.

• Asset pricing calculations increasingly incorporate a “carbon risk” premium. A critical new tool for
management planning in the electric power industry is the assumed carbon penalty when evaluating
investments in generating assets. As we noted last year, we believe that the inclusion of carbon shadow
prices into liquidity, valuation and balance sheet calculations is a prudent step towards managing carbon
risks. The corollary of this continues to be the potential for carbon risk premiums to put upward pressure
on asset pricing. This year, the leading practitioner is Scottish Power. Its US subsidiary Pacificorp has
included a carbon valuation within its Integrated Resource Planning process. Using a range of carbon
prices up to $40 per tonne of CO2, it has created scenarios surrounding optimum generation portfolios
given such a price range. Like many of its European competitors, Scottish Power describes its European
carbon cost scenarios as “commercially confidential” due to the competitive nature of the power market.

• Coal-dependent utilities face the greatest risk. Increasing evidence suggests that the “carbon
intensity” of a firm’s generation portfolio, which is directly related to the incidence of coal within the
fuel/energy mix, is a crucial aspect in modelling corporate exposure to climate-change risks. Other factors
to assess include the carbon regulatory environment, geographic distribution of generating assets, power
market dynamics and the sophistication of corporate emissions management/hedging strategy. To lessen
this risk exposure, several firms are taking action. Iberdrola is phasing out up to 4,000mw of its former
fuel-oil and coal-fired plants. Electrabel is increasing its share of natural gas in its fuel mix, specifically
at the expense of coal. Also, Electrabel Netherlands has signed a Coal Covenant with the Dutch
government to have an annual absolute reduction target of 466 kton in the period 2008-2012. With the
phase out of nuclear energy, German utilities RWE, E.ON, and Energie Baden Wurtenburg may face
greater risks as they become more dependent on their coal facilities.

• To balance increasing market and environmental regulatory forces, utilities are investing more in
combined-cycle gas turbine (CCGT) technology plants. In Spain, Iberdrola plans to have more than
6,000mw of CCGT installed by 2008, with investments of c2.4 billion over 2004-2008. Its current installed
capacity in Spain is 3,800mw. Electrabel is increasing its share of CCGT plants and is currently replacing
one of its German coal-CHP plants with a new CCGT-CHP facility. Endesa plans to increase its CCGT
capacity by 2800mw, reaching 4000mw by 2008.

• Distributed power generation market continues to mature on the back of reliability concerns and
demand for better energy/transmission efficiency. According to market experts, even the modest
introduction of distributed generation (DG) technologies would significantly reduce line losses and ease
the strain on an increasingly congested transmission and distribution system. This would create a growing

56

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 57

Carbon Disclosure Project

number of opportunities for stand-alone distributed energy sources and dependable power supplies. The
backup power market alone has been estimated to be worth about $10 to $20 billion, growing at about
20% annually. FPL Energy is involved in this market by facilitating the interconnection of photovoltaic (PV)
energy to the grid. ConEd promotes DG systems by allowing customers to sell back their excess wind
and photovoltaic energy and by offering net metering tariffs. Exelon also provides various financial
incentives for on-site PV and wind systems under 40kw. In Europe, Iberdrola reports various R&D
projects focused on DG innovation.

• Emissions trading is a key part of the near-term risk management armoury. As the most viable
current option in an embryonic and fragmented CO2 regulatory regime, emissions trading holds court as
the market-based compliance mechanism of choice in the power industry. At present, most firms are still
awaiting the finalization of National Allocation Plans (NAPs) before making definitive investment decisions.
Despite this uncertainty, firms such as Electrabel have already begun to test the market through small
transactions, and seem intent on involvement in regulatory discussions to define the legal nature of
emissions rights, accounting issues, tax treatment of emissions rights and the development of standard
trading contracts. RWE Trading GmbH has participated in emissions trading in the UK and Denmark, and
reports participation in a European Pre-Compliance trade. In the US, despite the continuing uncertainty
surrounding the structure of any national trading regime, some firms have taken anticipatory action. AEP,
for example, is a founding member of the Chicago Climate Exchange (a voluntary pilot greenhouse gas
trading programme) and the only participating US electric utility.

• Meanwhile, firms seek out long-term technological solutions to carbon capture and storage.
Carbon sequestration technologies are gaining popularity among power generators as a long-term option
to achieve cost-effective compliance in a tightening regulatory environment. The technology offers hope
that power producers can continue to use vast global coal reserves while drastically reducing atmospheric
GHG emissions in the process. While sequestration’s technological effectiveness and political acceptance
as an environmentally effective offset mechanism remains far from certain, firms continue to plough R&D
resources into pilot research projects. AEP funds and participates in consortium efforts to research the
potential of terrestrial and geological carbon sequestration. It hosts a sequestration research project at
AEP’s Mountaineer Plant in West Virginia to test the capability of deep saline aquifers for storage of carbon
dioxide emissions. Under President George W. Bush’s $1 billion FutureGen Initiative, it partners with the
DOE and other utilities to develop and test a coal-derived hydrogen power plant. Endesa and Kansai are
less specific in their initiatives, but each claims to be focusing on carbon sequestration.

• Renewable energy growth continues apace as the dynamics of the energy marketplace evolve.
Environmental concerns, technological advancement, energy security issues, ongoing structural change
and broader market liberalization are all contributing to the growth in opportunity for renewable energy. In
general terms, the advantages of wind, geothermal, hydro, photovoltaic, biomass and the like are by now
well-recognized: declining cost (in certain situations), modularity, flexibility, lack of need for large capital
investments, lack of reliance on volatile fuel prices and, of course, low environmental impact. In line with
this thinking, both US and European power generators continue to make early-stage investments.
Iberdrola’s Strategic Plan notes planned renewable energy investments of c1.4 billion over 2004-2008.
It currently has installed renewables capacity of over 2,200mw and plans to increase this to more than
4,500mw by 2008. FPL Energy’s 2,719mw of installed wind capacity accounts for 43% of the US total
in this field. It also operates one of the world's largest solar plants in California. Endesa has plans to
install 2,100mw of renewable energy for a total of 3,400mw by 2008. Scottish and Southern Energy is
investing £220 million in wind energy and £250 million to upgrade its hydroelectric plants. Scottish
Power plans to invest £500 million in additional wind energy (800mw) by 2010. While the proportion of
wind in its overall fuel mix is minor, AEP continues to expand in this area, with about 300mw of capacity
in Texas. This makes the company one of the larger wind generators in the US.

57

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 58

Carbon Disclosure Project

Insurance & Reinsurance

(c) Impacts of Climate Change

• Liquidity problems for P/C insurers, reinsurers arising from large weather-related losses
• New and existing markets become unviable as climate change increases regional exposure
• Business interruption risks becoming unpredictable and more financially relevant
• Increases in population and infrastructure densities multiply size of maximum potential losses from
extreme weather events
• Opportunities exist in weather derivatives, catastrophe bonds, and GHG emissions trading
• Increased risks to human health (thermal stress, vector-borne disease, natural disasters)
• Insurance of GHG offset and clean energy projects and related financial services
• Professional indemnity for carbon credit guarantors and certifiers provides both risk (increased liability)
and opportunity (growing insurance market)

58

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 59

Carbon Disclosure Project

(d) Analysis of CDP Responses

INSURANCE & REINSURANCE

Strategy to Prepare for
Responsibility Quantified GHG Reporting
Considers Climate Emissions Trading Regimes Emission
Allocated for Formal GHG
Change to Present Reduction
Management of Evidence Use of Third Reduction Targets
Risks and/or Programs
Climate Change Monitoring of Early Emissions Data Party Reporting Set With Timeline
Opportunities in Place
Related Issues Developments Engagement Disclosed Protocol/Verification
Insurance

Cathay Financial ✔ ✔ ✔
Asia

Millea Holdings DP DP DP DP DP DP DP DP
Aegon NV NR NR NR NR NR NR NR NR
Allianz AG a ✔ ✔ ✔ ✔ ✔
AXA ✔ ✔ ✔ ✔
Generali DP DP DP DP DP DP DP DP
Insurance
Europe

Munich Re ✔ ✔ ✔ ✔ ✔ ✔ ✔
RAS RNC ✔ ✔ ✔ ✔
Swiss Re ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Zurich Financial
Services ✔ ✔
Ace Limited ✔ ✔ ✔
Aflac Incorporated DP DP DP DP DP DP DP DP
Allstate Corporation QF QF QF QF QF QF QF QF
American International
Group ✔ ✔ ✔ ✔
Berkshire Hathaway DP DP DP DP DP DP DP DP
Chubb Corp. NR NR NR NR NR NR NR NR
Great West Lifeco Inc DP DP DP DP DP DP DP DP
Hartford Financial
Services Group DP DP DP DP DP DP DP DP
North America
Insurance

John Hancock
Financial Services IN IN IN IN IN IN IN IN
Loews Corp. DP DP DP DP DP DP DP DP
Manulife Financial IN IN IN IN IN IN IN IN
Marsh & McLennan NR NR NR NR NR NR NR NR
Metlife Inc NR NR NR NR NR NR NR NR
Progressive Corp. Ohio DP DP DP DP DP DP DP DP
Prudential Financial Inc DP DP DP DP DP DP DP DP
Saint Paul
Companies Inc ✔
Sun Life Financial QF QF QF QF QF QF QF QF
XL Capital Limited
Aviva ✔ ✔ ✔ ✔ ✔ ✔
UK & Ireland
Insurance

Legal & General

Group PLC ✔ ✔ ✔ ✔ ✔ ✔
Prudential PLC ✔ ✔ ✔ ✔ ✔ ✔ ✔

59

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 60

Carbon Disclosure Project

(e) Guidance for Analysts

• Potential climate risks embedded in equity holdings are leading insurers to re-examine asset allocation
decisions. As we noted last year, the gearing of insurers towards equity markets increases their long-term
exposure to climate change-related market losses. While even the leaders are far from fully integrating
climate risks into their investment mandates, several firms have made leaps forward in systematically
considering these risks. Munich Re continues its interdisciplinary Challenge of Climate Change Project.
One of its arms – the Asset Management Working Group – undertook a risk analysis of climate change
that has now been incorporated in the mandate of Munich Re’s asset management company, MEAG.
Other firms continue to explore climate risks, albeit at a more conservative pace. Both Allianz and Aviva
report that climate change is taken into consideration as a supplementary condition in asset allocation,
but only in their socially responsible investment portfolios.

• Increased loss expenses and loan defaults remain the principal risks. The insurance industry faces
perhaps the widest financial exposure to damages that may result from climate change. Insurance
products that provide risk-transfer services for the agriculture/food industry, the real-estate sector, the
tourism industry and others are all facing the prospect of increasing claims as losses mount due to
climate-induced crop damage, flood damage and the like. As was the case last year, the major
reinsurers, Munich Re and Swiss Re, continue to bear the brunt of the risk and are the most highly
sensitized to the scope and severity of climate-change risks.

• Meanwhile, opportunities to generate new business are becoming more broadly recognized. Some
insurers have begun to explore the market for new products that may offer new revenue opportunities.
Cathay Financial believes that while its life insurance, non-life insurance and banking clients could be
adversely impacted by climate change, growing numbers of natural disasters could also result in
increased coverage and lending opportunities. AXA has partnered with Meteo France to provide clients
with insurance coverage for climatic uncertainty. The most aggressive companies in this market are the
reinsurers. Munich Re’s New Products/Markets Working Group has been assigned to uncover market
opportunities relating to the Kyoto Protocol’s flexible mechanisms (including joint implementation and
clean development mechanisms). Swiss Re’s Greenhouse Gas Risk Solutions is a dedicated unit
developed specifically with the aim of providing structured finance, investment services and insurance
solutions across the spectrum of emerging environmental markets.

• Emissions trading continues to attract serious attention. While we hold our position that the revenue
opportunities that the emissions trading markets present to insurers are not yet materializing, there is
evidence that insurers are prepared to wait. Allianz claims that emissions trading has been chosen as a
centre of competence at Dresdner Bank in order to advise clients. Swiss Re has begun to integrate
carbon finance into the range of insurance and financial functions it provides. Munich Re has analyzed
the emissions trading markets to identify existing market players, trends, opportunities and risks, and
says it has identified and evaluated new business opportunities.

• The best indicator of risk awareness continues to be the quality of internal GHG management
programmes. While most insurers face few material risks from their own direct emissions, we believe that
high-quality strategic efforts to manage emissions remain an excellent proxy for a firm’s overall awareness
of climate-change risks. Swiss Re has committed to becoming “greenhouse neutral” by reducing internal
emissions by 15% to 2014 and offsetting the remainder via investments in the World Bank Community
Development Carbon Fund (about 37,000 tonnes of CO2 per year). Legal & General has set a target to
have a carbon management plan in place that covers all L&G operations. Aviva has taken a decentralized
approach to management, allowing for flexibility in different markets. Its UK operations have set targets to

60

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 61

Carbon Disclosure Project

reduce electricity consumption by 20,000kwh by the end of 2004 and have entered renewable energy
contracts. AXA has also signed green energy contracts with its electricity provider, EDF, and will have the
energy savings certified by the Renewable Energy Certificate System (RECS) at the European level.

