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1FOREWORD
ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
2016 ET CARBON RANKINGS REPORTTRACKING THE CARBON EFFICIENCY OF THE WORLD’S LARGEST LISTED COMPANIES
2 CONTENTS
ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
3 About ET Index Research
4 Foreword
7 Executive Summary
Engaged indexes, carbon risk and performance
10 Index investing and its implications for reducing carbon risk
11 Engaged Tracking (ET) indexes
12 Decarbonising portfolios without sacrificing performance
Understanding the ET Carbon Rankings
14 Sector breakdown
16 Disclosure
21 The importance of Scope 3 (value chain) emissions
Carbon reduction potential
24 Benchmarking median carbon efficiency
25 Carbon reduction potential by sector
28 Carbon reduction potential by industry
ET Global Carbon Rankings 2016
34 ET Global 800 Carbon Leaders
35 Carbon Efficiency Sector Rankings
36 ET Carbon Disclosure Leaders
38 ET Sector Carbon Leaders
40 ET Industry Carbon Leaders
ET Carbon Ranking methodology
43 ET Carbon Ranking Universe
44 Methodology
47 Spotlight on Scope 3
48 Treatment of Scope 3 in the ET Carbon Ranking methodology
48 Overcoming the lack of data
49 Disclosure requirements, current emissions and intensity
Appendix
50 Regional results
53 Information for reporting companies
54 Sustainable Industry Classification System (SICS) taxonomy
56 The ET Carbon Ranking Quality Assurance Panel
59 References
3
ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
ET Index Research is a mission-driven organisation dedicated to helping investors and corporates identify, understand, and manage climate and carbon-related risks.
We help investors to reduce their exposure to carbon risk without sacrificing performance. Our methodology is designed to shift investment towards carbon-efficient companies across the economy. Engaged Tracking (ET) Investors take a systematic approach - incentivising the world’s largest companies to lower their greenhouse gas emissions and to improve the levels of transparency in their carbon and climate risk reporting.
We do this by producing the most comprehensive public ranking of the world’s largest listed companies according to the carbon intensity of their activities; by analysing carbon risk in investor portfolios; and by producing low-carbon and fossil-free indexes that can be used by investors as benchmarks or to create customisable low-carbon investment strategies.
ET Index Research is supported by family office investors and Climate-KIC, the European Union’s main climate innovation initiative. For more information or to view the public ET Carbon Rankings, please visit etindex.com.
ABOUT ET INDEX RESEARCH
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
Investors need to be aware that the landmark Paris Climate Agreement has changed the macroeconomic environment. The world is now set on a pathway towards economy-wide decarbonisation. The arrival of carbon pricing and mandatory climate risk disclosure in key capital markets poses new business risks and opportunities. The US coal sector is in decline. European power utilities face an existential crisis.1 It is clear that industries and companies that choose to ignore technological shifts and underestimate the rapidity of the shift to a low-carbon economy will suffer financially.
The G7 nations have committed to phasing out fossil-fuel subsidies by 2025 and renewable energy has finally arrived at scale. In many countries, clean power generation is now cheaper, on average, than fossil fuels. Costs of clean power will continue to fall as technology and efficiency improve. This trend will accelerate as fossil fuel subsidies are phased out across the G7 economies.
Carbon-intensive companies that do not prepare for the transition will be penalised by the market. By ratifying the Paris Climate Agreement, governments have provided a clear signal to all investors that the economy will decarbonise at an ever-increasing rate. As a result, we expect to see an ever-accelerating shift in the allocation of capital away from high-carbon assets towards lower-carbon ones.
It is clear that there will be winners and losers in the race to decarbonise the global economy. Prudent investors should be seeking to understand what economy-wide decarbonisation will look like. They should also consider how to honour fiduciary duties to their beneficiaries in that context, while noting that the modern legal definition of fiduciary duty covers the prudent management of all material financial risks, including carbon and climate risk.2
ET Index Research has demonstrated the importance of identifying carbon risk and the link between carbon emissions and equity returns in a special report.3 Consistent with this research, the ET Global 800 Low Carbon Transition Index tracks the world’s 800 largest companies, but reduces carbon exposure by 75% by weighting investment towards more carbon- efficient companies and away from carbon- intensive ones. If a pension fund had pursued a low-carbon investment strategy, tracking this index from the first ET Carbon Rankings in 2011 to October 2016, it would have earned 1.78% more each year than by tracking the same companies in a conventional index.
To make informed decisions about which companies are exposed to carbon risk in the new market ushered in by the Paris Climate Agreement, investors need, as a starting point, reliable greenhouse gas emissions data on investee companies.
FOREWORD
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ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
FOREWORD
The international Financial Stability Board recognises the issue of carbon risk and has set up a Task Force on Climate Related Financial Disclosures to make recommendations on how companies should disclose climate-related financial information so that investors and other capital market participants can “understand the concentrations of carbon-related assets in the financial sector and their exposures to climate-related risk”. 4
For investors to get a full picture of carbon risk they need to go beyond direct emissions from a company’s own activities (Scope 1 and 2) and understand indirect emissions from the activities in its value chain (Scope 3), from production of the raw materials it uses to the use of the goods it sells. Scope 3 emissions are typically the largest source of emissions within a company’s total footprint, and a major source of its carbon and climate-related risk. These value chain carbon costs can affect a company’s suppliers and customers, and the viability of a company’s core business. Costs linked to increased regulation and explicit emissions pricing cannot always be passed through the supply chain or to the final consumer. The materiality of Scope 3 emissions has been most strongly demonstrated in the US coal industry, where tightening emissions regulation has combined with other factors to decimate shareholder value.5
The financial importance of Scope 3 emissions data has been revealed by ET Index Research analysis of the performance of high-carbon and low-carbon intensity companies.6 Over the 2010-2016 period, low-Scope 3 intensity and low-Scope 1 and 2 intensity portfolios both outperformed high-intensity portfolios, by 7.2% and 4.8%, respectively. The greater performance difference between portfolios sorted on Scope 3 intensity further confirms the financial materiality of Scope 3 emissions, in addition to basic Scope 1 and 2 emissions.
At present, not every country enforces mandatory corporate greenhouse gas emissions reporting across Scope 1, 2 and 3.7 Therefore, one of the key functions of the ET Carbon Rankings is to shine a light on companies around the world that are failing to place this information into the public domain in a clear, comparable, and complete format; and to encourage them to disclose.
Corporate emissions reporting will be a central metric in tracking the transition to a low-carbon economy and managing transition risk. The central function of the Paris Climate Agreement is to guide a global response to the threat of climate change by keeping global temperature rises to well below 2 °C. This requires a rapid transition to net zero emissions across all sectors of the economy.7 Market pricing of carbon and climate-related risk, whether it be direct or indirect, will necessarily be focused on greenhouse gas emissions.
For the prudent investor, following a low-carbon investment strategy is a logical imperative. However, not all low-carbon strategies are created equal. According to Martin Skancke, Chair of the UN PRI, investors “need to differentiate between products that reduce individual exposure to carbon risk versus those that reduce collective aggregate climate change risk.” An investor who merely shifts the weights in their portfolio to low-carbon stocks, without engaging with other market participants or investee companies, reduces their own exposure to carbon risk but does nothing to reduce systemic risk. An investor who not only reduces their own exposure but also engages with other market participants and investee companies to encourage the flow of capital to low-carbon investments, benefits both themselves and the market.
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
James Cameron
FOREWORD
Reducing the systemic threat of climate change is a priority for all investors. Empirical research has shown that a 1 degree Celsius increase in global average temperature leads to a 5.7% decline in equity valuations. Thus, at current rates, each year’s global emissions are reducing stock market returns by 0.1%.9
ET Index Research was established specifically to address the systemic nature of carbon risk.10 The ET Carbon Rankings and the corresponding ET Low Carbon Index Series reduce individual investor exposure to carbon risk by shifting capital away from high-carbon companies in all sectors, while closely tracking the market. They reduce aggregate exposure to carbon and climate risk by clearly signalling to the largest listed companies and their supply chains that they
must decarbonise in order to move up the Rankings and gain a greater weighting within the Index. A greater weighting in the Index means companies receive a larger share of invested capital. The ET Index Research methodology provides investors with a tool to drive capital market alignment with economy-wide decarbonisation targets agreed to in Paris.
This mechanism offers investors a systematic and cost-effective approach to helping the world avoid the worst effects of climate change. Let’s use it.
James Cameron & Chris Huhne, Co-Chairs, ET Index Research
Chris Huhne
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ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
EXECUTIVE SUMMARY
The 2016 ET Carbon Rankings are a tool for investors to monitor and manage exposure to carbon risk, enabling them to identify companies that are decarbonising their operations. They measure the carbon efficiency of the world’s largest 2,000 listed companies, making up 85% of global stock market value. They account for approximately $45 trillion in market capitalisation and approximately 9.5 billion tonnes of CO2 in direct emissions, an amount that exceeds the combined total emissions of the United States, Canada and the European Union.11
They are the only publicly available rankings to assess both the carbon efficiency of companies’ direct operations (Scope 1 and 2 emissions) and of their full value chain (Scope 3), from transportation of raw materials to the use of the products they sell. Scope 3 emissions are of critical importance to investors because they typically make up 75% of companies’ carbon footprints and therefore reveal their exposure to increased costs across their value chain.12
By focusing on carbon efficiency – how much carbon each company emits for every $1 million of revenue generated – the Rankings allow investors to make direct comparisons between companies of different sizes and across different sectors.13 They look at each of the largest listed companies by region, according to market capitalisation. They do not exclusively focus on leading or laggard companies in terms of emissions or disclosure.
The Paris Climate Agreement came into force in November 2016 committing the world’s nations to decarbonise the global economy. Few, if any, sectors will be unaffected.14 The debate about the low-carbon transition has largely focused on fossil fuel companies and divestment, but the ET Carbon Rankings take a systemic approach that is designed to encourage decarbonisation in every sector, supporting the transition to a low-carbon economy and a climate-secure world.
The ET Carbon Rankings are designed to encourage investors to switch investment to more carbon-efficient companies, reducing their own exposure to carbon risk and rewarding companies that take action and disclose.
The Rankings are produced using a transparent methodology and based on publicly available carbon data for the reporting year ending in 2015. Data is subjected to a rigorous verification process and reviewed by the ranked companies. The Rankings are overseen by an independent quality assurance panel which consists of professionals from different disciplines and backgrounds who review the methodology, assisting the process of integrating new rules as and when they become feasible and appropriate. Please refer to the appendix for more details on the Panel.
