More than 680 financial institutions with $130+ trillion in assets call on nearly 10,400 companies to disclose environmental data
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Published: 18 March 2022
This Article was Written by: Katie Hill - My Green Pod
The Boards of nearly 10,400 companies worldwide – worth $105 trillion in market cap – will be requested to disclose data on their environmental impact this year by more than 680 financial institutions worth over US$130 trillion in assets, including Allianz, Amundi, AXA, BNP Paribas, CalPERS, Capital Group, State Street and Vanguard.
The companies have started to receive letters requesting they disclose their data on all or some of the following environmental issues: climate change, deforestation and water security.
Companies are being asked to disclose this information through CDP, the non-profit that runs the world’s environmental disclosure system for companies, cities, states and regions.
Almost 100 more financial institutions – including asset managers, asset owners, banks and insurance companies – have put their name to the disclosure request this year compared with last, demonstrating rising demand for TCFD-aligned corporate environmental information.
This growing market demand is driving more transparency every year, with CDP last year recording higher corporate disclosure numbers than ever before.
Nearly 3,200 companies – out of 7,176 requested – disclosed their environmental information in response to CDP’s Letter to the Board in 2021.
This is in addition to over 10,100 other companies that disclosed through CDP, either at the request of their business customers through CDP’s Supply Chain programme or of their own volition.
This means that in total, over 13,000 companies, representing some 64% of global market capitalisation, disclosed their data through CDP in 2021.
Driving up environmental reporting
Companies being asked to disclose by these institutions include over 3,300 companies that are being requested for the first time (marking a 46% increase since last year), as CDP pushes to scale the uptake of corporate environmental reporting even further.
Since the first disclosure request was sent out in 2002, CDP has grown to house the world’s largest global repository of environmental data; the aim is to grow this to cover 90% of the world’s highest-impact firms by 2025.
‘Since we sent out our first disclosure request to companies two decades ago, CDP has played a critical role in transforming environmental reporting from a niche side issue to the top of boardroom agendas, with disclosure now being mandated in regulation worldwide.
‘While many companies are disclosing, setting targets and taking action across their own business operations and value chains, there is a surprisingly large part of the market still to take the vital first step of disclosure. These companies are becoming increasingly out of touch with reality, investor and public opinion, not just because of the regulatory stick that is approaching, but also because there are so many proven benefits to transparency.
‘We hope that this request, backed by such an influential group of financial institutions worldwide, will hit home and drive transparency and action even further.’
CEO of CDP
Non-disclosure ‘no longer an option’
While more companies are being requested and reporting every year, many still do not disclose enough data on their environmental impact.
Nearly 4,000 companies – including Berkshire Hathaway, Chevron, Exxon Mobil and Glencore – failed to respond to the request for disclosure from financial institutions in 2021.
Non-disclosure will no longer be an option for many of these companies, with a series of mandatory environmental disclosure requirements coming in this year, including in the EU, Japan, New Zealand and India, as well as TCFD regulation being introduced in the UK from next month.
Non-disclosing companies will also face increasing pressure from financial institutions. Companies that repeatedly ignore this disclosure request may be targeted as part of CDP’s Non-Disclosure Campaign, in which investors directly engage with specific companies they invest in to push for greater transparency on environmental issues.
Outside of regulation and market demand, there are many other proven benefits to transparency. CDP data show that companies that publish their environmental data consistently and on an annual basis can protect and improve their reputation, boost their competitive advantage, uncover risks and opportunities, track and benchmark progress and get access to lower costs of capital.
The CDP questionnaires currently track corporate progress on climate, forests and water, but as part of its new five-year strategy, CDP is expanding its work to cover more environmental issues.
This year, questions on biodiversity impacts are being asked for the first time and in the future, the scope will expand to cover issues ranging from land and oceans to waste and food.
These expansions represent the move to a more holistic, integrated understanding of the relationship between halting dangerous climate change and the protection and restoration of the natural world.
CDP’s 2022 corporate questionnaires will also incorporate more specific questions on company climate transition plans, which will be vital in assessing the quality of plans, progress over time and in tracking the real economy transition.
Supporting informed financial decisions
CDP’s questionnaires are sector-specific and aligned with the recommendations of the TCFD, which have formed the basis of most incoming climate and environmental disclosure regulation, as well as the global disclosure standards currently being developed by the International Sustainability Standards Board (ISSB).
Company submissions to CDP can therefore be used to assist in collecting, structuring and disclosing a dataset that is consistent with these recommendations, and in compliance with current and, often, incoming regulation.
The data CDP collects powers investment research, products, indices and ratings including Bloomberg, STOXX, Trucost, FTSE/Russell, MSCI and ISS ESG. It also helps capital markets engage with companies and make more informed financial decisions.