Food Products, Retailing, Beverages

and Tobacco
(a) Impacts of Climate Change

• Risk of global food supply interruption

• Cost and losses to agricultural producers from drought
• Increased cost of new or supplemental water resource development; increased irrigation costs
• Greater risk from animal infection (ex: BSE, avian flu) insect infestation, plant disease, wildlife damage etc
• Extra costs and productivity losses to livestock producers
• Decline in food production/disrupted food supply/increased food prices
• Market opportunities for sequestration capacity in agricultural and tobacco growing sectors and in
forestry for packaging materials
• Opportunities for technological advancements

61

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 62

Carbon Disclosure Project

(b) Analysis of CDP Responses

FOOD PRODUCTS, RETAILING, BEVERAGES AND TOBACCO

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Cadbury
Schweppes PLC ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Campbell Soup
Company DP DP DP DP DP DP DP DP DP
Conagra NR NR NR NR NR NR NR NR NR
Danone ✔ ✔ ✔ ✔ ✔ ✔ ✔
✔ ✔ ✔ ✔
Food Products

General Mills
Heinz HJ ✔ ✔ ✔ ✔ ✔ ✔
Kellogg IN IN IN IN IN IN IN IN IN
Kraft Foods Inc DP DP DP DP DP DP DP DP DP
NestlÇ ✔ ✔ ✔ ✔ ✔ ✔
Sara Lee ✔ ✔
Unilever PLC ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Wrigley William
Junior Company NR NR NR NR NR NR NR NR NR
Carrefour ✔ ✔ ✔
CVS Corp. NR NR NR NR NR NR NR NR NR
George Weston
Limited ✔ ✔
Food and Drug Retailing

Ito Yokado
Company Limited ✔ ✔ ✔ ✔ ✔ ✔
Kroger NR NR NR NR NR NR NR NR NR
Loblaw ✔ ✔
Safeway PLC DP DP DP DP DP DP DP DP DP
Seven-Eleven Japan
Company Limited ✔ ✔ ✔ ✔ ✔ ✔
Sysco Corp. IN IN IN IN IN IN IN IN IN
Tesco PLC ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Walgreen Company DP DP DP DP DP DP DP DP DP
Altria Group Inc DP DP DP DP DP DP DP DP DP
Anheuser-Busch
Companies Inc QF QF QF QF QF QF QF QF QF
British American
Tobacco PLC ✔ ✔ ✔ ✔ ✔ ✔ ✔
Beverages and Tobacco

Coca Cola Company ✔ ✔ ✔ ✔

Coca Cola
Enterprises (see
Coca Cola Company
Diageo PLC ✔ ✔ ✔ ✔ ✔ ✔ ✔
Heineken NV ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Imperial
Tobacco Group ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Interbrew DP DP DP DP DP DP DP DP DP
Pepsico Inc ✔ ✔ ✔ ✔

62

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 63

Carbon Disclosure Project

(c) Guidance for Investors

• Food retailers continue to be active in GHG management. Best practice in this industry group is
found among the food processors, manufacturers and packagers. Carrefour has an excellent
Sustainable Development report, including its breakdown of CO2 emissions from each source at an
average retail outlet. Tesco expects average capital spending per year to be £4 million to reach its annual
5% emissions reduction target. Tesco’s fuel stations are offering Greenergy Global Diesel that offers a 5%
reduction in GHGs. Ito Yokado in Japan discloses its emissions as “CO2 emission per ¥100 million in
sales”, which for 2002 was 45.4 t-CO2. Cadbury Schweppes is engaging in fuel-switching activities. In
2004 alone, it expects to reduce its total global emissions of CO2 by 1%. Imperial Tobacco has
developed a climate change strategy that is rooted in the findings of the Carbon Disclosure Project of
last year. Imperial Tobacco states that the forecasted 30% increase in electricity prices in 2004/5 will
impact on its overheads within the EU – although it does not say by how much – in the short term.
Continuation of this trend will strengthen the case for energy conservation, energy efficiency and CO2
emissions cuts.

• Appreciation of supply chain exposure to weather-related phenomena is growing. As we noted last

year, companies with important raw materials suppliers in high-impact agricultural regions will be
especially at risk. Unilever’s tea plantations in Kenya and Tanzania have been affected by prolonged
drought. Imperial Tobacco says that sensitivity to climate change in tobacco-producing regions could
affect the growing and harvesting of crops – potentially affecting yields. Imperial grows less than 2% of
the tobacco it uses, so supply-chain impacts can be disproportionately large. The Sustainable Agriculture
Initiative (SAI) (www.saiplatform.org) formed by Danone, Nestlé and Unilever, was set up partly in
response to such concerns.

• Fuel usage – and switching to renewables – is a key area of focus. Several FT500 firms in this sector
describe their efforts to diversify and/or reduce fuel consumption to meet emissions targets and cut
costs. To recap from last year, Unilever’s use of renewable fuels now accounts for 11% of fuel needs.
Diageo has implemented a policy for haulers that defines minimum standards for fuel efficiency and
emissions. Japan Tobacco has reduced CO2 from distribution by improving transport routes and using
some natural gas-fuelled trucks. Nestlé is even using spent coffee grounds as a fuel for some
manufacturing processes. This year, we note that Cadbury Schweppes has measured its supply-chain
CO2 emissions to help it ascertain where its reduction programmes should be focused. PepsiCo has
converted its delivery trucks to EPA clean diesel fuels and is replacing older trucks with more fuel-efficient
vehicles. BAT is helping farmers to improve the fuel efficiency of the tobacco-curing process to reduce
CO2 emissions. Heineken is using biogas from its anaerobic waste-water treatment plants and is further
researching into green energy such as the use of spent brewers grain as biofuels.

• CO2 reduction strategies have translated to bottom-line savings for many firms. Unilever’s
Bestfoods have saved £1.34 million since 2001 through energy conservation measures. Danone hopes
that its latest energy savings will translate to about c20 million per year. Imperial Tobacco’s target for
energy conservation opportunities offers an estimated saving of £2 million per annum with a two to four-
year payback period.

• More companies are considering entering the emissions trading markets. Nestlé and Unilever (via
the UK ETS) have been the primary participants from this sector so far. Imperial Tobacco expresses the
belief that emissions trading may provide a further financial benefit in the form of sequestration
opportunities within agricultural and tobacco-growing business segments.

63

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 64

Carbon Disclosure Project

Regional Food & Agriculture Implications of Climate Change

Africa: Grain yields are projected to decrease for many scenarios, diminishing food security, particularly in
small food-importing countries. Desertification would be exacerbated by reductions in average annual rainfall,
run-off and soil moisture, especially in Southern, Northern and Western Africa. Significant extinctions of plant
and animal species are projected and would affect rural livelihoods, tourism and genetic resources.

Asia and the Pacific: Decreases in agricultural productivity and aquaculture due to thermal and water stress,
sea-level rise, floods and droughts, and tropical cyclones would diminish food security in many countries of
arid, tropical and temperate Asia; agriculture would expand and productivity would increase in northern areas.
Climate change would exacerbate threats to biodiversity due to land-use and land-cover change and
population pressure in Asia. In Australia and New Zealand, the net impact on some temperate crops of
climate and CO2 changes may initially be beneficial but this balance is expected to become negative for
some areas and crops with further climate change. Some species with restricted climatic niches and which
are unable to migrate due to fragmentation of the landscape, soil differences or topography could become
endangered or extinct.

Europe: There will be some positive effects on agriculture in northern Europe; productivity will decrease in
southern and eastern Europe. The rate of biodiversity loss would increase.

Latin America: Yields of important crops are projected to decrease in many locations in Latin America, even
when the effects of CO2 are taken into account; subsistence farming in some regions of Latin America could
be threatened. The rate of biodiversity loss would increase.

Polar: Natural systems in the polar regions are highly vulnerable to climate change and current ecosystems
have low adaptive capacity; technologically developed communities are likely to adapt readily to climate
change but some indigenous communities, in which traditional lifestyles are followed, have little capacity and
few options for adaptation.

Small Island States: The projected sea-level rise of 5 mm/year for 100 years would cause enhanced coastal
erosion, loss of land and property, dislocation of people. Limited arable land and soil salinization makes
agriculture of small island states, both for domestic food production and cash crop exports highly vulnerable
to climate change.
Source: Innovest Global Food Industry Report, 2004.

Metals & Mining (Including Steel)

(a) Impacts of Climate Change

• Material increases in operating costs due to higher energy prices

• Exposure to national GHG emissions regulations
• Unplanned/Premature capital outlays on emissions controls
• Increased demand for commodities such as Platinum Group Metals (PGMs) and aluminium that facilitates
transition to less emissions-intensive economy
• Sequestration opportunities relating to reforestation of marginal land

64

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 65

Carbon Disclosure Project

(b) Analysis of CDP Responses

METALS & MINING, STEEL

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Alcan QF QF QF QF QF QF QF QF QF
Alcoa ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Anglo American ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Barrick ✔ ✔ ✔ ✔
BHP Billiton ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Newmont DP DP DP DP DP DP DP DP DP
Rio Tinto ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Vale Rio Doce (CVRD) NR NR NR NR NR NR NR NR NR
Nippon Steel ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

(c) Guidance for Investors

• The type of commodity produced is critical to determining market risks and opportunities. Several
firms with large exposures to coal markets have begun to analyze the strategic implications of GHG
regulations. BHP Billiton has included GHG regulation scenarios in its calculations of base case supply
and demand forecasts for its Energy Coal business. Others are investing in clean coal technologies in an
attempt to circumvent the possibility of declines in global coal consumption due to climate-change
concerns. Both Rio Tinto and BHP Billiton participate in industry and government-sponsored research
programmes to commercialize clean coal technologies.

• Conversely, significant market opportunities also exist for those firms with strong positions in
commodities such as aluminium, platinum group metals and high-performance steel. As we noted
last year, each of these commodities is an essential material in applications that are expected to provide
technological solutions to climate change. In particular, Alcoa and Rio Tinto see market opportunities for
their aluminium products as lightweight components that reduce emissions in transport applications.
Alcoa has conducted research on the GHG and fuel efficiency impacts of using aluminium in a host of
transportation applications. Nippon Steel research suggests that the reduction effects of high-functional
steel products for automobiles, ships, rail vehicles, construction and power generator boilers are
approximately 6.5 million tonnes of CO2 per year.

• Location, Location, Location. Financial exposure to GHG regulations is defined by the location of
GHG-emitting assets. In this sector, the search for low-cost, high-quality ore bodies is driving
exploration and production into increasingly far-flung regions. This operational expansion results in a
diversity of corporate exposures to GHG regulations. For some firms, mineral reserves must be mined in
regions with tight GHG regulations (such as Canada and the EU), while others may have their reserves
concentrated in regions with no current – and limited foreseeable – GHG regulations (such as Africa and
South America). A case in point is Anglo American, which believes that its operating focus in developing
nations places it in a lighter regulator regime than some competitors. By contrast, Nippon Steel says that
a ¥3,000 ($27) per tonne carbon tax could cost the steel industry a total of ¥150 billion($1.36 billion), with
Nippon Steel bearing an estimated ¥50 billion of this.

65

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 66

Carbon Disclosure Project

• Internal GHG reduction programmes become ever more sophisticated in search of least-cost
options. While companies in this sector are keeping an eye on potential technology breakthroughs, the
search continues for internal efficiency gains that can serve the dual goals of reducing both GHG
emissions and costs. Foremost among these internal efforts continues to be energy efficiency. Anglo
American has conducted energy audits in various businesses, and its technical division has initiated a
review of energy options across the company. Likewise, most companies in the sector are able to point
to some variety of energy efficiency initiative in their operations.

• The search for breakthrough technologies continues. The buzz words in the metals and mining
industry are Clean Coal, Zero-Emissions Aluminium smelting, carbon capture and sequestration, as the
industry searches for technological innovations that will enable the cost-effective reduction of GHG
emissions. A major driver of this push towards technology is the diminishing returns from internal
efficiency efforts. As the available opportunities to cut corporate emissions through energy efficiency,
process enhancements and the like dry up, the pressure is on to find new efficiencies by advancing the
technology front. Rio Tinto and BHP Billiton placed the most emphasis on clean-coal initiatives this year,
while BHP Billiton was the front-runner in funding research into geological sequestration. Rio Tinto takes
a diversified approach with its Foundation for a Sustainable Minerals Industry, whose mandate is to
support research and technical development on a number of GHG-related fronts. Nippon Steel
participates in the International Iron and Steel Institute’s “CO2 Breakthrough Programme”, a global
initiative to achieve radical CO2 reductions through technology. Meanwhile, Alcoa continues its long-
running pursuit of inert anode technology (which it believes can virtually eliminate direct GHG emissions
from the smelting process).

• As technology develops, the best interim strategy is to continue seeking recourse to the
emissions trading market. As the mining majors seek out paths of cost-effective achievement of
reduction goals, a key strategy for each company surveyed is emissions trading. Alcoa is engaged in
GHG regime development in Europe and Quebec. BHP Billiton is engaged in Europe and Australia.
Rio Tinto sees emissions trading as a vital component of its greenhouse response, and has undertaken
trades in the UK and bought renewable energy certificates in the US and Australia. Anglo American’s
industrial minerals operations and pulp/paper mills will be included in the EU ETS. There are also
alternatives to emissions trading, primarily through the Kyoto Protocol’s proposed Clean Development
Mechanisms. Both Anglo American and BHP Billiton are examining cheap reduction opportunities in
developing nations that may be available via this route.

• Pricing Carbon into decision making: the new practitioners. We continue to believe that the inclusion of
carbon shadow prices into liquidity, valuation and balance-sheet calculations is a prudent step towards
managing carbon risks. In 2003, we noted that BHP Billiton was the sole company to be actively
integrating carbon shadow prices into investment decisions involving investments with emissions over
100,000 tonnes of CO2 per year. In 2004, Anglo American declared that it, too, was incorporating the
cost of GHG emissions into future investment decision making.

• Management continues to plough resources into carbon management. A year after the first Carbon
Disclosure Project, corporate mechanisms to manage climate risks continue to evolve, signifying the
continued belief that carbon risks must be appropriately managed. Last year, the leading companies were
Rio Tinto (with its Climate Change Executive), Alcan (with its GHG Programme) and BHP Billiton (with
its GHG Management Plans for operations). This year, we add Anglo American to the ranks, with its
creation of a multi-disciplinary Carbon Working Group, and its appointment of a corporate manager for
climate change. Also, Alcoa continues its leadership via its Climate Change Strategy Team.

66

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 67

Carbon Disclosure Project

• Policy design and implementation remains a key economic uncertainty, clouding the ability of
firms to determine new cost structures reliably in a GHG-constrained world. Rio Tinto is particularly
vocal regarding the competitive implications of policy development and implementation. It sees the threat
of poor policy as a distorting force on market signals that could unfairly discriminate against its coal
products, aluminium-smelting operations, and iron ore and steel-making technologies.

Effect of increase in energy cost on stock price

at various assumed levels of energy cost as a % of operating expense
Metals and Mining Sector
Assumed energy cost as a % of operating expense: 5% 10% 15% 20% 25% 30%
0%
According to industry experts
-5% interviewed by Innovest, energy costs
in the Metals & Mining sector typically
-10% range from 20% to 30% of operating
Decrease in Stock Price

-15%

-20%

-25%

-30%

-35%

-40%

-45%

-50%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Increase in Energy Price

Paper & Forest Products

(a) Impacts of Climate Change

• Material increases in operating costs for pulp and paper operators due to higher energy prices
• Exposure of pulp and paper operators to national GHG emissions regulations
• Possible opportunities to enhance cash flow from carbon sequestration in forest operations
• Opportunities in biomass-based power production, sequestration in forests, and for biofuels in
agriculture and forestry
• Increased risk from fire and pest problems
• Decreased value of land assets due to climate extremes and secondary effects

67

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 68

Carbon Disclosure Project

(b) Analysis of CDP Responses

PAPER AND FOREST PRODUCTS

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

International Paper
Company ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Stora Enso Corp. ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Svenska Cellulosa ✔ ✔ ✔ ✔ ✔ ✔ ✔
Weyerhaeuser Company ✔ ✔ ✔ ✔ ✔ ✔

(c) Guidance For Investors

• Carbon sequestration opportunities edging towards reality for forest management and plantation
operators. CO2 trading markets offer huge opportunities for forest companies, particularly in view of the
progress made on land use and forestry in the Kyoto negotiations. International Paper reports that it has
sold carbon credits in the Chicago Climate Exchange (CCX). International Paper was a founding partner
in the CCX and is committed to reducing emissions 4% from 1998 by 2001. It was also a founding
member of the US EPA’s Climate Leaders’ Programme, and has agreed to voluntary reductions of 15%
from 2000 by 2010. StoraEnso is also a founding member of the Chicago Exchange.