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
EXECUTIVE SUMMARY
“ It is quite clear that the low carbon transition is underway, with carbon intensity falling 2.8% globally in 2015. As a result, investors will be increasingly asking companies to disclose the risks and opportunities arising from climate change. This will include Scope 1, 2 and 3 emissions, and increasingly the wider financial impacts of climate change, such as the impact on asset valuations, investments, disposals and earnings. Better disclosure by companies is therefore a must if markets are to correctly identify and price climate risk and direct capital to low carbon opportunities. This is at the core of the work of the FSB Task Force on Climate-related Financial Disclosures.”
Jon Williams, Partner, Sustainability and Climate Change, PwC
Key Findings
• Carbon-efficient stocks perform better than carbon-intensive stocks. A portfolio formed of the stocks in the most carbon-efficient half of the ET Carbon Rankings Universe, has outperformed a corresponding portfolio formed of the most carbon-inefficient half of the universe by 9% over five years.
• Companies that report their emissions are making rapid progress in decarbonising their operations. Among the world’s 800 largest listed companies, 363 reported their Scope 1 and 2 emissions. These disclosers increased their carbon efficiency by an average of 15% from 2015 to 2016, saving 360 million tonnes of CO2, equivalent to the annual emissions of Turkey.
• Leading companies could save the equivalent of Japan’s annual emissions by achieving mid-range carbon efficiency for their sector. Analysis of just the 363 companies that have reported Scope 1 & 2 emissions shows that if the most carbon-intensive companies achieved the median level of carbon efficiency it would save 1.4 billion tonnes of CO2, equivalent to the annual emissions of Japan.
• Just 27 companies in five carbon-intensive industries could save 1.2 billion tonnes of CO2. If these companies achieved the median level of Scope 1 and 2 carbon efficiency for their industry it would save twice as much CO2 as South Korea emits each year. The industries are: Electric Utilities; Oil and Gas Exploration and Production; Construction Materials; Chemicals; and Real Estate Owners, Developers and Investment Trusts.
• Computer software company Oracle is the world’s most carbon-efficient company, producing just 34 tonnes of carbon dioxide across Scopes 1, 2 and 3 for every $1 million of revenue. The median carbon efficiency across the world’s 2,000 largest listed companies is 1,538 tonnes across Scopes 1, 2 and 3.
• Most companies are still not aware of the benefits of carbon emissions disclosure. The number of companies reporting public and complete Scope 1 and 2 emissions has grown from 38% in 2011 to 41% in 2016.
• Few companies are reporting emissions from their value chain, but this is changing rapidly. Reporting of full Scope 3 emissions doubled from 1% of companies in 2015 to 2% in 2016.
• 25 companies make it into the ET Carbon Disclosure Leaders list, which is reserved for companies that disclose complete Scope 1 and 2 emissions that have been independently assured by a third-party and that disclose all 15 Scope 3 Categories.
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ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
EXECUTIVE SUMMARY
Carbon Context
The historic Paris Climate Agreement puts carbon risk on the agenda for all investors with the commitment to keep global temperature rises below 2 °C. It includes specific reference to ensuring that finance flows in alignment with the pathway towards low greenhouse gas emissions and climate-resilient development.
Mark Carney, Governor of the Bank of England and chairman of the international Financial Stability Board (FSB), has warned that action to limit climate change could leave fossil fuels and other high-carbon investments as worthless stranded assets threatening investors with huge losses.15 A task force set up by the FSB is due to make recommendations in December 2016 on how asset owners and the companies they invest in should report on the potential impact of climate change on their bottom line.
There is also growing awareness of the importance of reporting and reducing emissions across companies’ full value chain. Dell, Toyota and Unilever are among more than 200 companies worldwide that have signed up to the Science Based Targets initiative and pledged to reduce emissions in line with the global commitment to keep climate change below 2 °C.16 This includes carrying out a full assessment of their Scope 3 emissions.
World leaders have committed to avoiding dangerous climate change. It is now vital for the world’s largest companies to show leadership on emissions accounting and reporting, and setting decarbonisation targets. Those that act will play an important part in achieving that goal. Those that fail to act risk seeing their businesses undermined by global action to cut carbon.
1. They enable investors to identify their exposure to carbon risk and manage it by switching investment to more efficient companies across the economy or within sectors.
2. They provide investors with an engagement tool that incentivises companies to reduce and disclose their carbon emissions.
3. They underpin the ET Low Carbon and Fossil Free Index Series, allowing investors to closely track traditional market indexes such as the FTSE 100 or S&P 500, achieving significant carbon reductions without sacrificing performance.
The ET Carbon Rankings have three key objectives to support the transition to a low-carbon economy and a climate-secure world:
“ As stated in the recent BlackRock Investment Institute paper ‘Adapting portfolios to climate change’, we think that incorporating climate considerations in the investment process should and can be a fiduciary duty. On top of this, low carbon indices have the potential to perform in line with or better than parent indices.”
Isabelle Rucart, Head of Sustainable ETFs & Index Investments, BlackRock
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
ENGAGED INDEXES, CARBON RISK AND PERFORMANCE: INDEX INVESTING AND ITS IMPLICATIONS FOR REDUCING CARBON RISK
Index investing strategies – also referred to as passive investing – are rapidly growing as a proportion of the market. In 2016, passive equity vehicles accounted for over 40% of total US equity fund assets, up from 18.8% a decade ago, according to Morningstar.17 This is representative of the global trend, with over $4 trillion in savings now in index funds.
The reason for this shift in assets is clear. Investors are disillusioned with active investing strategies that charge higher fees and typically fail to perform better than more cost-effective index-based counterparts.18
In a low-return environment where fees and performance come under particularly harsh scrutiny, it is hard to see an end to this accelerating shift towards passive investing, particularly as technology continues to drive down costs. This has important ramifications for how financial flows can be guided to address the financial risks and opportunities linked to climate change.
Firstly, stock market indexes, acting as benchmarks for fund performance or as the basis of investment strategies, will occupy an increasingly important role in the allocation of capital across the economy. However, pure index investing strategies reward companies solely on the basis of current financial performance and fail to anticipate future risks and opportunities such as those created by the low-carbon transition.
Secondly, the role of investor engagement on climate change with investee companies will become an increasingly important function for index houses and passive investment funds. Blackrock, Vanguard and other asset management giants have been openly criticised for their failure to use their position of significant influence to vote on shareholder resolutions relating to climate change.19
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ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
ENGAGED INDEXES, CARBON RISK AND PERFORMANCE
Engaged Tracking Indexes embed the principle of investor engagement directly into the index investment strategy. They include non-financial criteria, such as sustainability indicators, when weighting companies within the index. The index provider contacts index constituents to inform them of the non-financial criteria on which they will be ranked and what steps are required to improve their position.
Simply put, companies have to do better on non-financial performance to move up the rankings and to attract more investor capital.
This provides an innovative and cost-effective form of index investing which incorporates stewardship principles and shareholder engagement. Engaged Tracking Indexes clearly communicate investor expectations to constituent companies. They are a systematic tool for reallocating capital according to non-financial performance in a transparent manner.
ET Low Carbon Indexes go beyond reweighting companies according to the intensity of their direct carbon emissions and take into account the full scope of their carbon footprint. Reweighting within the index is done according to a company’s ET Carbon Rank®, which includes Scope 1, 2 and 3 emissions. The ET Low Carbon Index® methodology incentivises ever increasing disclosure and lowering of emissions since these are the criteria upon which the Rankings are based.
ET Low Carbon Indexes enable investors to position themselves in a forward looking way to reduce their exposure to systemic carbon risk, while simultaneously signalling to investee companies that investors expect a swift transition to more carbon-efficient business models. They provide a systematic tool for redistributing capital from high to low-carbon companies in the most efficient manner possible.
In the case of the ET Carbon Rankings and corresponding ET Low Carbon and Fossil Free Index Series, constituent companies are informed of the following Engaged Tracking Investor expectations:
• Measure and disclose a full Scope 1, 2 and 3 greenhouse gas emissions inventory.
• Disclose in annual reports how action to limit global warming as part of the Paris Agreement may affect operations.
• Publish business transition plans that explain how the company will manage the business risks and opportunities arising from a 2 °C regulatory environment, including those related to GHG emissions, capital expenditure, remuneration policy, and political spending, among other enterprise risks.
• Communicate how such a business transition plan can be implemented.
ENGAGED TRACKING INDEXES
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
ENGAGED INDEXES, CARBON RISK AND PERFORMANCE
ET Index Research offers a suite of indexes which track major market indexes like the S&P 500 allowing investors to significantly reduce their exposure to carbon risk without sacrificing performance. Each index provides three options allowing investors to balance reduction in carbon exposure against tracking error (standard deviation from performance of the conventional portfolio). Custom variations based on the Rankings can also be created to suit specific investor requirements.
ET Low Carbon Tracker Index Series: 25% reduction in emissions versus the conventional index. Very low tracking error – suitable for pension funds and other tracking error constrained investors.
ET Low Carbon Benchmark Index Series: 50% reduction in emissions versus the conventional index. Low tracking error based on balance between carbon reduction and deviation from the conventional index.
ET Low Carbon Transition Index Series: 75% reduction in emissions versus conventional index. Medium tracking error – focused on carbon reduction.
Table 1 demonstrates that ET Low Carbon Indexes can achieve very significant reductions in carbon emissions while generating similar returns to the conventional indexes they track.
It compares the performance of a conventional index of the world’s 800 largest listed companies with three ET Low Carbon Indexes investing in the same companies, but adjusting their weightings based on their position in the ET Global 800 Carbon Ranking. All three weighted indexes delivered better returns over five years and two outperformed over three years.
The Engaged Tracking approach can be used to create low-carbon versions of any index. Other global indexes such as the FTSE All World, MSCI All Country World Index and S&P Global 1200 achieved similar performances over the same time frame as the ET Global 800 Low Carbon Index Series, highlighting the potential of the ET Global 800 Low Carbon Index Series as a viable index benchmark.
DECARBONISING PORTFOLIOS WITHOUT SACRIFICING PERFORMANCE
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ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
ENGAGED INDEXES, CARBON RISK AND PERFORMANCE
The ET Global Carbon Risk Factor tracks the difference in returns between low-intensity stocks and high-intensity stocks.
The ‘risk factor’ is calculated by first constructing an equal-weight portfolio of all stocks in the ET Carbon Rankings Universe and then constructing a low-carbon tilted version of this portfolio in the same way the ET Low Carbon Indexes are tilted. The carbon factor is then calculated as the difference in return between the tilted and the equal-weight portfolios. This can be viewed as the difference in return between a low- and a high-intensity portfolio, formed of the top and bottom halves of the ET Carbon Rankings Universe, respectively. This makes the carbon factor a pure barometer of the performance of carbon-tilted strategies over time.
FIGURE 1: THE ET GLOBAL CARBON RISK FACTOR
Figure 1 shows that the low-intensity portfolio has outperformed the high-intensity portfolio by 9% over the past five years.
The ET Global Carbon Risk Factor is now available on Bloomberg under the ticker “ETIXCRBF Index”.
