Last week, with the assistance of Bill Clinton, the Carbon Disclosure Project (CDP) released its fifth annual report on corporate climate change disclosure. A not-for-profit organization, the CDP approached 2,400 corporations requesting information on their greenhouse gas emissions and the steps they are taking to manage their climate change risks and opportunities. The survey was conducted on behalf of 315 signatory institutional investors representing $41 trillion in assets.
As part of this year’s report, the CDP worked with Innovest to develop the Climate Disclosure Leadership Index (CLI). This index highlights 68 companies distinguished by the quality of their climate change disclosure and compares their carbon exposure, emissions reporting and carbon beta ratings. Included in this select group were four North American energy companies, including Exelon and Entergy (U.S. electrical utilities), ExxonMobil and Suncor (a Canadian oil sands producer).
The CDP is all about pushing corporations to increase their climate change disclosure - increasing their transparency with respect to a key environmental risk.
In the U.S., a group of state pension fund officials and environmental groups are taking a more direct path to the same end. The Washington Post reports that in a petition filed September 18th the group led by CERES is asking the U.S. Securities and Exchange Commission (SEC) to force all public companies to provide investors with more comprehensive information of the expected risks they face with climate change. This move follows on the a multi-year campaign in which social investment organizations have launched repeated shareholder resolutions at the annual general meetings of energy companies pressuring them to provide better disclosure of climate risks and/or develop action plans for addressing climate change.
[It’s worth remembering that efforts to get companies to release carbon risk information are only ten years old. Investors have been seeking accurate financial information from these same companies for upwards of a century and it is only with the heavy hand of regulation that the SEC and its peers in other jurisdictions are able to ensure that public companies routinely provide high quality financial reports (and even with regulation the likes of Enron pop up from time to time).]
While transparency, particularly with respect to environmental risks, is essential for sustainable investing, how much should transparency itself be valued in determining what is sustainable and what is not?
When I ask this question, Suncor comes to mind. Suncor consistently ranks high in sustainability rankings such as those offered by the Dow Jones Sustainability Index or the above noted Climate Disclosure Leadership Index. In part, these high ratings are based on the company’s excellent communications, explicit recognition of its risks and plans to address them. However, at the end of the day Suncor’s primary business is the extraction of oil from Canada’s oil sands. By definition, its principal product has a high carbon content.
For example, in 2005 Suncor reported emissions intensity of 0.44 tonnes CO2 per cubic metre of oil equivalent (tonnes CO2/m3OE). This is certainly better than the average emissions intensity of Canadian bitumen producers (0.52 tonnes CO2/m3OE - based on information from three companies of which one was Suncor) (CAPP Stewardship Report, 2006) but substantially more than the emissions intensity of conventional oil & gas producers.
2005 Emissions Intensity in the Canadian Oil Industry (tonnes CO2/m3OE)
CAPP – Bitumen Mining/Upgrading 0.52
CAPP – Conventional Oil & Gas Production 0.23
Is Suncor a sustainable energy company?