• Forest, pulp and paper operators benefit from use of biomass energy in internal energy mix.
More activity was reported in the use of biomass as a clean and increasingly efficient form of electricity
generation. Weyerhaeuser has committed to meeting two-thirds of its pulp and paper mill energy
requirements from GHG neutral biomass fuels recovered from its manufacturing processes. Svenska
Cellulosa is another large user of bio-fuel, which provides 37% of its fuel requirements. SCA has large areas
of growing forest land. Standing timber volume has increased by 40% over the past 50 years. The net
increase in timber corresponds to CO2 absorption by SCA forests of one million tonnes per year.
Weyerhaeuser is working on the development of biomass “gasification” technology, which could significantly
reduce CO2 emissions beyond what can be achieved through conventional biomass energy technologies.

• Firms’ continued efforts to quantify GHG emissions. International Paper has reported annual CO2
emissions from fossil fuels since 1996, and is using the GHG protocols established by the WRI/WBCSD.
Weyerhaeuser also participates in the development and updating of the WRI and WBCSD GHG
Greenhouse Gas Protocol and the related “Project Quantification Standard” initiatives, and reports that it
is still in the process of quantifying its GHG emissions. StoraEnso uses the NCASI Protocol, which is
based on WRI/WBCSD methodology.

• Involvement in regulatory/policy making is positioning leading firms to seize carbon-credit

opportunities. The industry recognizes that any additional costs associated with primary fuel and energy
inputs, together with any costs to reduce direct GHG emissions, could have a substantial effect on
profitability. Accordingly, many firms within this sector are actively seeking ways to cut emissions in a
proactive fashion. Weyerhaeuser and StoraEnso are members of the American Forest and Paper
Association, which has a voluntary agreement with its partners to reduce GHG emission intensity by 12%
between 2000 and 2012. Weyerhaeuser continues to direct efforts through its relationships with the US
government’s “Climate Vision” programme, the California Climate Action Registry, the Pew Centre on
Global Climate Change, the WRI and other business, NGO and related stakeholder organizations.

68

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 69

Carbon Disclosure Project

• Sustainable forestry/afforestation projects seen as an opportunity: Weyerhaeuser is working to

deploy sustainable forest management practices to maintain the large pools of carbon dioxide
sequestered in its forests. The firm is also investing in afforestation ventures in Uruguay – new forests that
will sustainably sequester millions of tonnes of CO2, even when future harvests are taken into account.
The Uruguay project is tentative, as the status of emerging rules for Kyoto CDM projects remains
uncertain.

Oil & Gas

(a) Impacts of Climate Change

• Increases in operating costs due to higher energy prices (esp. downstream/chemicals)

• Exposure to national/regional GHG emissions regulations
• Business interruptions due to storm activity (esp. Gulf of Mexico)
• Strategic opportunities in natural gas/LNG/midstream power sectors
• Erosion of fossil fuel market share in power production and vehicle propulsion markets
• Strategic opportunities in carbon sequestration
• Unplanned/Premature capital outlays for emissions control technology
• Strategic opportunities in clean technologies and renewables

69

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 70

Carbon Disclosure Project

(b) Analysis of CDP Responses

INTEGRATED OIL & GAS

Strategy to Prepare for
Responsibility Quantified GHG Reporting
Considers Climate Emissions Trading Regimes Emission
Allocated for Formal GHG
Change to Present Reduction
Management of Evidence Use of Third Reduction Targets
Risks and/or Programs
Climate Change Monitoring of Early Emissions Data Party Reporting Set With Timeline
Opportunities in Place
Related Issues Developments Engagement Disclosed Protocol/Verification

BG Group ✔ ✔ ✔ ✔ ✔ ✔ ✔
BP ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
ChevronTexaco ✔ ✔ ✔ ✔ ✔ ✔ ✔
ConocoPhillips ✔ ✔ ✔ ✔ ✔ ✔
ENI ✔ ✔ ✔ ✔ ✔ ✔
Exxon Mobil ✔ ✔ ✔ ✔ ✔ ✔ ✔
Gazprom NR NR NR NR NR NR NR NR
Imperial Oil ✔ ✔ ✔ ✔ ✔
Lukoil OAO NR NR NR NR NR NR NR NR
Marathon Oil DP DP DP DP DP DP DP DP
Norsk Hydro ✔ ✔ ✔ ✔ ✔ ✔ ✔
Occidental Petroleum ✔ ✔ ✔ ✔ ✔ ✔
Petro-Canada ✔ ✔ ✔ ✔ ✔ ✔ ✔
Petrobras ✔ ✔ ✔ ✔ ✔ ✔
Repsol YPF ✔ ✔ ✔ ✔ ✔ ✔ ✔
RD/Shell ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
SIBNEFT- Siberian Oil NR NR NR NR NR NR NR NR
Statoil ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Suncor Energy ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Surgutneftegaz NR NR NR NR NR NR NR NR
Total ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Yukos Oil Company QF QF QF QF QF QF QF QF

OIL & GAS EXPLORATION & PRODUCTION

Strategy to Prepare for
Responsibility Quantified GHG Reporting
Considers Climate Emissions Trading Regimes Emission
Allocated for Formal GHG
Change to Present Reduction
Management of Evidence Use of Third Reduction Targets
Risks and/or Programs
Climate Change Monitoring of Early Emissions Data Party Reporting Set With Timeline
Opportunities in Place
Related Issues Developments Engagement Disclosed Protocol/Verification

Anadarko Petroleum NR NR NR NR NR NR NR NR
Apache Corp. QF QF QF QF QF QF QF QF
Burlington Resources Inc DP DP DP DP DP DP DP DP
Devon Energy Corp. DP DP DP DP DP DP DP DP
Encana Corp. IN IN IN IN IN IN IN IN
Oil & Natural Gas NR NR NR NR NR NR NR NR
CNOOC

70

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 71

Carbon Disclosure Project

(c) Guidance for Analysts

• Oil and gas majors vary considerably in terms of the GHG intensity of their operations
(see chart below)

Estimated GHG Intensity 2001-2002

(Million Tonnes CO2e per Boe/day)

Statoil
Petrobras GHG Intensity 2002
PetroCanada GHG Intensity 2001

Repsol YPF
BP
ChevronTexaco
Occidental Petroleum
RD/Shell
Total
ExxonMobil
ENI
Suncor
Imperial Oil
BG
Norsk Hydro
0 10 20 30 40 50 60 70
Source: Innovest

• The short-term: clean technologies seen to pay the most immediate dividends. While breakthrough
technologies await commercialization, several companies are developing clean-energy technologies that
will allow firms to profit now. Exxon Mobil is researching economically competitive options such as
advanced fuels and lubricants, new combustion technologies and hybrid engines that help reduce GHG
emissions. It has invested more than $100 million in Stanford University’s Global Climate and Energy
Project, a commercial research effort on GHG-reducing technology solutions. PetroCanada has
collaborated with the biotech company Iogen to commercialize a process for producing ethanol from
waste by-products from the agricultural industry. In April 2004, Iogen announced that it produced the
world’s first cellulose ethanol fuel for commercial use. Energy experts expect the global market for bio-
fuels such as ethanol to exceed $10 billion by 2012. Suncor announced in 2004 that it would build a
$120 million ethanol plant in Canada. Chevron Texaco has created Sasol Chevron Holdings, a joint
venture based on gas-to-liquids (GTL) technology, which it sees as a promising clean-fuel prospect. In
Nigeria, the firm plans to bring its first project, the 33,000 barrel-per-day Escravos GTL plant, on stream
by 2005.

• The medium-term: energy firms attempt to bolster reserve strength in natural gas to position for
future clean-energy demand. Despite its recent reserve-accounting woes, Royal Dutch Shell continues
to look favourably on natural gas as a transition fuel to bridge the gap between coal and oil and future
alternative energy technologies. In the past 12 months, the firm has made strides in Liquefied Natural Gas
(LNG) via its Sakhalin development and its new LNG receiving terminal in Mexico. ENI sees natural gas as
the fuel of choice in the short and medium term and has identified gas development as a strategic priority.

71

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 72

Carbon Disclosure Project

In addition to reserves, ENI is developing advanced energy infrastructure, including the Bluestream and
Greenstream deep offshore pipelines connecting Libya and Italy. BG states that gas’s ability to form part
of the solution to climate change – by displacing higher carbon-content fuels – will allow the company to
benefit from climate-change policies and measures. Exxon Mobil identifies natural gas as offering
significant global opportunities as a substitute for coal in electricity generation. The company believes that
its leading position in gas supply can help enable manufacturers and power producers to reduce GHG
emissions through fuel switching.

Oil, Gas Reserves Split for 2002 (M Boe)

Suncor
Imperial Oil
Occidental Petroleum
PetroCanada
Yukos
Marathon Gas
Norsk Hydro
Oil
BG
ConocoPhillips
Petrobras
Surgutneftegas
Statoil
Lukoil
ENI
Repsol YPF
ChevronTexaco
Total
BP
RD/Shell
ExxonMobil

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000

4-Year Gas Reserve Growth 1999-2002 (%)

-28% Imperial Oil
-11% Marathon
-9% RD/Shell
-8% Suncor
-5% Surgutneftegas
-2% ExxonMobil
Ststoil 1%
Occidental Petroleum 8%
Norsk Hydro 9%
PetroCanada 10%
Total 11%
Chevron Texaco 13%
Petrobras 26%
Repsol YPF 27%
ENI 35%
BP 37%
BG 70%
YukosSuibneft 102%
ConocoPhillips 152%

-40% -20% 0% 20% 40% 60% 80% 100% 120% 140% 160% 180%

72

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 73

Carbon Disclosure Project

• The long-term: companies seek early advantages in renewable energy markets. In 2000, Suncor
announced plans to invest CDN$100 million (US$73m) in renewable energy projects by the end of 2005.
To date, the company reports a partnership with Enbridge in the 11mw, $22 million SunBridge Wind
Power Project and a partnership with EHN Wind Power in a separate 30mw, $48 million project. The two
schemes are expected to provide 115,000 tonnes of CO2 emission reductions annually. Royal Dutch
Shell continues to grow its wind energy business with a target portfolio of 1,600mw by 2005, while Shell
Solar GmbH and Gesellschaft für Solarenergie (GEOSOL) are building the world’s largest solar power
station in Germany. BP’s solar business has seen its sales increase from 32mw to 71mw over the past
four years. Petrobras’s renewables development programme focuses on solar, wind, biomass, biofuels
and hydrogen. The company is making annual investments of $21 million towards these efforts. Chevron
Texaco has also invested in solar, wind and geothermal projects, in the belief that these energy sources
will be important in the overall energy mix of the future global economy. Fuel cells also remain a future
growth area. PetroCanada has teamed with Ballard Power Systems and Methanex Corp to prepare the
way for a commercially viable fuel distribution network to meet demand from fuel-cell vehicles. Chevron
Texaco is focusing on hydrocarbon liquid production as a fuel source for fuel-cell systems.

• Climate change is increasingly seen as a strategic imperative requiring comprehensive

management. As was the case last year, virtually all firms surveyed have developed carbon management
strategies, albeit of varying quality. Key initiatives include GHG reduction efforts – notably energy
efficiency, reduced gas flaring and cogeneration – investments in renewable energy, development of
emissions trading expertise and shifts towards low-carbon natural gas in reserves. In the gas-flaring area
alone, Chevron Texaco says it is leading several billion-dollar efforts to reduce flaring from its operations.
Measurement and reporting systems continue to evolve, with management structures such as Suncor’s
GHG Methodology Task Team gaining prominence. Dedicated carbon management teams are also
cropping up. ENI is developing a network of GHG Managers operating at the corporate level, business
unit level and site level. Royal Dutch Shell has appointed a corporate Group Climate Change Adviser,
and has similar posts in regions where regulations are most imminent, including Canada and Europe.
Since 1998, PetroCanada has had in place its internal cross-functional Global Climate Change Team.
Repsol YPF has its Climate Change Unit, and BP named its CEO, Lord Browne, as having ultimate
management control over the company’s strategy for climate change.

• Costing carbon into new investments continues to attract attention as a risk-management tool.
Last year, we noted that BG and Shell were known to be incorporating shadow carbon prices into
investment appraisals. This year, Repsol YPF said it had begun using internal CO2 reference prices in the
evaluation of all new investments. Most firms are keeping shadow price estimates proprietary in the
interests of competitive positioning. Chevron Texaco requires all new capital projects to undergo GHG
emissions analysis as part of their appropriations requests.

• Emissions trading expertise continues to be a ‘must’; more companies join the ranks of
practitioners. Every oil and gas major that responded to the CDP information request has some level of
engagement in emissions trading (ET) markets. BP and Shell continue to be recognized as housing some
of the world’s leading expertise on emissions trading, and most other firms are rapidly increasing their
know-how. Repsol YPF has appointed a Head of Carbon markets and created an EU ETS Working
Group with the aim of reducing transaction costs, managing compliance and preparing to conduct actual
trades. ENI is attempting to minimize its emission certification costs by defining an audit/certification plan
within the company. Statoil has designated its SVP Group Finance as responsible for its corporate
“Carbon Treasury” which will be the company’s single interface with emission trading markets. Shell
Trading developed its Environmental Products Trading Business to oversee all emissions trading activities
and has gained early experience in trading via voluntary participation in the UK Emissions Trading

73

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 74

Carbon Disclosure Project

Scheme. Chevron Texaco has undertaken baseline studies on fuel switching, flare reduction and
geothermal power projects to determine if such projects could qualify for saleable emissions credits.
Suncor, operating in the embryonic Canadian ET market, has approached regulatory uncertainty by
taking anticipatory action. It completed the world’s first cross-border emission reduction trade in 1999
and is highly involved in discussions with the Canadian government regarding ET market development.