ET Index Research analysis reveals that companies in the top half of the 2015 ET Global 800 Carbon Ranking, that is the most carbon-efficient 400 global companies, have experienced greater Return on Equity, Return on Assets, Growth in Net Income, and Growth in Revenue over the past year to October 2016 than companies in the bottom half.20
Index
Carbon Intensity
Reduction1Y Total Returns
3Y Total Returns
5Y Total Returns
3Y Annualised
Returns
5Y Annualised
Returns
ET Global 800 Low Carbon Tracker 25.00% 0.33% 12.87% 57.78% 4.11% 9.54%
ET Global 800 Low Carbon Benchmark 50.00% -0.41% 13.29% 61.11% 4.24% 10.00%
ET Global 800 Low Carbon Transition 75.00% -0.77% 15.10% 67.65% 4.79% 10.87%
Conventional Global 800 - 2.21% 13.02% 54.56% 4.16% 9.09%
FTSE All World - 2.77% 12.09% 51.74% 3.87% 8.69%
MSCI ACWI - 2.63% 11.73% 51.20% 3.76% 8.61%
S&P Global 1200 - 2.62% 13.82% 57.75% 4.41% 9.53%
TABLE 1: ET GLOBAL 800 LOW CARBON INDEX SERIES PERFORMANCE OVER 5 YEARS TO END OCTOBER 2016.
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
Health Care
Financials
Consumption II
Services
Transportation
Technology andCommunications
Infrastructure
Non−RenewableResources
Consumption I
ResourceTransformation
RenewableResources and
Alternative Energy
0 5 10 15 20
Percentage of companies
UNDERSTANDING THE ET CARBON RANKINGS: SECTOR BREAKDOWN
FIGURE 2:SECTOR BREAKDOWN OF THE ET CARBON RANKING UNIVERSE – 2,000 LARGEST LISTED COMPANIES.
The 2016 ET Carbon Rankings measure the carbon efficiency of the world’s largest 2,000 listed companies, making up 85% of global stock market value. They account for approximately $45 trillion in market capitalisation and approximately 9.5 billion tonnes of CO2 in direct emissions, an amount that exceeds the combined total emissions of the United States, Canada and the European Union.
Figure 2 and Table 2 provide a breakdown of the global ET Carbon Ranking Universe, highlighting the percentage represented by each SICS sector across the 2,000 largest listed companies. Financials makes up 19%, with Infrastructure accounting for 13%, followed by Technology & Communications with 11%.
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ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
UNDERSTANDING THE ET CARBON RANKINGS
To understand the Rankings results it is important to understand the sector composition of the Rankings Universe. For a breakdown of the ET Sector Carbon Leaders, that is the most carbon efficient companies in each SICS sector that report complete data, please refer to page 38.
The ET Carbon Rankings use the Sustainable industry Classification System™ (SICS®) from SASB®, the Sustainability Accounting Standards Board®. The SICS categorises companies into 10 sectors, 35 subsectors and 80+ industries in accordance with their resource intensity, sustainability impact, and sustainability innovation potential. SASB splits the Consumption sector into Consumption I, covering food and drink, and Consumption II, covering consumer goods. See page 54 of the appendix for the full taxonomy.
SICS sector Number of Companies Percentage
Consumption I 127 6.4%
Consumption II 155 7.8%
Financials 380 19.2%
Health Care 129 6.5%
Infrastructure 260 13.1%
Non-Renewable Resources 209 10.5%
Renewable Resources and Alternative Energy 9 0.5%
Resource Transformation 210 10.6%
Services 139 7.0%
Technology and Communications 228 11.5%
Transportation 138 7.0%
TABLE 2:SECTOR BREAKDOWN OF THE ET CARBON RANKING UNIVERSE – 2,000 LARGEST LISTED COMPANIES.
For the ET Industry Carbon Leaders, the list reserved for the most carbon efficient company in each SICS industry that discloses complete data, please refer to page 40.
The full ET Carbon Ranking can be viewed online at etindex.com.
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
UNDERSTANDING THE ET CARBON RANKINGS
DISCLOSURE
Disclosure is the first step towards managing and reducing emissions. The proof is in the data. Companies that report their emissions are making rapid progress in decarbonising their operations.
Among the world’s 800 largest listed companies 363 reported their Scope 1 and 2 emissions. These disclosing companies increased their carbon efficiency by an average of 15% from 2015 to 2016, from 221 tonnes of carbon dioxide to 189 tonnes for every million dollars of revenue. This reduction has saved approximately 360 million tonnes of carbon dioxide, roughly equivalent to the annual emissions of Turkey (please see infographic on page 27).
Across the entire ET Carbon Ranking global universe of the world’s 2,000 largest listed companies, the 812 companies which disclosed full Scope 1 and 2 emissions increased carbon efficiency by 3%. This figure mirrors the findings of the PwC Low Carbon Economy Index, which shows a global fall in the intensity of country-wide emissions of 2.8% in 2015.21
Companies that make public their emissions data demonstrate that they are monitoring it and are willing to be judged on their efforts. Investors and other stakeholders will form a view of companies that do not make their emissions data public, often assuming the worst.
Scope 1 and 2 Disclosure
As shown in Figure 3, the number of companies reporting complete Scope 1 and 2 data has remained virtually static since 2015, down 1% from 42% in 2015 to 41% in 2016. Although it has increased since 2011, the first year for which the ET Carbon Rankings employed an intensity-based ranking system.
The trend continues towards a greater number of companies having their data independently assured each year, with an increase of 28% since 2011 (from 18% to 23%). ET Index Research expects this trend to continue as the carbon reporting landscape matures.
3a_HistoricalDisclosureCategories_S12_all_data_Publication
2011
2015
2016
0 25 50 75 100
Percentage of companies
Public, complete and third−party assurance
Public, complete and no third−party assurance
Incomplete No public data
FIGURE 3:SCOPE 1 AND 2 DISCLOSURE – 2,000 LARGEST LISTED COMPANIES.
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ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
UNDERSTANDING THE ET CARBON RANKINGS
Scope 3 Disclosure
Scope 3 disclosure is improving rapidly. The proportion of companies reporting all 15 Scope 3 categories increased from 1% to 2% between 2015 and 2016. The proportion of companies reporting 10 or more Scope 3 categories has increased from 1% to 3% over the same period.
ET Index Research expects to see the number of companies reporting full Scope 3 data grow exponentially as the Science Based Targets Initiative gathers momentum. The proportion could quickly reach 10% as 200 companies have already signed up to the initiative at time of publication, committing to set carbon emissions reduction targets in line with a 2 °C scenario. Of particular relevance to the ET Carbon Rankings is the requirement that companies carry out a full Scope 3 (value chain) emissions inventory in order to participate.
As shown in Figure 4, a large number of companies are still failing to complete a full Scope 3 inventory whereby all 15 Scope 3 categories are disclosed, including those that are not relevant or material
15 Categories Disclosed
10 to 14 Categories Disclosed
1 to 9 Categories Disclosed
No Public Data
4a_HistoricalDisclosureCategories_S3_all_data_Publication
2011
2015
2016
0 25 50 75 100
Percentage of companies
FIGURE 4:SCOPE 3 DISCLOSURE BY CATEGORY AND TREND OVER TIME – 2,000 LARGEST LISTED COMPANIES.
to the company. However, although all 15 categories are not frequently being disclosed, meaningful numbers are being disclosed in every Scope 3 category by at least one company in every SICS sector. The only Scope 3 category where ET Index Research was unable to find a reasonable number was the Financial industry which did not disclose a meaningful number for Scope 3 Category 15: Investments. Several companies completed a partial inventory for this category but acknowledged that it was far from complete.
Where no data is available for a given Scope 3 category at the sector level, the highest reported emissions intensity for that category, from any company in the universe, is used. This is irrespective of the sector.
Figure 4 shows that 75% of companies disclosed no Scope 3 data in 2016; in 2015 it was 71%. This reflects a tightening of ET Index Research criteria rather than a fall in disclosure. The Rankings now only recognise Scope 3 data that is broken down by individual Scope 3 category, whereas in previous years a single total Scope 3 number was accepted.
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
UNDERSTANDING THE ET CARBON RANKINGS
Public, complete and third−party assurance
Public, complete and no third−party assurance
Incomplete No public data
Disclosure by Sector
As shown in Figure 5, the Renewable Resources and Alternative Energy SICS sector performs best in terms of the quality of disclosure with 67% of companies reporting complete data and 44% featuring in the top disclosure category: public, complete and third-party assured. However, it is not particularly surprising that this sector performs well, given that being low carbon is a key marketing touch point. The ET Carbon Rankings feature only nine companies in this sector, which includes Vestas Wind Systems.
The Resource Transformation sector has the second-best record with 51% of companies disclosing complete data, and 30% having their data independently assured. The Resource Transformation sector is well
represented in the Rankings with 210 companies overall. It includes names such as BASF, Dow Chemical and BAE Systems.
The Transportation sector comes third, with 39% of companies disclosing complete information, and 22% of those having their data independently assured. This sector is represented by 138 companies and includes names such as UPS, Deutsche Post and TNT.
The Health Care, Financials, and Consumption II (consumer goods) sectors have the lowest levels of disclosure with 32%, 34% and 37% disclosing complete data, respectively. It could be argued that they are traditionally viewed as ‘low risk’ sectors and therefore experience less pressure than more carbon-intensive sectors to disclose.
0 25 50 75 100
Percentage of companies
Health Care
Financials
Consumption II
Services
Transportation
Technology andCommunications
Infrastructure
Non−RenewableResources
Consumption I
ResourceTransformation
RenewableResources and
Alternative Energy
FIGURE 5:DISCLOSURE AND THIRD-PARTY ASSURANCE LANDSCAPE AND TREND FOR SCOPE 1 & 2 DATA BY SECTOR – 2,000 LARGEST LISTED COMPANIES.
19
ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
UNDERSTANDING THE ET CARBON RANKINGS
FIGURE 6:SCOPE 3 DISCLOSURE BY CATEGORY AND SECTOR – 2,000 LARGEST LISTED COMPANIES.
15 Categories Disclosed
10 to 14 Categories Disclosed
1 to 9 Categories Disclosed
No Public Data
0 25 50 75 100
Percentage of companies
Technology andCommunications
Consumption II
Financials
Services
Infrastructure
Health Care
Consumption I
Transportation
RenewableResources and
Alternative Energy
Non−RenewableResources
ResourceTransformation
Figure 6 shows that Scope 3 disclosure follows a similar pattern. The Renewable Resources and Alternative Energy sector ranks first for the percentage of companies disclosing complete Scope 3 data across all
15 categories, with 11%. It is followed by Technology & Communications and Transportation with 5% and 4%, respectively.
