Post Paris, the spotlight shines bright on business climate action

28th Oct 2016

With the Paris Agreement – unprecedented in speed of ratification – came a clear message for businesses worldwide: the transition to a low carbon economy is inevitable and accelerating; adapt and thrive or continue with business as usual and face serious business risk.

But how far has business already come with their climate actions and are they prepared for the level of change that must be achieved to keep global warming below 2 degrees Celsius?

To answer this question, CDP, in partnership with We Mean Business, has launched a new report series that annually tracks the progress of companies’ climate actions. The first report in the series is now available: Out of the starting blocks: Tracking progress on corporate climate action analyses over 1000 of the heaviest emitting and highest market value companies globally to understand how they are moving the global economy closer to its climate goals.

This baseline-setting report reveals that whilst business is gearing up to go low-carbon with 85% of companies already having emissions reduction targets in place, these targets are currently only taking companies one quarter of the way to being in line with a 2 degree world. Business must step up ambition in order to fulfill its carbon reducing potential and achieve the emissions reductions required.

Science based targets provide the compass we need as we transition to a low carbon economy. 94 major companies are showing us that this is possible, having committed to align their targets with the latest climate science through the science based targets initiative. Telecoms company Proximus is aiming to make the entire Proximus group climate neutral in 2016; Sony committed to achieving 90% reductions by 2050 against a 2008 baseline; and Italian utility Enel’s target includes the decommissioning of 13 GW of fossil power plants in Italy, part of a long term goal to operate in carbon neutrality by 2050.

Importantly for business, the report highlights that reducing emissions pays. Sixty-two companies have cut their emissions by an average of 26% while increasing revenue by 29% over five years. The remaining companies saw average revenues drop by 6% and emissions rise by 6%. These companies are proving that decoupling emissions from revenue growth is not only possible, but makes sound business sense.

Investors are poised to capitalize on the opportunities that await. Some of the biggest index providers in the world, including S&P and STOXX, have created low-carbon indices to help investors direct their money towards the sustainable companies of the future. Meanwhile, New York State’s pension fund – the third largest in the United States – has built a US$2 billion low-carbon index in partnership with Goldman Sachs, using CDP data.

Measurement and transparency are where meaningful climate action starts. As investors look to shift investments to less carbon intensive infrastructure, never has the availability of high quality information been more important.

Through CDP’s annual request for information, disclosure has been propelled into the mainstream. Over fifteen years ago, when CDP began, climate disclosure was nonexistent in capital markets. Today some 5,800 companies, representing close to 60% of global market capitalization, disclose vital environmental information to the market through CDP.

The spotlight is already shining more intensely on corporate actions. With global greenhouse gases hitting record levels in 2016, ambitious climate action can no longer be kicked into the long grass. The Paris deal looks set to shift the status quo. As hundreds of companies disclose to CDP that they anticipate substantive changes to their business resulting from the Paris deal, we expect to see a move to longer-term, more science based targets in future years.

There is still all to play for in the race to seize the opportunities from a low carbon transition and investors are increasingly seeking to predict who the winners and losers will be.

Read more about how companies are limbering up for climate action post Paris Agreement in Out of the starting blocks: Tracking progress on corporate climate action.