BP is one of the first companies to attempt accurate calculation of the emissions associated with its their
product use and disposal. This is a large number, but the company is to be greatly complimented on the
foresight to make and state the calculation:

Emissions from end-use of BP Products

(Million tonnes CO2)

Coal (divested during 2003) 15
Fuels and lubricants 590
Gas 610
Chemicals (assumes combustion) 83
TOTAL 1,298

“Assuming that all of our products were consumed and therefore converted to CO2, emissions in 2003
were 1,298 million tonnes from the end use of the products we sell”

• Compliance with emerging GHG regulations requires solutions; carbon sequestration emerges as
a key technology option. In addition to recourse to the emissions trading markets, several companies
are seeking low-cost compliance solutions via carbon sequestration technologies. Several companies
drew attention to their participation in the $28 million CO2 Capture Project which supports research into
the viability of capturing carbon dioxide from combustion sources and storing the gas underground in
geologic formations. Participating companies include BP, Chevron Texaco, Norsk Hydro, Statoil, Shell,
and Suncor. Separately, Petrobras’s R&D centre is looking at sequestration options from various
vegetable formations (algae, swamps, forests) and the viability of carbon dioxide injection in depleted oil
fields.

• Niche markets continue to add value in a shifting energy market. Beyond their core competencies in
oil and gas, several firms are staking out positions in other markets that are expected to benefit from
climate-related shifts. Chevron Texaco’s Chevron Energy Solutions unit targets the demand-side
management market by delivering customized, cost-reducing energy solutions to commercial and
industrial businesses. The US market it targets has an estimated yearly energy demand – excluding
energy commodity sales – of more than $100 billion. Norsk Hydro’s aluminium interests continue to
benefit from increased demand in vehicle technologies, as automakers seek out ways to lower vehicular
weight to achieve greater fuel economy and compliance with tougher emissions rules. BG expects to
launch its micro combined heat and power technology in 2005, and believes that it can contribute
significantly towards the UK’s Kyoto target while also generating new revenue.

• As with other resource sectors, energy efficiency is at a premium. All of the integrated firms that
submitted responses were conscious of their exposure to rising energy costs, and were therefore
focusing on energy-efficient projects to reduce operating expenditures and hedge risk.

74

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 75

Carbon Disclosure Project

Effect of increase in energy cost on stock price

at various assumed levels of energy cost as a % of operating expense
Integrated Oil & Gas Sector
Assumed energy cost as a % of operating expense: 5% 10% 15% 20% 25% 30%
0%

-5% According to industry experts

interviewed by Innovest, energy costs
in the Intergrated Oil & Gas sector typically
-10%
range from 30% to 40% of operating
Decrease in Stock Price

-15%

-20%

-25%

-30%

-35%

-40%

-45%

-50%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Increase in Energy Price

Transportation
(a) Impacts of Climate Change

• Material increases in operating costs due to higher fuel prices

• Exposure to national/global GHG emissions regulations
• Risks of reduced demand for coal transportation services
• Opportunities in clean fuel markets, logistics
• Increased opportunities and public sector support for less GHG-intense transportation forms
(e.g. light rail transit)
• Disruptions to packaging, transportation regulations
• Weather disruptions to schedules, operating viability

75

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 76

Carbon Disclosure Project

(b) Analysis of CDP Responses

TRANSPORTATION
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

AP Moller-Maersk DP DP DP DP DP DP DP DP DP
Autostrade
BAA PLC ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Burlington Northern
Santa Fe Corp ✔ ✔ ✔ ✔ ✔ ✔ ✔
Surface Transport

Canadian National
Railway Company DP DP DP DP DP DP DP DP DP
Central Japan
Railway Co DP DP DP DP DP DP DP DP DP
East Japan
Railway Company ✔ ✔ ✔ ✔ ✔ ✔
Norfolk
Southern Corp. IN IN IN IN IN IN IN IN IN
Union Pacific Corp. DP DP DP DP DP DP DP DP DP
Distribution

✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Trading &

Mitsubishi Corp.
Mitsui & Company
Limited ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Deutsche Post AG ✔ ✔ ✔ ✔ ✔ ✔ ✔
Air Freight &

Fedex Corp. ✔ ✔ ✔ ✔ ✔
Couriers

TPG NV ✔ ✔ ✔ ✔ ✔
United Parcel
Service Inc ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Airline

Southwest ✔

(c) Guidance For Investors

• Higher operating costs will squeeze margins and place a premium on efficiency. We reiterate last
year’s view that margins will be squeezed by CO2 emissions abatement expenses and higher fuel prices
(caused by higher costs upstream in the energy business). Diesel fuel expenses are a sizeable percentage of
overall operating expenses for the larger firms (typically 5% to15% and sometimes higher). BAA is among
the top 20 energy users in the UK and admits that it will be greatly affected by carbon charges. Rail firms
believe that they have a natural advantage here. BNSF, a US rail company, points to the fact that Railroad
Energy Intensity (BTU per ton-mile) is 346 compared with 444 for waterborne commerce and 3,337 for
trucks. Moreover, rail freight fuel efficiency is up to 404 miles/gallon of diesel from 332 miles in 1990.

• Transport firms have moved to more common/more sophisticated approaches to quantifying

internal emissions. Deutsche Post measures all emissions from all its business segments, and
calculates emissions per average piece of mail (DP claims that the offset for GHG emissions would cost
approximately 10 – 20 c/t CO2e). TPG measures emissions from all segments. UPS uses the GHG
Protocol (but focuses only on the US). BAA measures all CO2 emissions. East Japan Railway uses fuel
consumption coefficients to determine emissions, while BNSF reports CO2 emissions using the US
Department of Energy procedure. BAA is supported by the Carbon Trust through a voluntary agreement
and is a participant in the Carbon Management Pilot Programme.

76

Innovest Strategic Value Advisors May 2004

11187 CDP 41-77 10/5/04 6:03 pm Page 77

Carbon Disclosure Project

• Pursuing emissions trading trials provides another competitive dimension for diversified
companies. The Japanese firms Mitsubishi and Mitsui have continued their financial stake in emissions
trading firms, the former with Natsource and the latter with CO2e.com. Mitsui also joined the World
Bank’s Prototype Carbon Fund with a $6 million investment expecting a 1.2 million ton CO2e to be the
dividend. The firm also maintains about 40,000 hectares of forest land in Japan, sinking 172,000
tCO2e/year, and spends $3 million annually on its maintenance.

• Research into alternative fuels for ground vehicle and rail fleets continues. UPS maintains its R&D
on hybrid electric and fuel-cell vehicles in partnership with undisclosed automotive manufacturers, and
reports that it operates the world’s largest private sector fleet of alternative fuelled vehicles. BAA is
exploring on-site embedded generation, securing an off-site supply of renewable energy. BNSF is
purchasing new locomotives with advanced microprocessors and other features that translate to fuel
efficiency gains, and remains committed to meeting White House Council on Environmental Quality
targets to reduce GHG intensity by 18% by 2012.

• Government partnerships continue to expand as regional transportation policies shift in favour of

low GHG intensity programmes. As we noted last year, rail companies, logistics firms, courier and
express delivery services and other integrated transportation modes that produce fewer life-cycle GHG
emissions are involved with public-private partnerships around the world. For example, both FedEx and
UPS are participating in the “Smartway Transport” scheme under the US EPA’s Climate Leaders
Programme to reduce GHG emissions from the ground transportation sector, and many rail firms have
begun to market their services on the strength of their low carbon characteristics. East Japan Railway is
pushing for the promotion of inter-modal shift for individual transport/commuting, and Autostrade is
working with the Environment Minister in Italy in order to optimize energy consumption and traffic
management.

77

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 78

Carbon Disclosure Project

Matrices for Remaining Sectors

ADVERTISING
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Omnicom Group Inc. NR NR NR NR NR NR NR NR NR

AEROSPACE AND DEFENCE

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Boeing Co. NR NR NR NR NR NR NR NR NR
General Dynamics NR NR NR NR NR NR NR NR NR
Honeywell
International Inc. NR NR NR NR NR NR NR NR NR
Lockheed Martin Corp. IN IN IN IN IN IN IN IN IN
Northrop
Grumman Corp. DP DP DP DP DP DP DP DP DP
Raytheon Co. QF QF QF QF QF QF QF QF QF
United Technologies
Corp. ✔ ✔ ✔ ✔ ✔ ✔ ✔

BIOTECHNOLOGY
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Amgen Inc. NR NR NR NR NR NR NR NR NR
Genentech Inc. NR NR NR NR NR NR NR NR NR
Genzyme ✔ ✔ ✔ ✔
Gilead Sciences NR NR NR NR NR NR NR NR NR
Medimmune Inc. NR NR NR NR NR NR NR NR NR
Serono IN IN IN IN IN IN IN IN IN

78

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 79

Carbon Disclosure Project

BROADCAST AND CABLE TV

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

British Sky
Broadcasting Group ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Clear Channel
Communications NR NR NR NR NR NR NR NR NR
Comcast Corp. NR NR NR NR NR NR NR NR NR
Cox Communications, Ltd. ✔
General Motors CL H
(see General Motors)
Liberty Media Corp. NR NR NR NR NR NR NR NR NR
Mediaset QF QF QF QF QF QF QF QF QF

BUILDING PRODUCTS
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Masco NR NR NR NR NR NR NR NR NR
Saint-Gobain ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

COMMERCIAL SERVICES AND SUPPLIES

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Automatic Data
Processing NR NR NR NR NR NR NR NR NR
Cendant Corp. NR NR NR NR NR NR NR NR NR
Dai Nippon
Printing Group ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
First Data Corp.
H&R Block
Paychex Inc. NR NR NR NR NR NR NR NR NR
Pitney Bowes ✔ ✔ ✔ ✔ ✔ ✔ ✔

79

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 80

Carbon Disclosure Project

COMMUNICATIONS EQUIPMENT
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Alacatel ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Cisco Systems ✔ ✔ ✔ ✔ ✔
Ericsson ✔ ✔ ✔ ✔ ✔ ✔
Motorola ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Nokia ✔ ✔ ✔ ✔ ✔
Nortel Networks ✔ ✔ ✔ ✔ ✔ ✔
Qualcomm ✔ ✔ ✔ ✔ ✔ ✔

COMPUTERS AND PERIPHERALS

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Dell ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
EMC Corp. IN IN IN IN IN IN IN IN IN
Hewlett-Packard ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
IBM ✔ ✔ ✔ ✔ ✔ ✔ ✔
Lexmark IN IN IN IN IN IN IN IN IN
Sun Microsystems NR NR NR NR NR NR NR NR NR
Toshiba ✔ ✔ ✔ ✔ ✔ ✔ ✔

CONSTRUCTION AND FARM MACHINERY

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Caterpillar Inc. NR NR NR NR NR NR NR NR NR
John Deere & Co. IN IN IN IN IN IN IN IN IN
Volvo AB ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

80

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 81

Carbon Disclosure Project

CONSTRUCTION MATERIALS
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

CRH ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
LaFarge ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

CONSUMER AND HOUSEHOLD SERVICES

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Apollo Group Inc NR NR NR NR NR NR NR NR NR

ELECTRICAL EQUIPMENT
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Emerson ✔ ✔ ✔ ✔ ✔ ✔
Schneider Electric ✔

ELECTRONIC EQUIPMENT AND INSTRUMENTS

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Canon Inc. ✔ ✔ ✔ ✔ ✔ ✔ ✔
Hitachi Ltd. ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Kyocera ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Murata Manufacturing
Co. Ltd. ✔ ✔ ✔ ✔ ✔ ✔ ✔
Ricoh Co. Ltd. ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

81

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 82

Carbon Disclosure Project

ENERGY EQUIPMENT AND SERVICES

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Baker Hughes Inc. QF QF QF QF QF QF QF QF QF

Halliburton Energy Services ✔ ✔ ✔ ✔ ✔ ✔
Schlumberger Inc. ✔ ✔ ✔

HEALTHCARE EQUIPMENT AND SUPPLIES

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Baxter Int. ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Beckton Dickenson ✔ ✔ ✔
Biomet Inc. NR NR NR NR NR NR NR NR NR
Boston Scientific ✔ ✔ ✔ ✔ ✔ ✔
Guidant Corp. NR NR NR NR NR NR NR NR NR
Medtronic ✔ ✔ ✔
St. Jude Medical CRMD ✔ ✔
Stryker NR NR NR NR NR NR NR NR NR
Zimmer Holdings ✔ ✔ ✔ ✔

HEALTHCARE PROVIDERS AND SUPPLIES

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Aetna Inc. NR NR NR NR NR NR NR NR NR
Anthem
Cardinal Health NR NR NR NR NR NR NR NR NR
HCA Inc. NR NR NR NR NR NR NR NR NR
McKesson Corp. NR NR NR NR NR NR NR NR NR
Tenet Healthcare Corp. NR NR NR NR NR NR NR NR NR
United Health Group
Wellpoint Health
Network Inc. NR NR NR NR NR NR NR NR NR

82

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 83

Carbon Disclosure Project

HOTELS, RESTAURANT AND LEISURE

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Carnival NR NR NR NR NR NR NR NR NR
Compass Group PLC IN IN IN IN IN IN IN IN IN
Marriott DP DP DP DP DP DP DP DP DP
McDonald’s DP DP DP DP DP DP DP DP DP
Six Continents PLC DP DP DP DP DP DP DP DP DP
Starbucks ✔ ✔ ✔ ✔ ✔ ✔

HOUSEHOLD DURABLES
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Matsushita Electric ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Newell Rubbermaid Inc NR NR NR NR NR NR NR NR NR
Nintendo ✔ ✔ ✔ ✔ ✔ ✔
Philips Electronics QF QF QF QF QF QF QF QF QF
Sharp ✔ ✔ ✔ ✔ ✔ ✔ ✔
Sony ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Thomson ✔ ✔ ✔ ✔ ✔ ✔

HOUSEHOLD AND PERSONAL PRODUCTS

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Avon Products Inc. NR NR NR NR NR NR NR NR NR

Beiersdorf IN IN IN IN IN IN IN IN IN
Clorox NR NR NR NR NR NR NR NR NR
Colgate ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Gillette ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Henkel ✔ ✔ ✔ ✔ ✔ ✔
Kao ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Kimberly-Clark ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
L’Oreal ✔ ✔ ✔ ✔ ✔ ✔
Proctor & Gamble ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Reckitt Benckiser PLC ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

83

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 84

Carbon Disclosure Project

INDUSTRIAL CONGLOMERATES
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

3M ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
General Electric ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Hutchison Whampoa
Limited NR NR NR NR NR NR NR NR NR
Siemens QF QF QF QF QF QF QF QF QF
Tyco International
Limited DP DP DP DP DP DP DP DP DP