20
ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
UNDERSTANDING THE ET CARBON RANKINGS
Disclosure by Region
As shown by Figure 7, across the developed markets, Europe leads the pack with the highest levels of public disclosure of Scope 1 and 2 data. Two thirds, 67%, of the ET Europe 300 – Europe’s 300 largest listed companies – disclose complete data and 23% disclose some data, even though it is classified as incomplete according to the ET Carbon Ranking methodology.
Only 43% of North America’s 300 largest listed companies – the ET North America 300 – report complete data across Scope 1 and 2. The Asia-Pacific region, which is a composite of developed and emerging economies, is similar to North America, with 41% of the ET Asia Pacific 300 disclosing complete Scope 1 and 2 data. The lowest level of public disclosure, 12%, is in the ET BRICS 300 which tracks the 300 largest listed companies in Brazil, Russia, India, China and South Africa.
The picture is different for Scope 3 disclosure (Figure 8): 7% of Asia Pacific companies disclose 10 or more categories; North America and Europe follow with
15 Categories Disclosed
10 to 14 Categories Disclosed
1 to 9 Categories Disclosed
No Public Data
Public, complete and third−party assurance
Public, complete and no third−party assurance
Incomplete No public data
3c_DisclosureCategories_S12_Region
0 25 50 75 100
Percentage of companies
ET BRICS 300
ET Asia−Pacific 300
ET NorthAmerica 300
ET Europe 300
ET Global 800
4c_DisclosureCategories_S3_Region
0 25 50 75 100
Percentage of companies
ET BRICS 300
ET Asia−Pacific 300
ET NorthAmerica 300
ET Europe 300
ET Global 800
6% and 4%, respectively. Fewer than 1% of BRICS companies disclose 10 or more Scope 3 categories.
FIGURE 7:DISCLOSURE AND THIRD-PARTY ASSURANCE LANDSCAPE AND TREND FOR SCOPE 1 & 2 DATA BY REGION.
FIGURE 8:DISCLOSURE BY SCOPE 3 CATEGORY AND REGION
21
ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
Scope 3 Materiality: Oil, Gas and Coal sector
Global action to keep climate change below 2 °C threatens the business model of oil, gas and coal companies. Mark Carney, Governor of the Bank of England, has warned that vast reserves could become unburnable stranded assets, threatening investors with huge losses.
However, companies like Exxon can appear carbon-efficient if judged solely on Scope 1 and 2 emissions. This is particularly true for companies that have high revenues and that are relatively carbon-efficient in their process for extracting and distributing fossil fuels.
The true impact of a fossil-fuel company is in the use of the products it sells (Scope 3 category 11).24 Including Scope 3 emissions is essential to understanding the carbon efficiency of a company such as Exxon and its exposure to carbon risk. Furthermore, a drop in demand for fossil fuels across the economy will directly affect companies in the supply chain, so understanding the full extent of a company’s carbon exposure throughout the value chain is key to understanding the risk.
Figures 9 and 10 confirm previous analysis by ET Index Research and ACCA (the Association of Chartered Certified Accountants), finding that Scope 3 emissions typically account for at least 75% of a company’s carbon footprint.25 The data shows that in the relatively small sample of companies which have disclosed each of the 15 Scope 3 categories, these emissions account for 80% of the total carbon footprint. Across the larger sample of companies that have disclosed at least 10 Scope 3 categories, that number drops to 76%.
Scope 3 (value chain) emissions represent emissions over which the company has influence but not control, ranging from production and transportation of raw materials to the end use of sold products by a company, or business travel. They are of critical importance to investors because they typically make up 75% of a company’s carbon footprint and therefore reveal their exposure to increased costs across their value chain.
Government regulation, the development of low-carbon technologies and consumer demand are among factors which are incentivising low-carbon business models. This affects companies in all sectors but the impact of these factors is easiest to see in high-carbon sectors such as the automobile and fossil fuel industries.
Scope 3 Materiality: Automotive sector
Automotive companies with higher Scope 3 emissions are exposed to market risks as consumer preference and government support switch to lower and zero emissions vehicles.22 Recent scandals, such as those involving VW and Mitsubishi Motors, indicate how tightening emissions regulations and enforcement of existing rules can lead to rapid shareholder value destruction.
Emissions rules are tightening across all G20 countries and more regulators may follow the US Department of Justice in penalising misconduct. The world’s largest automotive manufacturers must be ready to address the environmental and human health impacts of excessive air pollution from their product, including carbon emissions.23
UNDERSTANDING THE ET CARBON RANKINGS
THE IMPORTANCE OF SCOPE 3 (VALUE CHAIN) EMISSIONS
22
ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
UNDERSTANDING THE ET CARBON RANKINGS
80%
76%
20%
24%
Average Scope 3 as % of Total Intensity
Average Scope 1 and 2 as % of Total Intensity
Average Scope 3 as % of Total Intensity
Average Scope 1 and 2 as % of Total Intensity
Material Scope 3 categories by sector
Table 3 seeks to highlight which of the 15 Scope 3 categories are more likely to be material for any given sector. In every sector, for each Scope 3 category, the maximum percentage of total Scope 3 intensity represented by that category for a single company is shown. The three highest categories for each sector are highlighted in the table and are likely to be ‘material’.
Thus, in the Infrastructure sector we can see that Fuel and Energy-related Activities make up 99% of one company’s Scope 3 emissions and Downstream Leased Assets make up 97% of another company’s Scope 3 emissions. Both these categories are likely to be highly material. Conversely, Business Travel, Employee Commuting, Processing of Sold Products and Upstream Leased Assets make up no more than 1% of any company’s Scope 3 emissions within the sector, suggesting these may not be material categories for this sector.
The data sample includes all companies that are disclosing 10 or more Scope 3 categories. Thus, the percentages can be considered to be calculated on fairly complete Scope 3 disclosures only. If relatively incomplete disclosures were included, then a sector with a company which disclosed only one category would have a 100% maximum percentage for that particular category.
There are likely to be some categories which are material but are not highlighted in this table, because there has not yet been adequate disclosure. The ET Carbon Ranking methodology includes all Scope 3 categories in the analysis of companies in each sector.
FIGURE 9:AVERAGE SCOPE 1 AND 2 INTENSITY COMPARED WITH SCOPE 3 INTENSITY AS A PERCENTAGE OF THE TOTAL FOOTPRINT FOR COMPANIES DISCLOSING ALL 15 SCOPE 3 CATEGORIES IN THE ET CARBON RANKING UNIVERSE.
FIGURE 10:AVERAGE SCOPE 1 AND 2 INTENSITY COMPARED WITH SCOPE 3 INTENSITY AS A PERCENTAGE OF THE TOTAL FOOTPRINT FOR COMPANIES DISCLOSING AT LEAST 10 SCOPE 3 CATEGORIES IN THE ET CARBON RANKING UNIVERSE.
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ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
UNDERSTANDING THE ET CARBON RANKINGS
TABLE 3: MAXIMUM PERCENTAGE OF TOTAL SCOPE 3 EMISSIONS INTENSITY BY CATEGORY.
SICS sector
Business travel
Capital goods
Downstream
leased assets
Downstream
transportation and distribution
Employee com
muting
End of life treatment of sold products
Franchises
Fuel-and-energy-related activities
Investments
Processing of sold products
Purchased goods and services
Upstream
leased assets
Upstream
transportation and distribution
Use of sold products
Waste generated in operations
Infrastructure 1% 29% 97% 2% 1% 7% 0% 99% 17% 1% 44% 0% 14% 83% 7%
Financials 49% 12% 0% 33% 81% 1% 0% 34% 0% 0% 51% 0% 0% 1% 19%
Resource Transformation 1% 17% 0% 9% 1% 34% 0% 74% 2% 0% 51% 0% 2% 99% 2%
Technology and Communications 52% 92% 9% 5% 26% 7% 1% 65% 8% 1% 70% 6% 18% 88% 1%
Transportation 1% 23% 0% 1% 12% 7% 0% 59% 1% 0% 87% 0% 84% 100% 0%
Consumption I 5% 16% 0% 8% 1% 34% 0% 2% 34% 0% 72% 0% 7% 5% 1%
Health Care 6% 36% 1% 5% 4% 4% 0% 7% 6% 0% 76% 2% 16% 60% 5%
Non-Renewable Resources 0% 1% 0% 9% 2% 4% 0% 43% 0% 96% 53% 0% 19% 99% 0%
Services 2% 4% 0% 13% 1% 10% 98% 0% 0% 0% 68% 0% 9% 84% 0%
Consumption II 0% 26% 14% 0% 1% 1% 0% 5% 1% 0% 48% 0% 4% 0% 1%
Renewable Resources and Alternative Energy 0% 0% 0% 9% 0% 0% 0% 15% 0% 20% 28% 0% 28% 0% 1%
24
ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
Highest
Inte
nsity
Reductionto median
Reductionto lowest
Median
Lowest
CARBON REDUCTION POTENTIAL: BENCHMARKING MEDIAN CARBON EFFICIENCY
The ET Carbon Rankings are designed to encourage investors to shift investment to more carbon-efficient companies, reducing their own exposure to carbon risk and rewarding companies that take action and disclose it. This is intended to drive decarbonisation across the economy, by incentivising each company to become more carbon-efficient.
The ET Low Carbon Index Series, which is based on the ET Carbon Rankings, weights investment towards the 50% of companies that are less carbon-intensive and away from the 50% that are more carbon-intensive. Thus, the Index Series rewards companies that achieve greater than median carbon efficiency. In this section, the median carbon-efficiency is used as a benchmark to get a sense of the carbon reduction potential associated with this approach (see Figure 11).
Analysis of just the 363 companies that have disclosed complete Scope 1 and 2 emissions in the ET Global 800 reveals that in each sector, if the 50% which are more carbon-
intensive were to achieve the median level of carbon efficiency, it would save 1.4 billion tonnes of carbon dioxide a year, equivalent to the emissions of Japan, the world’s third largest economy.26
Further analysis reveals that 86% of these savings – 1.2 billion tonnes of carbon dioxide, equivalent to twice the emissions of South Korea – could be made by companies in just five industries: Electric Utilities; Oil and Gas Exploration and Production; Construction Materials; Chemicals; and Real Estate Owners, Developers and Investment Trusts.27
This analysis only looks at those companies that have disclosed complete Scope 1 and 2 emissions, and does not consider the impact of Scope 3 emissions which typically account for 75% of companies’ total emissions. It is safe to assume that far greater savings could be made if the world’s largest companies took action to increase their carbon efficiency to the median level in their sector across the full range of their direct and value chain emissions.
FIGURE 11:CARBON REDUCTION POTENTIAL.
