Over 1,600 high-impact companies that have not been disclosing their environmental data have been urged to do so by nearly 300 prominent financial institutions.
The campaign, led by the non-profit organisation CDP, has gained support from major financial institutions such as Schroders, Cathay Financial Holdings, Aviva Investors, and Manulife. Together, these institutions have a combined total of nearly $29 trillion (£23trn) in assets.
Launched in 2017, the number of financial institutions supporting the campaign has quadrupled and CDP’s analysis of its 2022 non-disclosure campaign reveals that companies were 2.3 times more inclined to disclose their environmental data when directly engaged by financial institutions.
This aligns with comments made to Sustainable Future News by Dottie Schindlinger, executive director of Diligent Institute in a recent interview that “when you ask a question of what you are doing in [ESG], and that question is coming from an investor, there is pressure to have an answer.”
Among the currently non-disclosing companies are Saudi Aramco, Exxon Mobil Corporation, Glencore, Chevron, Tesla, Volvo Group, Roche Holding AG, Swatch Group, and Caterpillar, which collectively possess over $21 trillion (£17trn) in assets.
Altogether, these 1,607 high-impact companies release around 4,200 megatonnes (Mt) of carbon dioxide equivalent (CO2e) into the atmosphere. This is almost the same as the total greenhouse gas emissions of the United Kingdom, the European Union, and Canada combined.
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As part of the push, companies will be asked to disclose data on CDP’s platform for at least one of three priority themes relevant to their operations:
- Climate change
- Forests
- Water
For the first time, a new module of plastics in the water questionnaire has also been introduced. The aim is to drive greater transparency on environmental impacts and investment risk and increase capital market action on sustainability.
Continuing the trend from previous campaigns, the supporting financial institutions continue to prioritise climate change-related disclosure, with 72% of the targeted companies being asked to provide data on this subject. There is also a growing focus on water and deforestation, as 28% of companies will be requested to report on water-related impact and 26% on forests.
What is driving the increase in demand?
Upcoming disclosure regulations in key economies like the UK, EU, Brazil, Japan, and the US are putting more pressure on financial institutions and companies to stay competitive in a rapidly changing market.
Non-financial reporting is also important as it offers investors a deeper insight into a company’s operations, helping them assess a broader set of risks and to understand long-term profitability.
“Despite ongoing discourse over the role of ESG in financial decision-making, the continuous growth in supporters of the CDP’s non-disclosure campaign demonstrates that financial institutions worldwide require data to support risk management practices, tracking portfolio alignment to net zero goals and unlocking sustainability-linked opportunities.” said Claire Elsdon, joint global director of capital markets at CDP. “These uses can serve to not only safeguard but also boost long-term profitability.”
The increase may also be related to concerns about the current trajectory to net zero. Recent warnings from the World Meteorological Organisation have stated that is a 66% chance of temporarily going beyond the 1.5 °C limit in at least one year between 2023 and 2027. For some organisations, this news may add fuel to accelerate decarbonisation efforts.
“Cathay has been participating in the Non-Disclosure Campaign since 2017, recognising transparency is essential for net zero transition.” said Sophia Cheng, chief investment officer, financial services firm, Cathay. “We believe responding to CDP is an important part of corporate disclosure and allows investors to understand the climate governance and performance of investees.”
The platform for the campaign is now open, and companies have until July 26, 2023, to submit their questionnaires to be eligible for scoring.
About CDP
CDP is a global non-profit that operates the world’s environmental disclosure system for companies, cities, states, and regions. Working with over 740 financial institutions managing $130 trillion (£104trn) in assets, CDP drives companies to disclose their environmental impacts, reduce emissions, safeguard resources, and protect forests.
In 2022, CDP facilitated data disclosure from nearly 20,000 organisations worldwide, including 18,700 companies and 1,100 cities/regions. As the largest environmental database, CDP scores influence investment decisions for a zero carbon, sustainable economy.
CDP is also a founding member of initiatives like Science-Based Targets, We Mean Business, The Investor Agenda, and Net Zero Asset Managers.