INDUSTRIAL MACHINERY
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Danaher ✔ ✔
Fanuc Ltd. NR NR NR NR NR NR NR NR NR
Illinois Tool Works NR NR NR NR NR NR NR NR NR
Mitsubishi ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

INTERNET SOFTWARE AND SERVICES

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

T-Online AG NR NR NR NR NR NR NR NR NR
USA Interactive NR NR NR NR NR NR NR NR NR
Yahoo Inc. NR NR NR NR NR NR NR NR NR

IT CONSULTING AND SERVICES

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Electronic Data
Systems Corp. NR NR NR NR NR NR NR NR NR
NTT Data Corp. ✔ ✔ ✔ ✔ ✔ ✔ ✔

84

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 85

Carbon Disclosure Project

LEISURE EQUIPMENT AND PRODUCTS

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Eastman Kodak Co. ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

Fuji Photo Film
Co. Ltd. ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Mattel ✔ ✔

MEDIA
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

AOL Time Warner IN IN IN IN IN IN IN IN IN

MOVIES AND ENTERTAINMENT

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Fox Entertainment NR NR NR NR NR NR NR NR NR
News Ltd. ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Viacom Inc. NR NR NR NR NR NR NR NR NR
Vivendi Universal ✔ ✔ ✔ ✔ ✔ ✔
Walt Disney Co. IN IN IN IN IN IN IN IN IN

MULTILINE RETAIL
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Amazon Inc. DP DP DP DP DP DP DP DP DP
Costco Wholesale Corp. NR NR NR NR NR NR NR NR NR
eBay ✔ ✔
GUS Plc. ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Kohls Corp. NR NR NR NR NR NR NR NR NR
Marks and Spencer ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Sears Roebuck Co. NR NR NR NR NR NR NR NR NR
Target Co. NR NR NR NR NR NR NR NR NR
Wal Mart De MEX
SA de CV ✔
Wal Mart Stores Inc. IN IN IN IN IN IN IN IN IN
Woolworths Ltd. NR NR NR NR NR NR NR NR NR

85

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 11/5/04 2:27 pm Page 86

Carbon Disclosure Project

PHARMACEUTICALS
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Abbott Laboratories ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Allergan IN IN IN IN IN IN IN IN IN
AstraZeneca ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Aventis ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Bristol-Meyers Squibb ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Eli Lilly ✔ ✔ ✔ ✔ ✔ ✔
Forest Laboratories NR NR NR NR NR NR NR NR NR
GlaxoSmithKline ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Johnson & Johnson ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Merck IN IN IN IN IN IN IN IN IN
Novartis International ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Novo Nordisk ✔ ✔ ✔ ✔ ✔ ✔ ✔
Pfizer ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Pharmacia Corp.
(acuqired by Pfizer)
Roche ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Sanofi Syntelabo ✔ ✔ ✔ ✔ ✔
Schering ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Schering - Plough ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Takeda ✔ ✔ ✔ ✔ ✔ ✔ ✔
Wyeth ✔ ✔ ✔ ✔ ✔ ✔ ✔
Yamanouchi ✔ ✔ ✔ ✔ ✔ ✔ ✔

PUBLIC SERVICES
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

SUEZ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
“Waste
Management, Inc.” ✔ ✔ ✔ ✔ ✔ ✔ ✔

86

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 87

Carbon Disclosure Project

PUBLISHING
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Gannett DP DP DP DP DP DP DP DP DP
McGraw Hill Co. IN IN IN IN IN IN IN IN IN
Reed Elsevier ✔ ✔ ✔ ✔ ✔ ✔
Tribune Co. ✔ ✔ ✔ ✔

SEMI-CONDUCTOR EQUIPMENT AND PRODUCTS

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Analog NR NR NR NR NR NR NR NR NR
Applied Materials ✔ ✔ ✔
Infineon ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Intel ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Linear Technology NR NR NR NR NR NR NR NR NR
Maxim Integrated
Products Ltd. NR NR NR NR NR NR NR NR NR
Rohm ✔ ✔ ✔ ✔ ✔ ✔
Samsung IN IN IN IN IN IN IN IN IN
ST Microelectronics ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Taiwan Semiconductor
Manufacturing Co. NR NR NR NR NR NR NR NR NR
Texas Instruments ✔ ✔ ✔ ✔ ✔ ✔
United Micro Electronics NR NR NR NR NR NR NR NR NR
Xilinx Inc. NR NR NR NR NR NR NR NR NR

SOFTWARE
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

“Computer Associates
International, Inc.” NR NR NR NR NR NR NR NR NR
Electronic Arts Inc. NR NR NR NR NR NR NR NR NR
Intuit Inc. NR NR NR NR NR NR NR NR NR
Microsoft ✔ ✔
Oracle DP DP DP DP DP DP DP DP DP
SAP ✔ ✔
Veritas ✔ ✔ ✔ ✔

87

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 88

Carbon Disclosure Project

TEXTILE AND APPAREL

Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Gucci Group NV NR NR NR NR NR NR NR NR NR
LVMH ✔ ✔ ✔ ✔ ✔
Nike Inc. ✔ ✔ ✔ ✔ ✔ ✔ ✔

SPECIALTY RETAIL
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Bed Bath and

Beyond Inc. NR NR NR NR NR NR NR NR NR
Best Buy Co. Ltd. NR NR NR NR NR NR NR NR NR
Gap Inc.
H&M ✔ ✔ ✔ ✔ ✔
Home Depot Inc. NR NR NR NR NR NR NR NR NR
Inditex Group ✔ ✔ ✔ ✔ ✔ ✔
Kingfisher PLC QF QF QF QF QF QF QF QF QF
Lowe’s Companies Inc. NR NR NR NR NR NR NR NR NR
TJX Companies Inc. DP DP DP DP DP DP DP DP DP
Staples Inc. QF QF QF QF QF QF QF QF QF

88

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 89

Carbon Disclosure Project

TELECOMMUNICATIONS
Strategy to Prepare for Emission Reduction
Considers Responsibility Quantified GHG Reporting
Emissions Trading Regimes Programs in Place
Climate Change Allocated for Formal GHG
to Present Management of Evidence Use of Third Energy CHG Reduction Targets
Risks and/or Climate Change Monitoring of Early Emissions Data Party Reporting Efficiency Reduction Set With Timeline
Opportunities Related Issues Developments Engagement Disclosed Protocol/Verification Programs Programs

Alltel DP DP DP DP DP DP DP DP DP
American Movil NR NR NR NR NR NR NR NR NR
AT & T Corp. QF QF QF QF QF QF QF QF QF
AT & T Wireless
Services Inc. DP DP DP DP DP DP DP DP DP
BCE Inc. DP DP DP DP DP DP DP DP DP
Bellsouth Corp. DP DP DP DP DP DP DP DP DP
BT Group PLC ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
China Mobile
(Hong Kong) Ltd. NR NR NR NR NR NR NR NR NR
Deutsche Telecom ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Etisalat NR NR NR NR NR NR NR NR NR
France Telecom ✔ ✔ ✔ ✔ ✔
Japan Telecom
Holdings Co. Ltd. DP DP DP DP DP DP DP DP DP
Kddi Corp. NR NR NR NR NR NR NR NR NR
KPN ✔ ✔ ✔ ✔
KT Corp. NR NR NR NR NR NR NR NR NR
Nextel
Communications Inc. NR NR NR NR NR NR NR NR NR
Nippon Telegraph
and Telephone Co. ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
NTT Docomo Inc. ✔ ✔ ✔ ✔ ✔ ✔
Orange
(see France Telecom)
Portugal Telecom ✔ ✔ ✔ ✔ ✔ ✔ ✔
Saudi Telecom NR NR NR NR NR NR NR NR NR
SBC
Communications Inc. DP DP DP DP DP DP DP DP DP
Singapore Telecom Ltd. NR NR NR NR NR NR NR NR NR
SK Telecom
Sprint IN IN IN IN IN IN IN IN IN
Swisscom ✔ ✔ ✔ ✔ ✔ ✔ ✔
TeliaSonera ✔ ✔ ✔ ✔ ✔
Telecom Italia/Olivetti ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Telecom Italia Mobile ✔ ✔ ✔ ✔ ✔ ✔ ✔
“Telefonica, S.A.” ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Telefonos de Mexico QF QF QF QF QF QF QF QF QF
Telstra Co. Ltd. ✔ ✔ ✔ ✔ ✔ ✔ ✔
Verizon
Communications Inc. ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Vodafone ✔ ✔ ✔ ✔ ✔ ✔

89

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 90

Carbon Disclosure Project

APPENDIX B.
Methodology For Calculating
Energy Price Sensitivity
1) For each company in the sector, we used consensus financial forecasts from Thomson/First Call for
current year forecasts. This includes Sales, Operating Profit, Net Income, Earnings Per Share. We use
Current Stock Price and forecast EPS to determine implied forward Price/Earnings Ratio.

Anglo American PLC

Sales (1) $ 23,329
Operating Expenses $ 18,943
Operating Profit (1) $ 4,385
Net Income (1) $ 2,297
Shares Outstanding 1,278
EPS Median Curr F Yr 1 (1) $1.80
Current Stock Price $21.61
Implied P/E Ratio 12.02

2) For each company in the sector, we then determined the effect of energy price increases. Starting with
Thomson/First Call forecasted Operating Expense, we assumed a) the level of energy cost as a
percentage of operating expense, and b) the increase in energy cost. In this example, we assumed that
energy was 25% of operating expense and that prices would increase by 5%. We then calculated the
amount of the increase in expenses, and deducted this from forecasted Net Income. Using implied
forward Price/Earnings Ratio, we then determined adjusted stock price and market capitalization.

Assumptions Anglo American PLC

Energy Cost as % of Operating Expenses 25% $ 4,735.85
Energy Cost Change 5% $ 236.79
Adjusted Net Income $ 2,060.21
Adjusted EPS $ 1.61
Adjusted Stock Price $ 19.38
Change in Stock Price $ 2.23
% Change in Stock Price -10.3%
Adjusted Market Cap $ 24,772
Change in Market Cap $ (2,847)

3) Calculations across the companies in the sector were then averaged. (Note that the maximum P/E ratio
used for this average in Metals & Mining is 30; Barrick Gold traded at a significantly higher P/E of 58,
reflecting the current asset value of its gold reserves.) Using these calculations, we were able to perform a
sensitivity analysis on both assumptions, providing a range of results depending on energy price change
and the cost of energy as a percentage of operating expense.

90

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 91

Carbon Disclosure Project

APPENDIX C.
Renewable Energy and Clean Technology:
Global Market Overview
• The World Energy Council estimates that the global market for renewable energy could be $625 billion by
2010 and $1,900 billion by 2020. Non-hydro renewables are expected to grow faster than any other
primary energy source to 2030, by an average of 6% per annum. Europe is being most aggressive. It aims
to generate 50% of its energy needs from renewables by 2050, corresponding to some $90-$135 billion.

IEA World Power Market Overview

Looking towards the long-term, world primary energy demand is expect to grow by 1.7% annually to 2030
according to the IEA. A business as usual trajectory would see fossil fuels account for 90% of this increase.
CO2 emissions in this scenario would rise by 1.8% per year to reach 38 billion tonnes in 2030, or 70%
above present day levels, with 2/3 of this coming from developing countries. Electricity demand growth will
be particularly strong; 2.4% per year, an effective doubling over the period. Demand for natural gas as fuel of
choice is also projected to double to 2030, with gas-fired power stations being the main factor. Oil
consumption is expected to rise by 1.6% annually, mostly on account of transportation needs. Coal demand
growth is projected to be lower than this, however, it is expected to remain the dominant fuel type in power
generation. China and India are anticipated to account for 2/3 of global demand increase to 2030. China
ranks second to the U.S. in energy consumption, and is expected to triple power generating capacity by
2015 (from 1995 levels), requiring some $449 billion in total investment. The IEA expects nuclear’s role in
power generation to shrink everywhere outside of Asia.
Non-hydro renewables are expected to grow faster than any other primary energy source, by 6% per
annum. Total output from renewables will increase 6-fold over this period. Worldwide, the growth in
electricity from renewable energy is projected to rise by 9-10% annually, compared with 2.4% for electricity
from conventional fossil fuel sources (Navigant Consulting, June 2003). This translates into a market of
approximately $35 billion by 2013, up from roughly $17 billion at present. IEA reckons that wind and
biomass will account for 80% of this increase.
Capital and generating costs of renewables are expected to fall dramatically over the next decade, making
clean electricity more competitive. Worldwide capacity additions from renewables are expected to be in the
region 400 GW, compared with 2,000 GW (or 40% of total) for natural gas, 1,400 for coal and 400 for
hydro. Total worldwide capacity additions are expected to be roughly 5,000 MW. Approximately 33% of this
will be in Asia. 2,000 MW of capacity, corresponding to some $1,740 billion in cumulative investments, will
be needed in OECD countries to replace aging plants and meet rising demand (World Power 2003, IEA
World Energy Outlook).

• Governments around the world reiterated their support for dealing with climate change via a portfolio of
low-carbon technologies, from greater energy efficiency and hybrid electric vehicles, to coal-based
integrated gasification combined cycle (IGCC) with carbon capture and sequestration and fuel cells. Many
have set clear targets for renewables.

• The European Union’s official target is 12% of energy from renewables by 2010, a target that requires
annual growth in production of renewable electricity of 5.7%. Europe also aims to generate 50% of its
energy needs from renewables by 2050. (See map for details of individual country renewable energy
targets and incentives.)

91

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 92

Carbon Disclosure Project

• The UK government’s target is to source 15% of national power from renewables by 2015 (it is currently
around 3%). In 2003, the government invited bids from companies to invest up to £6 billion into offshore
wind in the biggest boost the UK's green energy sector has ever seen.

• In the US, most states have renewables targets of one form or another. The Bush administration’s
Climate and Energy Policies provide for $7 billion in tax credits for clean energy initiatives over the next 10
years. Plans promoted by the Democratic presidential candidate, John Kerry, envisage producing 20% of
US energy from renewable fuels by 2020.

• The Mandatory Renewable Energy Target in Australia aims to generate 9,500gwh of renewable energy
annually by 2010, and 20,000gwh by 2020. This equates to roughly 2% market share for renewables by
2010. Since 2001, A$900 million (US$648m) has reportedly been invested in the Australian renewables
market, with a further A$1 billion planned or committed.

• The Canadian federal government has launched a CDN$1 billion (US$730m) Climate Change Action
Plan. Sustainable Development Technology Canada (SDTC) will allocate over $300 million of capital into
the clean-tech sector in the coming months in partnership with private-sector investors.