25
ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
SICS sector
Num
ber of Companies
Weighted Average Carbon
Intensity (Scope 1 & 2 tCO
2e/$m Revenue)
Total Scope 1+2 Emissions of
Disclosing Companies (tCO
2e)
Total Revenue ($m)
Median Intensity for sector
(Scope 1 & 2 tCO2e/$m
Revenue)
Average Intensity for sector (Scope 1 & 2 tCO
2e/$m
Revenue)
% Reduction if every Com
pany low
ers Emissions to level of
Median Intensity (Scope 1 & 2
tCO2e/$m
Revenue)
GHG Em
issions Reduction Potential if every Com
pany low
ers Emissions to level of
Median (tCO
2e)
Infrastructure 33 694 1,095,182,247 1,578 327 467 53 579,182,625
Non-Renewable Resources 31 595 1,753,953,949 2,950 431 488 28 483,076,854
Resource Transformation 46 198 356,475,870 1,803 91 122 54 192,817,032
Technology and Communications 52 44 134,408,182 3,032 25 29 43 57,974,508
Consumption I 37 90 97,653,019 1,091 63 70 29 28,392,328
Transportation 28 152 400,877,838 2,637 144 141 5 20,590,672
Health Care 32 21 37,430,119 1,809 11 13 44 16,639,459
Financials 59 5 28,257,454 5,457 3 4 37 10,514,678
Consumption II 23 38 87,684,138 2,326 36 36 6 4,973,246
Services 20 62 42,279,592 685 55 56 11 4,614,909
Renewable Resources and Alternative Energy 2 166 2,733,861 16 166 166 – –
Average 33 188 366,994,206 2,126 123 145 28 127,161,483
Total 363 2,065 4,036,936,269 23,384 1,352 1,592 310 1,398,776,311
CARBON REDUCTION POTENTIAL
Table 4 shows the potential to reduce emissions across the 11 SICS sectors of the economy if every company with an emissions intensity greater than the median value for their sector were to reduce their emissions to achieve that level of carbon efficiency. Three sectors account for 86% of the entire emissions reduction potential, 1.26 billion tonnes of carbon dioxide a year. This is one and a half times the total emissions from global aviation.28
The Infrastructure sector is the most carbon-intensive of all. If the least carbon-efficient companies achieved the median level it would cut the sector’s emissions by 53%, saving 579 million tonnes of carbon dioxide per year, slightly more than the total annual emissions of Canada.29 AvalonBay Communities, Swire Pacific and Vinci are among 33 companies disclosing complete data in this sector.
CARBON REDUCTION POTENTIAL BY SECTOR
TABLE 4:EMISSIONS REDUCTION POTENTIAL ACROSS THE 11 SECTORS (COMPANIES DISCLOSING COMPLETE SCOPE 1 & 2 DATA) – WORLD’S 800 LARGEST LISTED COMPANIES.
26
ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
CARBON REDUCTION POTENTIAL
Figure 12 shows the 11 SICS sectors in order of their potential to reduce absolute carbon emissions, if every company with an emissions intensity greater than the median value were to achieve the same level as the median company within the sector.
FIgure 13 shows the 11 SICS sectors ranked in order of their potential to reduce carbon emissions relative to total emissions intensity for the sector, under the same scenario as
Figure 12 and Table 4. The emissions-intensity reduction potential is shown by calculating the emissions that could be saved if every company with an emissions intensity greater than the median value were to achieve the same level as the median company within the sector.
Figure 14 displays country level emissions figures that these reductions can be compared to.
Health Care
Financials
Consumption II
Services
Transportation
Technology andCommunications
Infrastructure
Non−RenewableResources
Consumption I
ResourceTransformation
RenewableResources and
Alternative Energy
0 500,000,000 1,000,000,000 1,500,000,000
GHG Emissions (tCO2e)
GHG Emissions aer Reduction Potential Achieved Potential Reduction in GHG Emissions (tCO2)
Non-Renewable Resources is the second most carbon-intensive SICS sector. If the least carbon-efficient companies achieved the median level it would cut sector emissions by 28%, saving 483 million tonnes of carbon dioxide a year, roughly equivalent to the annual emissions of Saudi Arabia.30 Royal Dutch Shell, Siam Cement and Rio Tinto are among 31 companies disclosing complete data in this sector.
The Resource Transformation sector has the potential to achieve the third greatest savings in emissions and the greatest percentage reduction. If the least carbon-efficient companies achieved the median level it would cut sector emissions by 54%, saving 193 million tonnes of carbon dioxide a year, half the annual emissions of Australia.31 Mitsubishi Electric Corp, Siemens and General Electric are among 46 companies disclosing complete data in this sector.
FIGURE 12: SECTORS WITH THE GREATEST ABSOLUTE EMISSIONS REDUCTION POTENTIAL (COMPANIES DISCLOSING COMPLETE SCOPE 1 & 2 DATA) – WORLD’S 800 LARGEST LISTED COMPANIES.
27
ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
Mt CO2 (million tonnes)
0 – 100
100 – 500
500 – 700
700 – 1500
1500 – 5000
> 5000
UNITED STATES5,335 MT CO2
UK415 MT CO2
MEXICO456 MT CO2
AUSTRALIA409 MT CO2
SAUDIARABIA495MT CO2
TURKEY353 MT CO2
INDIA2,342MT CO2
RUSSIAN FEDERATION1,766 MT CO2
GERMANY767 MT CO2
CHINA10,541 MT CO2
INDONESIA453 MT CO2
JAPAN 1,279 MT CO2
BRAZIL501 MT CO2
IRAN618 MT CO2
CANADA566 MT CO2
SOUTH KOREA610 MT CO2
SOUTH AFRICA393 MT CO2
Health Care
Financials
Consumption II
Services
Transportation
Technology andCommunications
Infrastructure
Non−RenewableResources
Consumption I
ResourceTransformation
RenewableResources and
Alternative Energy
0 200 400 600 800
Carbon intensity (tCO2e/$m Revenue)
Carbon Intensity aer ReductionPotential Achieved
Potential Reduction in Carbonintensity (tCO2e/$m Revenue)
CARBON REDUCTION POTENTIAL
FIGURE 13: SECTORS WITH THE GREATEST PROPORTIONAL EMISSIONS REDUCTION POTENTIAL (COMPANIES DISCLOSING COMPLETE SCOPE 1 & 2 DATA) – WORLD’S 800 LARGEST LISTED COMPANIES.
FIGURE 14: GLOBAL CO2 EMISSIONS FROM FOSSIL FUEL USE AND CEMENT PRODUCTION 2014
Source: Emission Database for Global Atmospheric Research (EDGAR)
FIGURE 13: SECTORS WITH THE GREATEST PROPORTIONAL EMISSIONS REDUCTION POTENTIAL (COMPANIES DISCLOSING COMPLETE SCOPE 1 & 2 DATA) – WORLD’S 800 LARGEST LISTED COMPANIES.
28
ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
CARBON REDUCTION POTENTIAL
Infrastructure, Non-Renewable Resources and Resource Transformation are the three SICS sectors with the greatest opportunity to cut carbon. Table 5 delves deeper, looking at the SICS industries within these sectors that have the greatest potential to reduce emissions if every company with an emissions intensity greater than the median value were to achieve the same level as the median company within the sector.
The Electric Utilities industry, which includes companies such as American Electric Power, E.ON and Enel, has the greatest potential to reduce emissions. If the least carbon-efficient companies achieved the median level it would save 462 million tonnes of carbon a year, slightly more than the annual fossil fuel and industrial process emissions of Mexico.32
The Oil and Gas Exploration and Production industry, which includes companies such as Royal Dutch Shell, Total and Conoco Phillips, has the next greatest potential to reduce emissions. If the least carbon-efficient companies achieved the median level it would save 294 million tonnes of carbon a year, almost the annual electricity emissions of Poland.33
The third greatest potential for emissions reduction is in the Construction Materials industry, which includes cement companies such as CRH, Siam Cement and LafargeHolcim. This industry could save 175
million tonnes of carbon a year, slightly less than the emissions of Vietnam, if the least carbon-efficient companies achieved the median level.34
These three industries together with two others, the Chemicals industry and the Real Estate Owners, Developers and Investment Trusts industry have the potential to save nearly 1.2 billion tonnes of carbon a year - equivalent to the emissions of Japan - if the least carbon-efficient companies achieved the median level.35
Figure 15 shows the SICS industries within the Infrastructure, Non-Renewable Resources and Resource Transformation SICS sectors in order of their potential to reduce absolute carbon emissions, if every company with an emissions intensity greater than the median value were to achieve the same level as the median company within the industry.
Figure 16 shows the SICS industries within the Infrastructure, Non-Renewable Resources and Resource Transformation SICS sectors in order of their potential to reduce carbon emissions relative to the total emissions intensity for the industry. The emissions-intensity reduction potential is shown by calculating the emissions that could be saved if every company with an emissions intensity greater than the median value were to achieve the same level as the median company within the industry.
CARBON REDUCTION POTENTIAL BY INDUSTRY
29
ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
CARBON REDUCTION POTENTIAL
SICS industry
Num
ber of Companies
Weighted Average Carbon
Intensity (Scope 1 & 2 tCO2e/$m
Revenue)
Total Emissions of Disclosing Com
panies (tCO2e)
Total Revenue ($m)
Median Intensity for industry
(Scope 1 & 2 tCO2e/$m
Revenue)
Average Intensity for industry (Scope 1 & 2 tCO
2e/$m
Revenue)
% Reduction if every Com
pany low
ers Emissions to level of
Median Intensity (Scope 1 & 2
tCO2e/$m
Revenue)
GHG Em
issions Reduction Potential if every com
pany low
ers Emissions to level of
Median (tCO
2e)
Electric Utilities 13 1,030 871,567,417 846 484 723 53 462,340,833
Oil and Gas – Exploration and Production 15 547 1,243,022,897 2,273 418 482 24 294,165,687
Construction Materials 4 2,239 274,397,777 123 807 1,153 64 175,476,159
Chemicals 16 629 261,941,435 417 273 393 56 147,989,602
Real Estate Owners, Developers and Investment Trusts 9 621 107,138,767 172 79 149 87 93,513,175
Industrial Machinery and Goods 8 158 44,092,472 279 33 50 79 34,784,243
Gas Utilities 3 382 28,863,371 76 102 194 73 21,134,869
Oil and Gas – Midstream 3 1,357 90,340,081 67 1,232 1,084 9 8,311,307
Containers and Packaging 2 363 19,130,478 53 275 275 24 4,669,812
Electrical and Electronic Equipment 12 35 21,574,662 615 30 31 15 3,266,246
Metals and Mining 5 463 137,853,744 298 454 408 2 2,665,132
Oil and Gas – Services 3 80 6,796,369 84 51 59 36 2,458,569
Engineering and Construction Services 5 49 19,446,541 399 43 42 11 2,193,748
Aerospace and Defense 8 22 9,736,823 440 17 18 22 2,107,128
Waste Management 1 1,672 36,915,487 22 1,672 1,672 – –
Integrated Utilities 1 5,231 31,000,022 6 5,231 5,231 – –
Iron and Steel Producers 1 15 1,543,082 106 15 15 – –
Home Builders 1 4 250,642 57 4 4 – –
Average 12 828 178,089,559 352 623 666 39 88,320,199
Total 220 15,725 3,383,701,626 6,685 11,843 12,649 586 1,324,802,983
TABLE 5: EMISSIONS REDUCTION POTENTIAL ACROSS 18 INDUSTRIES IN THE INFRASTRUCTURE, NON-RENEWABLE RESOURCES AND RESOURCE TRANSFORMATION SECTORS (COMPANIES DISCLOSING COMPLETE SCOPE 1 & 2 DATA) – WORLD’S 800 LARGEST LISTED COMPANIES.
30
ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
CARBON REDUCTION POTENTIAL
GHG Emissions (tCO2e)
Carbon emissions a�er Reduction Potential Achieved
Potential Reduction in GHG Emissions (tCO2e)
Iron and Steel Producers
Home Builders
Waste Management
Integrated Utilities
Aerospace and Defense
Engineering and Construction Services
Oil and Gas − Services
Metals and Mining
Electrical and Electronic Equipment
Containers and Packaging
Oil and Gas − Midstream
Gas Utilities
Industrial Machinery and Goods
Real Estate Owners, Developersand Investment Trusts
Chemicals
Construction Materials
Oil and Gas − Exploration & Production
Electric Utilities
0 400,000,000 800,000,000 1,200,000,000
Carbon Intensity (tCO2e/$m Revenue)
Iron and Steel Producers
Home Builders
Waste Management
Integrated Utilities
Aerospace and Defense
Electrical and ElectronicEquipment
Engineering and Construction Services
Metals and Mining
Oil and Gas − Services
Containers and Packaging
Oil and Gas − Midstream
Industrial Machinery and Goods
Oil and Gas − Exploration & Production
Gas Utilities
Chemicals
Real Estate Owners, Developersand Investment Trusts
Electric Utilities
Construction Materials
0 2,000 4,000 6,000
Carbon Intensity a�er ReductionPotential Achieved
Potential Reduction in Carbonintensity (tCO2e/$m Revenue)
FIGURE 15:INDUSTRIES WITH THE GREATEST ABSOLUTE EMISSIONS REDUCTION POTENTIAL (COMPANIES DISCLOSING COMPLETE SCOPE 1 & 2 DATA) – WORLD’S 800 LARGEST LISTED COMPANIES.
FIGURE 16:INDUSTRIES WITH THE GREATEST PROPORTIONAL EMISSIONS REDUCTION POTENTIAL (COMPANIES DISCLOSING COMPLETE SCOPE 1 & 2 DATA) – WORLD’S 800 LARGEST LISTED COMPANIES.
31
ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
CARBON REDUCTION POTENTIAL
Table 6 shows the best and worst performers in the five most carbon-intensive industries, illustrating the huge differences in Scope 1 and 2 carbon efficiency. In Electric Utilities, the worst performer, Electric Power Development of Japan, is 16 times less carbon-efficient than the industry median and 133 times less efficient than the best performer, Italy’s Terna Rete Eletrrica Nazionale. A similar picture emerges in other industries.
It should be noted that the worst performers in this table are at least measuring and disclosing their emissions, an indication that they are also likely to be managing them. In every industry there are many more companies which are not even disclosing their emissions.
The best Scope 1 and 2 performers are not necessarily the best when Scope 3 is taken into account. For example, when value chain emissions are added Germany’s E.On is the industry leader in Electric Utlities with a carbon efficiency of 1,869 tCO2e/$m revenue compared with Terna Rete’s 6,588 tCO2e/$m revenue.
Table 7 shows the reduction potential if every company within the industries highlighted below were to reduce its emissions to the level of the most carbon-efficient company within the same industry (the ‘lowest’ is
illustrated in Figure 11). Companies should compete on carbon efficiency as they compete in other areas and target industry-leading emissions intensity.
Analysis of the 363 companies that have disclosed complete Scope 1 and 2 emissions in the ET Global 800 reveals that if every company were to achieve the carbon efficiency of the industry leaders it would save 2.8 billion tonnes of carbon dioxide a year, just below the annual emissions of India.36
The greatest gains can be made within the Oil and Gas – Exploration and Production industry. If every company were to lower its emissions to the level of the best in the industry, savings of 1.22 billion tonnes of carbon dioxide could be made. This is equivalent to twice the annual emissions of South Korea.37
The Electric Utilities industry could save 0.78 billion tonnes of carbon dioxide, equivalent to the emissions of Germany while the Chemicals industry could save 0.25 billion tonnes carbon dioxide, equivalent to the emissions of Ukraine.38
These are not trivial sums and highlight that investors have a key role to play in encouraging all investee companies to align with industry best practice.
Name Country SICS industryScope 1 & 2 Intensity (tCO2e/$m Revenue)
Industry Median Intensity Scope 1 & 2 (tCO2e/$m Revenue)
% of Median
Terna Rete Elettrica Nazionale SpA Italy Electric Utilities 61 484 13%
Electric Power Development Co Ltd Japan Electric Utilities 8,127 484 1,679%
Genel Energy Plc UK Oil and Gas Exploration and Production 5 418 1%
Cairn Energy Plc UK Oil and Gas Exploration and Production 4,123 418 986%
Sika AG Switzerland Construction Materials 28 807 3%
UltraTech Cement Ltd India Construction Materials 9,443 807 1,170%
Johnson Matthey Plc UK Chemicals 29 273 11%
Petronas Chemicals Group Bhd Malaysia Chemicals 13,961 273 5,114%
Prologis Inc USReal Estate Owners, Developers and Investment Trusts
3 79 4%
Hopewell Holdings Ltd Hong KongReal Estate Owners, Developers and Investment Trusts
16,440 79 20,810%
TABLE 6: BEST AND WORST CARBON EFFICIENCY PERFORMERS IN THE FIVE MOST CARBON- INTENSIVE INDUSTRIES (COMPANIES DISCLOSING COMPLETE SCOPE 1 & 2 DATA) – WORLD’S 800 LARGEST LISTED COMPANIES.
32
ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
CARBON REDUCTION POTENTIAL
SICS industry
Num
ber of Companies
Weighted Average Carbon
Intensity (Scope 1 & 2 tCO2e/$m
Revenue)
Total Emissions of Disclosing Com
panies (tCO2e)
Total Revenue ($m)
Minim
um Intensity for Industry
(Scope 1 & 2 tCO2e/$m
Revenue)
Average Intensity for industry (Scope 1 & 2 tCO
2e/$m Revenue)
% Reduction if every Com
pany low
ers Emissions to level of m
ost Carbon Efficient Intensity (Scope
1 & 2 tCO2e/$m
Revenue)
GHG Em
issions Reduction Potential if every Com
pany low
ers emissions to level of of
most carbon efficient (tCO
2e)
Oil and Gas – Exploration and Production 15 547 1,243,022,897 2,273 10 482 98 1,220,978,775
Electric Utilities 13 1,030 871,567,417 846 109 723 89 779,768,017
Chemicals 16 629 261,941,435 417 32 393 95 248,730,805
Construction Materials 4 2,239 274,397,777 123 296 1,153 87 238,176,753
Real Estate Owners, Developers and Investment Trusts 9 621 107,138,767 172 3 149 99 106,586,984
Metals and Mining 5 463 137,853,744 298 221 408 52 72,162,609
Oil and Gas – Midstream 3 1,357 90,340,081 67 451 1,084 67 60,302,305
Industrial Machinery and Goods 8 158 44,092,472 279 10 50 93 41,196,052
Gas Utilities 3 382 28,863,371 76 94 194 75 21,780,144
Electrical and Electronic Equipment 12 35 21,574,662 615 15 31 59 12,655,628
Engineering and Construction Services 5 49 19,446,541 399 25 42 50 9,682,108
Containers and Packaging 2 363 19,130,478 53 186 275 49 9,339,624
Aerospace and Defense 8 22 9,736,823 440 13 18 42 4,054,821
Oil and Gas – Services 3 80 6,796,369 84 35 59 57 3,865,787
Waste Management 1 1,672 36,915,487 22 1,672 1,672 – –
Integrated Utilities 1 5,231 31,000,022 6 5,231 5,231 – –
Iron and Steel Producers 1 15 1,543,082 106 15 15 – –
Home Builders 1 4 250,642 57 4 4 – –
Average 12 828 178,089,559 352 468 666 71 199,097,510
Total 220 15,725 3,383,701,626 6,685 8,890 12,649 1,068 2,986,462,657
and Resource Transformation SICS sectors in order of their potential to reduce carbon emissions relative to the total emissions intensity for the industry. The emissions-intensity reduction potential is shown by calculating the emissions that could be saved if every company reduced its emissions intensity to the level of the most carbon-efficient company within its industry.
TABLE 7: EMISSIONS REDUCTION POTENTIAL ACROSS 18 INDUSTRIES IN THE INFRASTRUCTURE, NON-RENEWABLE RESOURCES AND RESOURCE TRANSFORMATION SECTORS IF ALL COMPANIES LOWERED EMISSIONS TO THE LEVEL OF THE MOST CARBON-EFFICIENT COMPANY (COMPANIES DISCLOSING COMPLETE SCOPE 1 & 2 DATA) – WORLD’S 800 LARGEST LISTED COMPANIES.
Figure 17 shows the SICS industries within the Infrastructure, Non-Renewable Resources and Resource Transformation SICS sectors in order of their potential to reduce absolute carbon emissions, if all companies reduced their emissions intensity to the level of the most carbon-efficient company within their industry.
Figure 18 shows the SICS industries within the Infrastructure, Non-Renewable Resources
33
ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
CARBON REDUCTION POTENTIAL
GHG Emissions (tCO2e)
Carbon emissions a�er Reduction Potential Achieved
Potential Reduction in GHG Emissions (tCO2e)
Iron and Steel Producers
Home Builders
Waste Management
Integrated Utilities
Oil and Gas − Services
Aerospace and Defense
Containers and Packaging
Engineering and Construction Services
Electrical and Electronic Equipment
Gas Utilities
Industrial Machinery and Goods
Oil and Gas − Midstream
Metals and Mining
Real Estate Owners, Developersand Investment Trusts
Construction Materials
Chemicals
Electric Utilities
Oil and Gas − Exploration & Production
0 400,000,000 800,000,000 1,200,000,000
Carbon intensity (tCO2e/$m Revenue)
Iron and Steel Producers
Home Builders
Waste Management
Integrated Utilities
Aerospace and Defense
Electrical and ElectronicEquipment
Engineering and Construction Services
Oil and Gas − Services
Industrial Machinery and Goods
Containers and Packaging
Metals and Mining
Gas Utilities
Oil and Gas − Exploration & Production
Chemicals
Real Estate Owners, Developersand Investment Trusts
Oil and Gas − Midstream
Electric Utilities
Construction Materials
0 2,000 4,000 6,000
Carbon Intensity a er ReductionPotential Achieved
Potential Reduction in Carbon intensity (tCO2e/$m Revenue)
FIGURE 17:INDUSTRIES WITH THE GREATEST ABSOLUTE EMISSIONS REDUCTION POTENTIAL IF ALL COMPANIES LOWERED EMISSIONS TO THE LEVEL OF THE MOST CARBON-EFFICIENT COMPANY IN THEIR INDUSTRY (COMPANIES DISCLOSING COMPLETE SCOPE 1 & 2 DATA) – WORLD’S 800 LARGEST LISTED COMPANIES.