• In Japan, electricity generation targets to 2010 range from increases of 10% for hydro to 50% for some
solar PV and wind installations. A 50% capital subsidy for the construction of wind plant and 20% for
geothermal will also spur the market. The “Green Credit System” is designed to give electricity producers
additional incentives to purchase renewable energy.

Renewable Energy Standards

IA: 2% by 1999
MN: 3.6% by 2002 and 4.8 by 2012
WI: 2.2% by 2011
ME: 30% by 2000
MA: 4% by 2009

CT: 13% by 2009

NJ: 6.5% by 2012
PA: varies by utility

CA: 18% by 2012, 20% by 2017

AZ: 1.1% by 2007, 60% solar 13 states IL, HI and MN
NM: 5% of standard offer TX: 2.2 by 2009 also have non-binding
NV: 15% by 2013, 5% solar renewable goals

Source: CO2e.com

92

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 93

Carbon Disclosure Project

Renewable Energy (Re) Targets & Incentives Across Europe

BENELUX COUNTRIES NORTHERN EUROPE (DENMARK, FINLAND, SWEDEN)

(BELGIUM, NETHERLANDS, LUXEMBOURG) Denmark: RE 2010 Target: 29%. Proportion of RE as part of the country’s gross
Belgium RE 2010 Target: 6%. RE Financial Incentives: electricity consumption rose from 6% to 20% during the 1995-2002 period. It is
Certain regions: c0.03/kWh market price + c0.07/kWh for expected to reach 29% by 2005. Denmark is the continental leader in the offshore
the tradeable green certificates. Systems in operation since wind power market (402 MW installed in 2003). RE Financial Incentives: wind: new
2002. c100 penalty cost for not meeting target. onshore c0.04/kWh mkt price + 0.01/kWh premium.; bBiomass: c0.04/kWh.
Netherlands RE 2010 Target: 9%. In 2002, electricity Finland RE 2010 Target: 31.5%. Driven by strong growth in the bio-energy sector, RE
production from RE totaled 3644 GWh, representing 3.4% currently accounts for 25% of Finland’s total energy consumption. RE Financial
of total electricity consumption. Among other incentives, Incentives: Small hydro: c0.035/kWh + c0.004/kWh premium;. wWind/biomass: same
consumption of renewable energy is encouraged by an mkt price + c0.007/kWh premium. Subsidies for 30% investment costs also available.
ecotax exemption for most forms of renewable electricity. Sweden RE 2010 Target: 60%. It is estimated that RE accounts for approximately
RE Financial Incentives: c0.029/kWh price for green 45.2% of Sweden’s total electricity consumption. Despite record growth in Sweden’s
certificates. Feed-in tariffs = c0.07/kWh (except for wind power market, RE production as a whole is constrained by the relatively large
onshore wind and biomass = c0.05/kWh) financed by a number of unexploited rivers protected by domestic law (as a source of small-scale
levy on connections to the grid. hydro power). RE Financial Incentives: Small hydro: c0.035/kWh (pool price) +
Luxembourg RE 2010 Target: 5.7%. Luxembourg has c0.01/kWh premium + 10% subsidies of capital cost;. wWind is premium of
stated that it can meet its 2010 objective only if total c0.03/kWh; biomass: same as hydro but 25% subsidies of capital cost.
electricity consumption in 2010 does not exceed that of
1997. Recent estimates put the proportion of total
domestic energy consumption flowing from RE at 2.5%.
RE Financial Incentives: c0.03/kWh (mkt price) +
c0.025/kWh (premium).

UK AND IRELAND
United Kingdom RE 2010 Target: 10%. Renewable
electricity supply is forecast to reach about 10% by 2010.
Most of the required growth will come from wind power,
both on and off-shore. RE Financial Incentives:
Renewables Obligation: c46.3/MWh penalty (buy-out
price). Certificates for each MWh generated from RE
(ROCs) are tradeable. ROCs are currently trading at around
£47/MWh and are likely to fall to c. £30/Mwh by 2010
(UBS Warburg, 2003). Offshore wind projects get 40%
capital grants. c0.03/kWh (mkt price) + c0.07kWh (green
certificate).
Ireland RE 2010 Target: 13.2%. RE currently provides
approximately 2% of Ireland’s electricity production. RE
Financial Incentives: Small hydro: c0.06/kWh; wind:
c0.05/kWh; biomass: c0.06/kWh.

WESTERN EUROPE (AUSTRIA, FRANCE, GERMANY)

Austria RE 2010 Target: 78.1%. RE growth is led by the wind power
SOUTHERN EUROPE and biomass sectors. RE Financial Incentives: Feed-in tariffs for old
(GREECE, ITALY, PORTUGAL, SPAIN) plants:– wind: c0.07 /kWh – c0.09/kWh depending on region;,
Greece RE 2010 Target: 20.1%. In 2002, RE constituted 2.4% of biomass: c0.05 – c0.18/kWh,; small hydro: c0.06/kWh – 0.03/kWh
Greece’s total electricity consumption. RE development in Greece is depending on volume of power produced. For new plants: wind is
characterized by a lack of overall specialized physical planning. At the end c0.08/kWh, biomass: c0.16-0.1/kWh, depending on power produced,
of 2003, total RE production amounted to 4257 MW. RE Financial and small hydro: c0.06/kWh.
Incentives: c0.07/kWh + c 0.8-1/kWh extra. France RE 2010 Target: 21%. RE electricity production grew from
Italy RE 2010 Target: 25%. Italy has stated that 22% is a realistic figure 64.5 TWh in 1997 to 70.6 TWh in 2002, an increase of nearly 10%. In
on the assumption that in 2010 gross national electricity consumption will 2002, RE-produced electricity represented over 15% of total domestic
be 340 TWh. RE Financial Incentives: Italy requires power suppliers to electricity production. RE Financial Incentives: Subsidies provided for
purchase 2% of electricity from RE sources. 1 green certificate in Italy RE through ADEME. Feed-in tariffs vary by technology: wind: =
corresponds to 100 MWh of RE production. c0.05/kWh (mkt price) + c0.084/kWh (for 5 yrs), subsequently c0.03-0.08/kWh depending on
c0.08/kWh (GC price). generation volume;. Small hydro: = c0.08/kWh (winter) and c0.04/kWh
Portugal RE 2010 Target: 39%. In 2002, the share of electricity produced (summer); biomass: = c0.05/kWh; geothermal: = c0.076/kWh.
from RE was 32.5%. It should be stressed that in countries with a large Germany RE 2010 Target: c12.5%. As of 2002, 8% of domestic
share of hydroelectricity production (such as Portugal and Sweden), the energy consumption in Germany came from RE. This figure is
chances of meeting targets depends heavily on variations in and expected to reach 12.5% by 2010, driven largely by growth in the wind
distribution of rainfall. RE Financial Incentives: c0.08/kWh except biomass power market and the relatively favourable regulatory environment (i.e.
= c0.06/kWh. few procedural obstacles in German law). RE Financial Incentives:
Spain RE 2010 Target: 29.4%. Total RE production grew 17.8% from Fixed tariffs. Electricity from hydro will be paid c0.07/kWh, wind farms
2001–2002. Taking into account large-scale hydro, it is estimated that will be paid c0.09/kWh over the first 5 years, and over 9 years for
over 30% of Spain’s total energy demand in 2010 will be derived from RE. offshore wind farms (similar rates for biomass). In return for a voluntary
RE Financial Incentives: c0.065/kWh (c0.035/kWh pool price + c0.03 agreement from the power industry to use cogen technologies, the
premium) for plants using cogen ad RE at a capacity less than 50MW. government has pledged $3.5 billion.

93

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 94

Carbon Disclosure Project

• China is hoping to increase wind power production from 400 million watts in early 2003 to 1.4 billion
watts in 2005, partially through clean development mechanisms (CDMs). In its 10th Five-Year Plan, China
proposed a 5.5% Renewables Portfolio Standard Policy. Transmission efficiency technologies and off-grid
applications for remote locations offer tremendous opportunities. China's State Development and Reform
Commission said in February that it was ready to invest 10 billion yuan ($1.2 billion) in solar photovoltaic
(PV) technology and implementation in the next five years.

• India already generates more than 2,100mw through wind power. This is to increase to 5,000mw by
2007. There are plans to add about 10,000mw generating capacity from renewables by 2012 (of which
6000mw would come from wind). Indian companies have exported wind turbines to many countries
including the US and Australia.

• The energy future of these countries, particularly that of China, is seen as pivotal to the future worldwide
GHG emissions profile. Because of the size and growth rate of their market, energy technology choices
made by Chinese political leaders will have profound effects across a number of energy and environmental
markets. Despite soaring discrepancies in living standards across the country, aggregate energy use in
China is skyrocketing, driven largely by increasing consumer demand for home appliances, lighting, gas-
powered cooking and, most importantly, automobiles. Car sales in China grew by 82% during the first half
of 2003 compared with the same period in 2002. It is worth noting that if the average Chinese consumer
used as much oil as the average American, China would require 90 million barrels per day – 11 million
more than the entire world produced each day in 2001. The question of how China’s mounting energy
demands will be met is of crucial concern to future coal, natural gas, oil and global GHG emissions
scenarios. International energy experts, including the Director of energy and water at the World Bank,
recently urged China to step up efforts to improve its energy efficiency and reduce reliance on fossil fuels.

• One school of thought suggests that a country without elections, such as China, may be better able to
make the logical case for investment in emissions reduction, based on self-preservation. This is because
an undemocratic government, that does not need to face elections every five years, may be better able to
act in the mid- to long-term national interest. Tragically the urgent action required seems beyond the
intelligence of the democracies – at least over the 1992 to 2004 period for implementation of the UN
Framework Convention on Climate Change (UNFCCC).

94

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 95

Carbon Disclosure Project

APPENDIX D.
The FT500 List of Companies
with Response Status
Apache US QF
Key:
Apollo Group US DP
Applied Materials US AQ
Answered questionnaire AQ
Astrazeneca UK AQ
Provided environmental report or AT & T US QF
other relevant information IN AT & T Wireless Services US DP
Questionnaire forthcoming at time Australia And New Zealand Banking Group Australia AQ
Automatic Data Processing US DP
of printing QF
Autostrade Italy AQ
Declined to participate DP Aventis France AQ
No response NR Aviva UK AQ
Avon Products US NR
AXA France AQ
3M Company US AQ BAA UK AQ
Abbey National UK AQ Baker Hughes US QF
Abbott Laboratories US AQ Banca Intesa Italy QF
ABN Amro Holding Netherlands AQ Banco Popular Espanol Spain QF
Ace Limited US AQ Bank Of America US AQ
Aegon Netherlands NR Bank Of Ireland Ireland QF
Aetna US NR Bank Of Montreal Canada AQ
Aflac US DP Bank Of New York US NR
Air Liquide France AQ Bank One US DP
Air Products & Chemicals US AQ Barclays UK AQ
Al Rajhi Banking & Investment Saudi Arabia NR Barrick Gold US AQ
Alcan US QF BASF Germany AQ
Alcatel France AQ Baxter International US AQ
Alcoa US AQ Bayer Germany AQ
Allergan US IN BB& T US AQ
Allianz Germany AQ BBV Argentaria Spain AQ
Allied Irish Banks Ireland AQ BCE Canada DP
Allstate US QF Becton Dickinson US AQ
Alltel US DP Bed Bath And Beyond US NR
Altria Group US DP Beiersdorf Germany IN
Amazon US DP Bellsouth US DP
America Movil Mexico NR Berkshire Hathaway US DP
American Electric Power Company US AQ Best Buy Company US QF
American Express Company US NR BG Group UK AQ
American International Group US AQ BHP Billiton UK AQ
Amgen US DP Biomet US NR
Anadarko Petroleum US NR BMW Germany AQ
Analog Devices US DP BNP Paribas France AQ
Anglo American UK AQ BOC Hong Kong Holdings Hong Kong NR
Anheuser-Busch Companies US QF Boeing Company US NR
Anthem US AQ Boston Scientific US AQ
AOL Time Warner US IN BP UK AQ
AP Moller-Maersk Denmark DP Bridgestone Japan DP

95

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 96

Carbon Disclosure Project

Bristol Myers Squibb US AQ Danske Bank Denmark DP

British American Tobacco UK AQ DBS Group Singapore AQ
British Sky Broadcasting Group UK AQ Deere US IN
BT Group UK AQ Dell US AQ
Burlington Northern Santa Fe US AQ Denso Japan AQ
Burlington Resources US DP Deutsche Bank Germany AQ
Cadbury Schweppes UK AQ Deutsche Post Germany AQ
Campbell Soup US DP Deutsche Telekom Germany AQ
Canadian Imperial Bank Of Commerce Canada AQ Devon Energy US DP
Canadian National Railway Canada DP Dexia Belgium AQ
Canon Japan AQ Diageo UK AQ
Cardinal Health US DP Dominion Resources US DP
Carnival US NR Dow Chemicals US AQ
Carrefour France AQ Du Pont EI De Nemours US AQ
Caterpillar US NR Duke Energy US AQ
Cathay Financial Taiwan AQ E On Germany AQ
Cendant US DP East Japan Railway Japan AQ
Central Japan Railway Japan DP Eastman Kodak US AQ
Centrica UK AQ Ebay US AQ
Cheung Kong Holdings Hong Kong NR Electrabel Belgium AQ
Chevron Texaco US AQ Electronic Arts US DP
China Mobile (Hong Kong) Limited Hong Kong DP Electronic Data Systems US DP
Chubb US NR Eli Lilly US AQ
Chubu Electric Power Company Japan AQ EMC US IN
Cisco Systems US AQ Emerson Electric US AQ
Citigroup US AQ Encana Canada IN
Clear Channel Communications US QF Endesa Spain AQ
Clorox US DP ENEL Italy AQ
CLP Holdings Hong Kong AQ Energie Baden-Wuerttemberg Germany AQ
CNOOC Hong Kong AQ ENI Italy AQ
Coca Cola Enterprises US IN Entergy US AQ
Coca Cola US IN Equity Office Properties Trust US AQ
Colgate-Palmolive US AQ Ericsson Sweden AQ
Comcast US DP Etisalat United Arab Emirates NR
Commonwealth Bank Of Australia Australia IN Exelon US AQ
Companhia Vale Do Rio Doce Brazil NR Exxon Mobil US AQ
Compass Group UK IN Fanuc Japan DP
Computer Associates International US IN Federal Home Loan Mortgage US DP
Conagra US NR Federal National Mortgage Association US IN
ConocoPhillips US AQ Fed-Ex US AQ
Consolidated Edison US NR Fifth Third Bancorp US NR
Costco Wholesale US NR First Data US AQ
Cox Communications US AQ Firstenergy US AQ
Credit Agricole France AQ Fleetboston Financial US see Bank of America
Credit Lyonnais France see Credit Agricole Ford Motor US AQ
Credit Suisse Switzerland AQ Forest Laboratories US NR
CRH Ireland AQ Fortis Belgium AQ
CVS US NR Fox Entertainment US NR
D/S 1912 Denmark See AP Moller Maersk FPL Group US AQ
Dai Nippon Printing Japan AQ France Telecommunications France AQ
Daimler-Chrysler Germany AQ Franklin Resources US QF
Danaher US AQ Fuji Photo Film Japan AQ
Danone France AQ Gannett US IN