FIGURE 18: INDUSTRIES WITH THE GREATEST PROPORTIONAL EMISSIONS REDUCTION POTENTIAL IF ALL COMPANIES LOWERED EMISSIONS TO THE LEVEL OF THE MOST EFFICIENT COMPANY IN THEIR INDUSTRY (COMPANIES DISCLOSING COMPLETE SCOPE 1 & 2 DATA) – WORLD’S 800 LARGEST LISTED COMPANIES.
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
ET Global 800 Carbon Rank Company name
Scope 1, 2 & 3 Intensity (tCO2e/$m Revenue)
Scope 1 & 2 Intensity (tCO2e/$m Revenue) SICS sector Region
1 Oracle Corp 34 10Technology and
CommunicationsNorth America
2 Biogen Inc 40 5 Health Care North America
3 Adobe Systems Inc 41 9Technology and
CommunicationsNorth America
4 UCB SA 73 15 Health Care Europe
5 Amgen Inc 74 17 Health Care North America
6 Astellas Pharma Inc 75 22 Health Care Asia-Pacific
7 CSL Ltd 99 43 Health Care Asia-Pacific
8 Telefonica SA 110 33Technology and
CommunicationsEurope
9 Carrefour SA 131 37 Consumption II Europe
10 Koninklijke KPN NV 133 5Technology and
CommunicationsEurope
ET GLOBAL CARBON RANKINGS 2016: ET GLOBAL 800 CARBON LEADERS 2016
The ET Global 800 Carbon Rankings rank the 800 largest listed companies in the world according to their carbon efficiency, based on the intensity of their combined Scope 1, 2 and 3 emissions.
Computer software company Oracle tops the Rankings. It generates just 34 tonnes of carbon dioxide for every $1 million of revenue, making it nearly four times as carbon-efficient as the company in tenth place. Other companies have lower Scope 1
and 2 emissions but its Scope 3 performance puts it firmly at the front of the pack.
Table 8 shows the ET Global 800 Carbon Leaders, the top ten most carbon-efficient companies in the ET Global 800. They include four each from North America and Europe and two from Asia Pacific. Five are from the Health Care sector, four from Technology & Communications and one from the Consumption sector covering the manufacture and retail of consumer goods, which are among the most carbon-efficient sectors.
TABLE 8: ET GLOBAL 800 CARBON LEADERS
35
ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
ET GLOBAL CARBON RANKINGS 2016
Sector rank SICS sector Average RankAverage Scope 1, 2 & 3
Intensity
1 Financials 141 359
2 Consumption II39 194 969
3 Health Care 294 629
4 Technology and Communications 332 1091
5 Renewable Resources and Alternative Energy 397 837
6 Consumption I40 411 1343
7 Transportation 480 2440
8 Resource Transformation 615 13367
9 Services 628 6409
10 Infrastructure 668 14686
11 Non-Renewable Resources 686 18779
CARBON EFFICIENCY SECTOR RANKINGS
Some sectors are inherently more carbon-intensive than others, so it is no surprise that the financial sector is the most carbon-efficient sector and Resource Transformation, Infrastructure and Non-Renewable Resources are at the bottom.
Table 9 shows the average rank of each sector across the 2016 ET Global 800 Carbon Ranking along with the average Scope 1, 2 and 3 intensity. As one would expect, the average rank is roughly in line
with the average Scope 1, 2 and 3 intensity for each sector.
Notably, Technology & Communications, despite having many highly-ranked companies, has a relatively poor average rank and relatively high average Scope 1, 2 and 3 intensity. This is because this sector also has many companies that are either relatively carbon-intensive, or that are poor disclosers. The same can be said for the Services sector.
TABLE 9: AVERAGE ET GLOBAL 800 CARBON RANK BY SECTOR
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
ET GLOBAL CARBON RANKINGS 2016
ET CARBON DISCLOSURE LEADERS 2016
ET Carbon Disclosure Leaders are the companies that are doing most to measure and communicate their carbon exposure. These are companies that are reporting public, complete data for Scope 1 and 2 emissions, obtaining independent assurance of this data, and disclosing all 15 Scope 3 Categories.
In 2016 there are 25 companies that make it into the list. Many of them are never likely to feature as one of the top ten most carbon-efficient companies because they are in more carbon-intensive sectors such as Resource Transformation and Infrastructure. Most of them are not even leaders in their own sector. However, these are companies that are proactively seeking to manage their carbon risk exposure.
By measuring and reporting on carbon emissions across their operations they are demonstrating that they are taking the issue seriously and gathering the information they will need to improve their carbon efficiency. Companies that disclose their Scope 1 and 2 emissions increased their carbon efficiency by 15% from 2015 to 2016, going from 221 tonnes of CO2 per million dollar of revenue to 189.
The Asia-Pacific region is the most heavily represented region with 10 companies, followed by Europe with 8, North America with 6, and BRICS with 1.
Table 10 includes companies from the ET Carbon Ranking Universe, which covers the world’s 2,000 largest listed companies. Companies in the ET Global 800 Rankings have their rank listed.
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ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
ET GLOBAL CARBON RANKINGS 2016
Company name SICS sector Region Revenues $m
Scope 1, 2 & 3 Intensity (tCO2e/$m Revenue)
Scope 1 & 2 Intensity (tCO2e/$m Revenue)
ET Global 800 Carbon Rank
Mondelez International Inc Consumption I North America 29,636 573 52 301
Aeon Co Ltd Consumption II Asia-Pacific 57,458 124 20 NA
Baxter International Inc Health Care North America 9,968 540 70 285
Biogen Inc Health Care North America 10,764 40 5 2
Sanofi Health Care Europe 38,696 282 28 33
British Land Co PLC/The Infrastructure Europe 897 14,162 56 NA
Exelon Corp Infrastructure North America 29,447 4,086 426 567
Ferrovial SA Infrastructure Europe 10,768 394 56 174
Gas Natural SDG SA Infrastructure Europe 28,948 5,494 833 596
Cemex SAB de CV Non-Renewable Resources North America 14,254 4,095 3,388 NA
Kumba Iron Ore Ltd Non-Renewable Resources BRICS 2,847 43,664 422 NA
Royal Dutch Shell PLC Non-Renewable Resources Europe 264,960 2,594 306 509
TOTAL SA Non-Renewable Resources Europe 143,421 4,057 319 566
Akzo Nobel NV Resource Transformation Europe 16,494 1,533 215 441
BASF SE Resource Transformation Europe 78,199 1,846 275 446
Omron Corp Resource Transformation Asia-Pacific 7,746 1,122 36 NA
Toshiba Corp Resource Transformation Asia-Pacific 60,849 1,318 50 NA
Canon Inc Technology and Communications
Asia-Pacific 31,405 246 39 29
Konica Minolta Inc Technology and Communications
Asia-Pacific 9,167 149 44 NA
NTT DOCOMO Inc Technology and Communications
Asia-Pacific 40,074 219 42 22
Sony Corp Technology and Communications
Asia-Pacific 75,111 310 16 62
Honda Motor Co Ltd Transportation Asia-Pacific 121,848 1,878 43 451
Mazda Motor Corp Transportation Asia-Pacific 27,736 1,258 27 NA
Nissan Motor Co Ltd Transportation Asia-Pacific 103,994 1,413 32 422
United Parcel Service Inc Transportation North America 58,363 489 223 263
TABLE 10: ET CARBON DISCLOSURE LEADERS 2016
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
ET GLOBAL CARBON RANKINGS 2016
ET SECTOR CARBON LEADERS 2016
ET Sector Carbon Leaders are the three most carbon-efficient companies in each sector (based on the intensity of their combined Scope 1, 2 and 3 emissions) that disclose
complete data for Scope 1 and 2. They are drawn from the ET Carbon Ranking Universe, which covers the world’s 2,000 largest listed companies.
TABLE 11: ET SECTOR CARBON LEADERS 2016
Company name SICS sector Revenues
Scope 1 & 2 Intensity (tCO2e/$m Revenue)
Scope 1, 2 & 3 Intensity (tCO2e/$m Revenue)
ET Global 800 Carbon Rank
Diageo PLC Consumption I 17,036 497 46 274
Unicharm Corp Household and Personal Products 6,105 240 27 NA
Uni-President Enterprises Corp Consumption I 13,109 534 11 NA
Aeon Co Ltd Consumption II 57,458 124 20 NA
J Sainsbury PLC Consumption II 38,534 129 36 NA
METRO AG Consumption II 68,033 129 35 NA
AXA SA Financials 123,745 292 1 34
Hartford Financial Services Group Inc Financials 18,377 293 2 35
T&D Holdings Inc Financials 21,653 292 3 NA
Amgen Inc Health Care 21,662 74 17 5
Biogen Inc Health Care 10,764 40 5 2
UCB SA Health Care 4,302 73 15 4
Barratt Developments PLC Infrastructure 5,923 582 5 NA
Ferrovial SA Infrastructure 10,768 394 56 174
Sekisui Chemical Co Ltd Infrastructure 10,173 445 83 NA
Cie de Saint-Gobain Non-Renewable Resources 43,982 1,005 296 415
CRH PLC Non-Renewable Resources 26,235 1,541 831 442
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ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
ET GLOBAL CARBON RANKINGS 2016
TABLE 11: ET SECTOR CARBON LEADERS 2016 (CONTINUED)
Company name SICS sector Revenues
Scope 1 & 2 Intensity (tCO2e/$m Revenue)
Scope 1, 2 & 3 Intensity (tCO2e/$m Revenue)
ET Global 800 Carbon Rank
Sika AG Non-Renewable Resources 5,706 681 28 NA
Vestas Wind Systems A/S Renewable Resources and Alternative Energy
9,350 653 8 375
Weyerhaeuser Co Renewable Resources and Alternative Energy
7,082 1,020 376 416
Mitsubishi Electric Corp Resource Transformation 39,522 1,227 31 419
Omron Corp Resource Transformation 7,746 1,123 36 NA
Sumitomo Chemical Co Ltd Resource Transformation 21,728 1,166 153 NA
Liberty Global PLC Services 18,280 5,995 27 599
Sky PLC Services 15,738 5,972 4 598
Twenty-First Century Fox Inc Services 28,987 5,998 6 607
Adobe Systems Inc Technology and Communications 4,796 41 9 3
Oracle Corp Technology and Communications 38,226 34 10 1
Proximus SADP Technology and Communications 6,673 92 19 NA
Daimler AG Transportation 165,910 541 20 286
MTR Corp Ltd Transportation 5,379 471 244 252
United Parcel Service Inc Transportation 58,363 223 489 263
MTR Corp ltd Transportation 5,379 471 244 252
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
ET GLOBAL CARBON RANKINGS 2016
ET INDUSTRY CARBON LEADERS 2016
ET Industry Carbon Leaders are the most carbon-efficient companies in each industry (based on the intensity of their combined Scope 1, 2 and 3 emissions) that disclose
complete data for Scope 1 and 2. They are drawn from the ET Carbon Ranking Universe, which covers the world’s 2,000 largest listed companies.