96

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 97

Carbon Disclosure Project

Gap US AQ Japan Telecom Holdings Japan DP

Gazprom Russia NR John Hancock Financial Services US see Manulife
Genentech US NR Johnson And Johnson US AQ
General Dynamics US NR JP Morgan Chase US QF
General Electric US AQ Kansai Electric Power Japan AQ
General Mills US AQ Kao Japan AQ
General Motors CL H US see General Motors KBC Belgium AQ
General Motors US AQ KDDI Japan DP
Generali Italy DP Kellogg US IN
Genzyme US AQ Keycorp US DP
George Weston US AQ Kimberly-Clark US AQ
Gilead Sciences US DP Kingfisher UK QF
Gillette US AQ Kohls US NR
Glaxosmithkline UK AQ Kookmin Bank South Korea NR
Golden West Financial US AQ Korea Electric Power South Korea NR
Goldman Sachs Group US NR KPN Netherlands AQ
Great West Lifeco Canada DP Kraft Foods US DP
Gucci Group Italy NR Kroger US NR
Guidant US DP KT Corp South Korea DP
GUS UK AQ Kyocera Japan AQ
H & M Hennes & Mauritz Sweden AQ Lafarge France AQ
H & R Block US AQ Legal & General UK AQ
Halliburton US AQ Lehman Brothers Holdings US
Hang Seng Bank Hong Kong see HSBC response from Peabody Energy AQ
Harley-Davidson US NR Lexmark International US IN
Hartford Financial Services US DP Liberty Media US NR
Hbos UK AQ Linear Technology US NR
HCA US DP Lloyds TSB UK AQ
Heineken Netherlands AQ Loblaw US AQ
Heinz HJ US AQ Lockheed Martin US IN
Henkel Germany AQ Loews US DP
Hewlett-Packard US AQ L'Oreal France AQ
Hitachi Japan AQ Lowe's Companies US IN
Home Depot US DP Lukoil Russia NR
Honda Japan AQ LVMH France AQ
Honeywell International US DP Malayan Banking Malaysia AQ
Hong Kong Electric Hong Kong NR Manulife Financial US IN
Household International US see HSBC Marathon Oil US DP
HSBC UK AQ Marks & Spencer UK AQ
Hutchison Whampoa Hong Kong NR Marriott International US IN
Iberdrola Spain AQ Marsh & McLennan US NR
Illinois Tool Works US DP Masco US NR
Imperial Oil Canada IN Matsushita Electric Japan AQ
Imperial Tobacco UK AQ Mattel US AQ
Inditex Spain AQ Maxim Integrated Products US NR
Infineon Technologies Germany AQ MBNA US NR
ING Netherlands AQ McDonalds US DP
Intel US AQ McGraw-Hill US IN
Interbrew Belgium DP McKesson US NR
International Business Machine US AQ Mediaset Italy QF
International Paper US AQ Medimmune US NR
Intuit US NR Medtronic US AQ
Ito Yokado Japan AQ Mellon Financial US DP

97

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 98

Carbon Disclosure Project

Merck US IN Pitney-Bowes US AQ
Merrill Lynch US AQ PNC Financial Services US AQ
Metlife US NR Portugal Telecom Portugal AQ
Microsoft US AQ Power Financial US DP
Millea Holdings Japan DP PPG Industries US AQ
Mitsubishi Estate Japan AQ Praxair US AQ
Mitsubishi Heavy Industries Japan AQ Principal Financial US IN
Mitsubishi Japan AQ Procter & Gamble US AQ
Mitsubishi Tokyo Financial Japan AQ Progress Energy US AQ
Mitsui Japan AQ Progressive Corp US DP
Mizuho Financial Japan DP Prudential Financial US DP
Morgan Stanley US DP Prudential UK AQ
Motorola US AQ Public Service Enterprise Group US AQ
Munich Reinsurance Germany AQ Qualcomm US AQ
Murata Manufacturing Japan AQ RAS Italy AQ
National Australia Bank Australia AQ Raytheon US QF
National City US AQ Reckitt Benckiser UK AQ
National Grid Transco UK AQ Reed Elsevier Netherlands / UK AQ
Nestle Switzerland AQ Reliance Industries India NR
Newell Rubbermaid US DP Renault France AQ
Newmont Mining US DP Repsol YPF Spain AQ
News Corporation Australia AQ Ricoh Japan AQ
Nextel Communications US NR Rio Tinto UK AQ
Nike US IN Roche Switzerland AQ
Nintendo Japan AQ Rohm Japan AQ
Nippon Steel Japan AQ Royal Bank Of Canada Canada AQ
Nippon Telegraph & Telephone Japan AQ Royal Bank Of Scotland Group UK AQ
Nissan Japan QF Royal Dutch / Shell Netherlands / UK AQ
Nokia Finland AQ RWE Germany AQ
Nomura Japan AQ Safeway US DP
Nordea Sweden AQ Saint Gobain France AQ
Norfolk Southern US IN Saint Jude Medical US AQ
Norsk Hydro Norway AQ Saint Paul Companies US AQ
Nortel Networks Canada AQ Samsung Electronics South Korea IN
Northrop Grumman US DP San Paolo IMI Italy AQ
Novartis Switzerland AQ Sanofi-Synthelabo France AQ
Novo Nordisk Denmark AQ Santander Central Hispano Spain AQ
NTT Data Japan AQ SAP Germany AQ
NTT DoCoMo Japan AQ Sara Lee US AQ
Occidental Petroleum US AQ Saudi American Bank Saudi Arabia NR
Oil & Natural Gas India NR Saudi Basic Industries Saudi Arabia NR
Olivetti Italy see Telecom Italia Saudi Electricity Saudi Arabia NR
Omnicom Group US DP Saudi Telecom Saudi Arabia NR
Oracle US DP SBC Communications US DP
Orange France see France Telecom Schering Germany AQ
Paychex US NR Schering-Plough US AQ
PepsiCo US AQ Schlumberger US AQ
Petro-Canada Canada AQ Schneider Electric France AQ
Petroleo Brasileiro Brazil AQ Schwab Charles US NR
Peugeot France AQ ScotiaBank Canada AQ
Pfizer US AQ Scottish & Southern Energy UK AQ
Pharmacia US see Pfizer Scottish Power UK AQ
Philips Electronics Netherlands QF Sears Roebuck US NR

98

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 99

Carbon Disclosure Project

Serono Switzerland AQ Tokyo Electric Power Japan AQ

Seven-Eleven Japan AQ Tokyo Gas Japan AQ
Sharp Japan AQ T-Online Germany DP
Shell Canada Canada AQ Toronto Dominion Bank Canada IN
Shin-Etsu Chemical Japan AQ Toshiba Japan AQ
SIBNEFT Russia NR Total France AQ
Siemens Germany QF Toyota Japan AQ
Singapore Telecom Singapore QF TPG Netherlands AQ
Six Continents UK DP Travelers Property Casualty US see St. Paul Companies
SK Telecom South Korea AQ Tribune US AQ
SLM US QF Tyco International US DP
Societe Generale France AQ UBS Switzerland AQ
Sony Japan AQ Unicredito Italy AQ
Southern Company US AQ Unilever UK AQ
Southtrust US DP Union Pacific US DP
Southwest Airlines US IN United Micro Electronics Taiwan NR
Sprint US IN United Overseas Bank Singapore AQ
Standard Chartered UK AQ United Parcel Service US AQ
Staples US QF United Technologies US AQ
Starbucks US AQ Unitedhealth Group US AQ
State Street US AQ US Bancorp US NR
Statoil Norway AQ USA Interactive US DP
STmicroelectronics France AQ Veritas Software US AQ
Stora Enso Finland AQ Verizon Communications US AQ
Stryker US NR Viacom US NR
Suez France AQ Vivendi Universal France AQ
Sumitomo Mitsui Financial Japan DP Vodaphone UK AQ
Sun Hung Kai Properties Hong Kong NR Volkswagen Germany AQ
Sun Life Financial Canada QF Volvo Sweden AQ
Sun Microsystems US NR Wachovia US AQ
Suncor Energy Canada AQ Wal Mart Stores US IN
Suntrust Banks US DP Walgreen US DP
Surgutneftegaz Russia NR Wal-Mart De Mexico Mexico AQ
Svenska Cellulosa Sweden AQ Walt Disney US IN
Svenska Handelsbanken Sweden AQ Wanadoo France see France Telecom
Swiss Reinsurance Switzerland AQ Washington Mutual US DP
Swisscom Switzerland AQ Waste Management US AQ
Sysco US IN Wellpoint Health Network US NR
Taiwan Semiconductor Taiwan NR Wells Fargo US AQ
Takeda Chemical Japan AQ Westpac Australia AQ
Target US DP Weyerhaeuser US AQ
Telecom Italia Italy AQ Woolworths Australia NR
Telecom Italia Mobile Italy AQ Wrigley William Junior US NR
Telefonica Spain AQ Wyeth US AQ
Telefonos de Mexico Mexico QF Xilinx US DP
TeliaSonera Sweden AQ XL Capital Bermuda AQ
Telstra Australia AQ Yahoo US NR
Tenet Healthcare US DP Yamanouchi Pharmaceutical Japan AQ
Tesco UK AQ Yukos Oil Russia QF
Texas Instruments US AQ Zimmer Holdings US AQ
Thomson Canada AQ Zurich Financial Services Switzerland AQ
TJX Companies US DP
Tohoku Electric Power Japan AQ

99

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 100

Carbon Disclosure Project

APPENDIX E.
CDP Questionnaire
1 November 2003
Carbon Disclosure Project (CDP) Greenhouse Gas Emissions Questionnaire
We request as full a reply as possible to the following questions by no later than 29 February 2004. Please
send responses electronically in English to the Project Coordinator at [email protected]. If you already publish
the relevant information, please indicate for each question how to access this. If at this stage you can only
provide indicative information we would still welcome this; “a best guess” is more valuable to us than no
response. If you are unable to answer any of these questions please state the reasons why.

Governance and Strategy:

1. Do you believe climate change, the policy responses to climate change and/or adaptation to climate
change represent commercial risks and/or opportunities for your company?
- If yes, specify the implications, detail the strategies adopted and actions taken to date.
- If no, please indicate why.

2. Do you have a strategy regarding preparation for emerging greenhouse gas emissions regulation and
trading regimes, in particular the European Union Emissions Trading Scheme?
- If yes, specify the implications, detail the strategies adopted and actions taken to date.
- If no, are you planning on doing so, and if so when?

3. Do you allocate responsibility for managing climate change related issues?

- If yes, what is the title of the person with this responsibility?
- If no, are you planning on doing so, and if so when?

Measurement:
Please specify the methodology you employ for measuring emissions, and explain if these data are audited
and/or externally verified.

4. What is the quantity of annual emissions of the six main GHGs (CO2, CH4, N2O, HFCs, PFCs and SF6)
produced by your operations in the following areas (Note 1)?
- Globally
- Annex B of the Kyoto Protocol
- EU Emissions Trading Directive.

5. Products and services: Do you measure the emissions associated with both the use and disposal of your
products and services (Note 2)?
- If yes, please provide further information.
- If no, are you planning on doing so, and if so when?

6. Supply chain: Do you measure the emissions generated by your supply chain?
- If yes, please provide further information including details of the boundaries you apply.
- If no, are you planning on doing so, and if so when?

100

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 101

Carbon Disclosure Project

Management:
7. Do you have emission reduction programmes in place?
- If yes, please detail explicit targets relating to Qs.4/5/6 and progress made to date.
- If no, are you planning on doing so, and if so when?

8. Please explain how you could reduce your GHG emissions to meet national, regional and international
targets for reductions. What are your estimated costs or savings associated with achieving these targets?

9. Have you considered scenarios involving reductions in GHG emissions beyond existing national, regional
and international targets? If yes please detail these scenarios, and your estimated costs or savings
associated with each one. If no, are you planning on doing so, and if so when?

Note 1: If you do not use a methodology for measuring emissions we suggest you follow guidelines such as those produced by the World Business
Council for Sustainable Development (www.ghgprotocol.org) as a basis for preparing your response.
Note 2: For example, if you are a financial services company, do you take into account the emissions related risks and/or opportunities of the
companies you invest in, lend to, or insure.

101

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 102

Carbon Disclosure Project

APPENDIX F.
CDP Signatory Contacts
The Carbon Disclosure Project is honoured to have served as a secretariat for the
following investors:

Abbey National +44 1908 348419

Aberdeen Asset Mangers, Sam Walker +44 207 463 6424
ABN AMRO, Jaap van der Geest, +31 20 629 4444
ABP, Michel Meijs +31 45 5794224
Acuity Investments
AMP Henderson Global Investors, Dr Ian Woods +61 2 9257 6405
Asahi Life Asset Management Co, Tadashi Hayami +81 3 3345 7853
ASN Bank, Joroen Jansen +31 703 569 358
AXA, Christophe Dufraux +33 1 40 75 55 72
Baillie Gifford
Bank Sarasin & Cie AG, Eckard Plinke +41 6 1277 7574
BNP Paribas Asset Management, Julie Cosson +33 1 5897 2951
Calvert, Elizabeth Lauienzo +1 301 657 7047
Catholic Superannuation Fund, Frank Pegan +61 3 9648 4710
Central Finance Board of the Methodist Church
CERES, Arianne van Buren +1 212 222 0700
CI Mutual Funds, Murray Oxby +1 416 681-3254
Commerzbank
Conneticut Retirement Plans and Trust Fund, Bernard Kavaler +1 860 702 3277
Co-operative Bank, Paul Monaghan +44 161 829 5460
Cooperative Insurance Society, Simon Cramer +44 161 837 4360
Credit Agricole Asset Management, Sébastien Audra +33 1 4323 3751
Credit Suisse Group, Media Relations +41 1 333 8844
Daiwa Securities Group Inc., Hajime Imbe
Deutsche Asset Management UK, Mark Pursey +44 207 545 0776
Development Bank of Japan, Takayuki Yamamoto +81 3 3244 1174
Dexia Asset Management, Eddy Ryssens +32 2 222 0673
Domini Social Investments, Kimberly Gladman +1 212 217 1023
Dreyfus Premier, Paul Hilton +1 212-922-6292
Dresdner RCM Global Investors, Bozena Jankowska +44 207 065 1468
Environment Agency, Howard Pearce +44 1454 624 332
Ethical Funds, Robert Walker +1 604 714 3833
First Swedish National Pension Fund (AP1), Nadine Viel Lamare +46 8 5662 0270
Fleet, Helen Sahi +1 860 952-6300
Folksam Insurance Group, Carina Lundberg +46 8 772 60 00
Fortis Investments, Lynn Pattinson +32 2 274 8466
Gartmore Investment Management, Tony Little +44 20 7782 2000
Henderson Global Investors, Nick Robins +44 207 818 4356
Hermes Investment Management, Colin Melvin +44 207 680 2251
HSBC Holdings, Ann-Marie Evans +44 207 991 0846
HVB Group, Stefan Loebbert +49 89 378 29765
ING Investment Management Europe, Herman Kleeven +31 7 0378 1798

102

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 103

Carbon Disclosure Project

Insight Investment, Rory Sullivan +44 207 321 1875

Interfaith Centre on Corporate Responsibility, Patricia Wolf +1 212 870 2294
ISIS Asset Management, Claudia Kruse +44 207 506 1179
Jupiter Asset Management, Emma Howard Boyd +44 207 314 4769
KBC Asset Management, Bruno Tuybens +32 2 429 3392
LAPFF (Local Authority Pension Fund Forum)
Legal and General, John Morgan +44 207 528 6213
London Pension Fund Authority, Peter Scales +44 207 369 6002
Meritas Financial Inc, Gary Hawton +1 519 624 6767
Merrill Lynch Investment Managers, Nigel Webb +44 207 743 5938
Misubishi Securities, Junji Hatano +81 3 6213 6860
Morley Fund Management, Toby Belsom +44 207 809 6198
Munich Re, Dirk Reinhard +49 89 3891 5909
Neuberger Berman
New York State Common Employees Retirement System
Newton Investment Mangement Limited
Ontario Teachers Pension Plan, Lee Fullerton +1 416 730 5347
Pax World Funds, Anita Green +1 417 276 3736
PGGM, Claudia Kruse +44 207 506 1179
Public Sector Superannuation Scheme /
Commonwealth Superannuation Scheme (PSS/CSS), Steve Gibbs +61 2 6263 6911
Rabobank, Veronique Schyns +31 30 2164 304
Railpen Investments, Frank Curtiss +44 207 786 7219
Real Assets Investment Mangement Inc, Indi Shoker +1 604 646 5866
Robeco
Rockefeller & Co Socially Responsive Group, Joyce Haboucha
SAM Sustainable Asset Management, Cécile Heusser-Bachmann +41 1397 1010
Sanlam Investment Management, Daniel Kriel +27 21 950 2571
Sanpaolo Wealth Management
Societe Generale Asset Management UK Ltd, Carole Arumainayagam +44 207 815 8600
Sogeposte, Claire Anjoran +33 1 4069 2530
State Street Global Advisors Limited, Kim Gluck
State Treasurer of Vermont
Storebrand, Stephen Williams, +44 207 222 0086
Swiss Re, Media Relations, +41 43 285 7171
Treasurer, State of California
Treasurer, State of Maine, Adam Krea
Trillium Asset Management, Shelley Alpern +1 617 423 6655
Triodos Bank, Thomas Steiner +31 30 693 6520
Tri-State Coalition for Responsible Investment, Patricia A. Daly +1 973 579 1732
UBS Global Asset Management (UK)
Unicredit Group
Union Investment, Rolf Drees +49 69 2567 2338
Universities Superannuation Scheme
VicSuper Proprietary Limited, John Fulcher +61 3 9667 9631
Walden Asset Management, Tim Smith, +1 617 726 7155
Wells Fargo
West AM, Dr Britta Murmann, +49 211 826 7719

103

Innovest Strategic Value Advisors May 2004

11187 CDP 78-104 10/5/04 5:40 pm Page 104

Carbon Disclosure Project

Notes

104

Innovest Strategic Value Advisors May 2004

11187 CDP Cover 11/5/04 8:53 am Page 2

Carbon Disclosure Pro j e c t Carbon Disclosure Pro j e c t

In addition to the support of the signatories CDP has been made

possible through the generous funding of: Esmée Fairbairn Foundation
UK, The Carbon Trust UK, Climate Initiatives Fund UK, The Funding
Network UK, Home Foundation Holland, The Nathan Cummings
Foundation USA, Network for Social Change UK, Rockefeller Brothers
Fund USA, Rufus Leonard UK, Turner Foundation USA, W. Alton Jones
Foundation USA, WWF UK.

Supported by

The Carbon Disclosure Project is financially One of the largest UK corporate brand
supported by the Carbon Trust, an and communications consultancies, Rufus
independent, government funded Leonard serve clients including Barclays,
organisation that helps UK business BBC, BT, Credit Suisse, Lloyds TSB and
and the public sector cut carbon emissions Shell. We were the first sponsor of CDP and
and capture the commercial potential of the project is housed in our offices.
low carbon technologies. www.rufusleonard.com
www.thecarbontrust.co.uk

The contents of this report may be used by anyone providing acknowledgement is given. The information herein has been obtained from sources which the
authors and publishers believe to be reliable, but the authors and publishers do not guarantee its accuracy or completeness. The authors and publishers
make no representation or warranty, express or implied, concerning the fairness, accuracy, or completeness of the information and opinions contained herein.
All opinions expressed herein are based on the authors and publishers judgement at the time of this report and are subject to change without notice due to
economic, political, industry and firm-specific factors. The authors and publishers and their affiliated companies, or their respective shareholders, directors, Our sincere thanks are extended to the following:
officers and/or employees, may have a position in the securities discussed herein. The securities mentioned in this document may not be eligible for sale in
The Association for Sustainable and Responsible Investment in Asia, www.asria.org
some states or countries, nor suitable for all types of investors; their value and the income they produce may fluctuate and/or be adversely affected by
exchange rates. © 2004 Innovest Strategic Value Advisors, Inc. All rights reserved. Brooklyn Bridge, www.tbli.org
The Institutional Investors Group on Climate Change, www.iigcc.org
Printed by Beacon Press using their environmental print technology. The printing inks are made using vegetable based oils. No film or processing
The Investor Network on Climate Risk, www.incr.com
chemicals were used. 95% of the cleaning solvents are recycled for further use and 84% of the waste associated with this product will be recycled.
The electricity was all generated from renewable sources. Beacon Press is a Carbon Neutral® company and is registered to environmental standards ISO The Development Bank of Japan, www.dbj.go.jp
14001 and EMAS. United Nations Environment Programme Finance Initiative, www.unepfi.net

105

Innovest Strategic Value Advisors May 2004 Innovest Strategic Value Advisors May 2004
11187 CDP Cover 11/5/04 8:53 am Page 1

CARBON DISCLOSURE PROJECT

Climate Change and Shareholder Value In 2004

On 1st November 2003, the Carbon Disclosure Project (CDP) issued
a second information request to the FT500 Global Index companies.
95 institutional investors representing assets in excess of $10 trillion are
signatories to the request, which asked for disclosure of investment-
relevant information relating to the risks and opportunities presented
by climate change. Full details of the responses and reports can be
found at www.cdproject.net
Key Findings of CDP2 CDP Signatories
Contacts
Recent developments are creating a fresh sense of urgency: Abbey National, Aberdeen Asset Managers,
ABN AMRO Asset Management, ABP,
Carbon Disclosure Project • The mainstream investment community has woken up to the financial implications Acuity Investments, AMP Henderson Global
Carbon Disclosure Project Fiscal agent and sponsor liaison of climate change; signatories to CDP increased by over 250%. Analysts and fund Investors, Asahi Life Asset Management
Co., Ltd, ASN Bank, AXA, Baillie Gifford,
The Drill Hall Rockefeller Philanthropy Advisors managers are starting to see risks and opportunities take shape. Assessing climate Bank Sarasin & Cie AG, BNP Paribas Asset
change is now becoming part of smart financial management. Management, Calvert, Catholic
57A Farringdon Road 437 Madison Avenue Superannuation Fund (CSF), Central
• The social and economic costs of climate change began to emerge: in 2003 Finance Board of the Methodist Church,
London EC1M 3JB New York weather-related disasters cost $70 billion and a European heat wave killed 20,000 CERES, CI Mutual Funds, Commerzbank,
[email protected] NY 10022 people. The number of natural disasters recorded by reinsurance companies reached a Conneticut Retirement Plans and Trust
Fund, Cooperative Bank, Cooperative
www.cdproject.net historical peak. More extreme weather events should be expected in the future. Insurance Society, Credit Agricole Asset
Management, Credit Suisse Group, Daiwa
Telephone + (44) 1273 604 666 • Companies are likely to face increased pressure from financial market authorities, Securities Group Inc, Deutsche Asset
Fax + (44) 207 404 4491 fiduciaries, company officers and accounting bodies to deal with climate risk factors. Management UK, Development Bank of
Japan, Dexia Asset Management, Domini
'Generally Accepted Carbon Accounting Principles' – ‘GACAP’ – appear likely to emerge. Social Investments, Dresdner RCM Global
• Legislation designed to put a price on carbon accelerated in 2003/4 throughout Investors, Environment Agency Pension
James Cameron, Chair – [email protected] Fund UK, Ethical Funds, AP1, Fleet,
the OECD. The 2004 global carbon market could reach $480m (c400m). Weather,
Paul Dickinson, Coordinator – [email protected] + (44) 7958 772864 GHG and green power markets are converging to broaden risk management options.
Folksam Insurance Group, Fortis
Investments, Gartmore Investment
Paul Simpson, Project Manager – [email protected] + (44) 207 274 4249 Certain industrial sectors and commodity markets will experience greater volatility; Management plc, Henderson Global
Investors, Hermes Investment Management,
Jeremy Smith, Director – [email protected] + (44) 7798 830894 wholesale electricity prices will impact profitability; adaptation to this ‘new normalcy’ HSBC Holdings, HVB Group, ING
Daniel Turner, Project Assistant – [email protected] + (44) 7952 889443 will be required. Investment Management Europe, Insight
Investment, Interfaith Centre on Corporate
• More FT500 firms now see opportunities in the ‘clean tech’ sector. Investment in Responsibility, ISIS Asset Management plc,
CDP Advisory Board the sector has quadrupled to $2.5 billion over the past 2 years. Jupiter Asset Management, KBC Asset
Management, Legal & General, Local
Andrew Dlugolecki – Andlug Consulting Authority Pension Fund Forum, Lombard
What the CDP responses tell us: Odier Darier Hentsch et Cie, London
Bob Monks – Lens • Climate change and shareholder interest are becoming more closely intertwined. Pension Fund Authority, Meritas Financial
Inc, Merrill Lynch Investment Managers,
Colin Maltby – Carbon Disclosure Project 59% of firms responded to CDP2 (47% in CDP1). 45% of the FT500 believe climate Mitsubishi Securities, Morley Fund
Eckart Wintzen – Ex’tent change represents risk and/or opportunity. 65% of companies in high-impact sectors Management, Munich Re, Neuberger
Berman, Newton Investment Management
Eileen Claussen – Pew Center on Global Climate Change are now measuring and reporting emissions versus 51% in CDP1. Responses were up Limited, New York State Common
40% in the US utilities sector and 23% in the oil and gas industry. Twice as many Employees Retirement System, Ontario
Robert Napier – WWF Teachers Pension Plan, Pax World Funds,
banks now have a stake in the renewables sector. PGGM, Public Sector Superannuation
• Significant differences of opinion remain within the same sector on the importance Scheme / Commonwealth, Superannuation
Scheme, Rabobank Group, Railpen
of climate change to company business and competitiveness. Many companies remain Investments, Real Assets Investment
firmly ‘behind the curve’. Only one firm cited the CEO as being responsible for Management Inc, Robeco, Rockefeller & Co
Socially Responsive Group, SAM
managing the issue. Sustainable Asset Management, Sanlam
• Major ‘disconnects’ still exist between some company’s response status and what is Investment Management, Sanpaulo Wealth
known publicly about their actual climate change stance. Management, Societe Generale Asset
Innovest Strategic Value Advisors Management UK Ltd, Sogeposte, State
• Not all companies respond to shareholders. At least 12 companies failed to Street Global Advisors Limited, Storebrand
Martin Whittaker Managing Director +1 905 707 0876 x 218 [email protected] Investments, Swiss Re, Treasurer of the
respond to the CDP letter despite having over 10% of their outstanding common
Matthew Kiernan CEO +1 905 707 0876 x 204 [email protected] State of California, Treasurer of the State of
shares owned by signatories to the CDP letter. Maine, Treasurer of the State of Vermont,
Devin Crago Senior Analyst +1 212 421 2000 x 225 [email protected] • Total emissions from operations (not including product use and disposal) reported to Trillium Asset Management, Triodos Bank,
Tri-State Coalition for Responsible
Katharine Preston Senior Analyst +1 905 707 0876 x 242 [email protected] CDP equalled c. 2.9 billion tons of CO2 equivalent, approximately 13% of total global Investment, UBS Global Asset Management
Doug Morrow Analyst +1 905 707 0876 x 216 [email protected] emissions from fossil fuel combustion. (UK), Unicredit Group, Union Investment,
Universities Superannuation Scheme,
Hewson Baltzell President +1 212 421 2000 x 215 [email protected] VicSuper Proprietary Limited, Walden Asset
Based on the responses received by the CDP, we have created the Climate Management, Wells Fargo & Co.,
225 East Beaver Creek Drive 4 Times Square, 3rd Floor 4 Royal Mint Court No.1 Rue des Reservoirs Leadership Index, comprising the 50 ‘best in-class’ responses. West AM
Suite 300 New York London B 605
Richmond Hill, Ontario L4B 3P4 New York EC3N 4HU Joinville-le-Pont
Report written by: CDP sponsored by: Innovest Strategic Value Advisors
+1 905 707 0876 +1 212 420 2000 +44 20 7073 0470 Paris 94340 Martin Whittaker PhD MBA
+33 1 48 86 03 69 +1 905 707 0876 x 218

Innovest [email protected]

For the Carbon Disclosure Project (CDP)

Strategic Value Advisors Paul Dickinson
+44 7958 772864
[email protected]