Company name SICS industry RegionRevenues
$m
Scope 1, 2 & 3 Intensity (tCO2e/$m Revenue)
Scope 1 & 2 Intensity (tCO2e/$m Revenue)
ET Global 800 Carbon
Rank
WPP PLC Advertising and Marketing Europe 18,700 6,003 7 609
Boeing Co/The Aerospace and Defense North America 96,114 2,242 14 475
Archer-Daniels-Midland Co Agricultural Products North America 67,702 788 265 386
United Parcel Service Inc Air Freight and Logistics North America 58,363 489 223 263
Japan Airlines Co Ltd Airlines Asia-Pacific 12,294 1,248 683 NA
Diageo PLC Alcoholic Beverages Europe 17,036 497 46 274
Christian Dior SE Apparel, Accessories and Footwear
Europe 42,195 333 7 99
Stanley Black & Decker Inc Appliance Manufacturing North America 11,172 5,352 31 594
Bank of New York Mellon Corp/The Asset Management and Custody Activities
North America 15,494 340 1 106
Toyota Industries Corp Auto Parts Asia-Pacific 19,808 901 1 406
Daimler AG Automobiles Europe 165,910 541 20 286
Biogen Inc Biotechnology North America 10,764 40 5 2
LIXIL Group Corp Building Products and Furnishings Asia-Pacific 15,591 573 49 NA
Sky PLC Cable and Satellite Europe 15,738 5,972 4 598
Kangwon Land Inc Casinos and Gaming Asia-Pacific 1,444 6,537 49 NA
Sumitomo Chemical Co Ltd Chemicals Asia-Pacific 21,728 1,166 153 NA
Intesa Sanpaolo SpA Commercial Banks Europe 26,928 294 3 49
Sika AG Construction Materials Europe 5,706 681 28 NA
Cielo SA Consumer Finance BRICS 3,389 317 1 65
TABLE 12:ET INDUSTRY CARBON LEADERS 2016
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ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
ET GLOBAL CARBON RANKINGS 2016
TABLE 12: ET INDUSTRY CARBON LEADERS 2016 (CONTINUED)
3M Co Containers and Packaging North America 30,274 42,899 186 781
Carnival PLC Cruise Lines North America 15,714 7,148 660 652
Galenica AG Drug Retailers and Convenience Stores
Europe 4,101 2,976 2 NA
E.ON SE Electric Utilities Europe 129,003 1,869 649 450
Mitsubishi Electric Corp Electrical and Electronic Equipment
Asia-Pacific 39,522 1,227 31 419
Ferrovial SA Engineering and Construction Services
Europe 10,768 394 56 174
METRO AG Food Retailers and Distributors Europe 68,033 129 35 NA
Weyerhaeuser Co Forestry and Logging North America 7,082 1,020 376 416
Hong Kong & China Gas Co Ltd Gas Utilities BRICS 3,817 4,755 94 587
Ricoh Co Ltd Hardware Asia-Pacific 20,405 154 25 NA
McKesson Corp Health Care Distributors North America 179,045 585 1 307
Sekisui Chemical Co Ltd Home Builders Asia-Pacific 10,173 445 83 NA
Hilton Worldwide Holdings Inc Hotels and Lodging North America 11,272 6,723 236 643
Unicharm Corp Household and Personal Products Asia-Pacific 6,105 240 27 NA
L'Oreal SA Household and Personal Products - Cosmetics
Europe 28,036 2,726 4 512
Omron Corp Industrial Machinery and Goods Asia-Pacific 7,746 1,122 36 NA
T&D Holdings Inc Insurance Asia-Pacific 21,653 292 3 NA
Itau Unibanco Holding SA Integrated Banks BRICS 50,428 350 2 134
WEC Energy Group Inc Integrated Utilities North America 5,926 13,436 5,231 713
Auto Trader Group PLC Internet Media and Services Europe 413 2,157 2 NA
Deutsche Bank AG Investment Banking and Brokerage Europe 52,274 332 4 97
Mitsui & Co Ltd Iron and Steel Producers Asia-Pacific 49,413 60,386 15 791
Merlin Entertainments PLC Leisure Facilities Europe 1,955 6,559 72 NA
Humana Inc Managed Care North America 54,289 583 2 305
Babcock International Group PLC Marine Transportation Europe 6,446 4,983 27 NA
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
ET GLOBAL CARBON RANKINGS 2016
Danone SA Meat, Poultry and Dairy Europe 24,878 583 60 306
Twenty-First Century Fox Inc Media Production and Distribution North America 28,987 5,998 6 607
Coloplast A/S Medical Equipment and Supplies Europe 2,144 222 20 23
Vale SA Metals and Mining BRICS 26,055 11,589 622 697
Aeon Co Ltd Multiline and Specialty Retailers and Distributors
Asia-Pacific 57,458 124 20 NA
Coca-Cola European Partners PLC Non-Alcoholic Beverages Europe 7,011 881 18 NA
Royal Dutch Shell PLC Oil and Gas – Exploration and Production
Europe 264,960 2,594 306 509
Snam SpA Oil and Gas – Midstream Europe 4,280 8,093 451 661
DCC PLC Oil and Gas – Refining and Marketing
Europe 17,106 7,710 8 NA
Baker Hughes Inc Oil and Gas – Services North America 15,742 7,941 35 657
Astellas Pharma Inc Pharmaceuticals Asia-Pacific 11,403 75 22 6
Uni-President Enterprises Corp Processed Foods Asia-Pacific 13,109 534 11 NA
Dai Nippon Printing Co Ltd Professional Services Asia-Pacific 13,367 6,265 69 NA
MTR Corp Ltd Rail Transportation BRICS 5,379 471 244 252
Klepierre Real Estate Owners, Developers and Investment Trusts
Europe 1,453 9,631 88 NA
Daito Trust Construction Co Ltd Real Estate Services Asia-Pacific 12,371 14,765 4 NA
Starbucks Corp Restaurants North America 19,163 6,557 70 625
Hong Kong Exchanges & Clearing Ltd
Security and Commodity Exchanges
BRICS 1,578 328 13 96
QUALCOMM Inc Semiconductors North America 25,281 2,016 9 455
Oracle Corp Software and IT Services North America 38,226 34 10 1
Proximus SADP Telecommunications Europe 6,673 92 19 NA
Imperial Brands PLC Tobacco Europe 19,628 558 14 292
Republic Services Inc Waste Management North America 9,115 1,881 1,672 452
United Utilities Group PLC Water Utilities Europe 2,774 5,538 151 NA
Vestas Wind Systems A/S Wind Energy Europe 9,350 653 8 375
TABLE 12: ET INDUSTRY CARBON LEADERS 2016 (CONTINUED)
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ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
ET CARBON RANKING METHODOLOGY: ET CARBON RANKING UNIVERSE
THE ET CARBON RANKINGS:
The ET Carbon Ranking Universe covers the largest 2,000 listed companies by market capitalisation in each jurisdiction. The ET Carbon Rankings are comprised of the following global, regional and national Rankings, with carbon data covering the reporting year ending in 2015.
ET Global 800 Carbon Ranking ET North America 300 Carbon Ranking ET Asia-Pacific 300 Carbon Ranking ET Europe 300 Carbon Ranking ET BRICS 300 Carbon Ranking ET US 250 Carbon Ranking ET UK 100 Carbon Ranking
ET Carbon Disclosure Leaders ET Sector Carbon Leaders ET Industry Carbon Leaders
Please see the appendix for the full results.
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
ET CARBON RANKING METHODOLOGY
METHODOLOGY
Companies are analysed using a strict quality control framework in order to ascertain a greenhouse gas emissions-intensity metric (tCO2e/$m revenue).
The analysis framework for gathering this information is based on the Greenhouse Gas Protocol, the most widely used international accounting tool for greenhouse gas (GHG) emissions. The GHG Protocol classifies GHG emissions according to three Scopes. See Figure 19.
Data sources include annual reports, sustainability reports and company websites. The completeness of the data and whether the information has been audited by an independent third party is also recorded. For each company, a Scope 1 and 2 intensity figure is calculated based on the total disclosed Scope 1 and 2 emissions divided by USD million of revenue (Scope 1 and 2/$m revenue). The same applies to Scope 3.
In cases where a company is not reporting complete information, an inference system is applied. The highest reported emissions-intensity figure from a disclosing company within the most appropriate peer group is applied to the non-disclosing company. This inference is carried out at the most granular industry level possible. For Scope 3, the inference system is applied to each category. This is not an estimate of the company’s emissions; rather it is a means of penalising non-disclosure in order to provide an incentive for disclosure.
The ET Carbon Rankings integrate the Sustainable Industry Classification System™ (SICS®) from SASB®, the Sustainability Accounting Standards Board®. The SICS categorises 10 sectors and 80+ industries in accordance with their resource intensity, sustainability impact, and sustainability innovation potential.
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ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
SCOPE 2INDIRECT
PURCHASEDELECTRICITY, STEAM,HEATING & COOLING
FOR OWN USE
SCOPE 3INDIRECT
SOURCES: ET INDEX RESEARCH, GREENHOUSE GAS PROTOCOL
SCOPE 3INDIRECT
CO2 CH4 N2O
HFCs PFCs SF6 NF3
COMPANYFACILITIES
COMPANYVEHICLES
1. PURCHASEDGOODS AND
SERVICES 2. CAPITALGOODS
3. FUEL ANDENERGY RELATED
ACTIVITIES
4. UPSTREAMTRANSPORTATION
AND DISTRIBUTION
11.USEOF SOLD
PRODUCTS
12. END-OF-LIFETREATMENT OF
SOLD PRODUCTS
10. PROCESSINGOF SOLD
PRODUCTS
9. DOWNSTREAMTRANSPORTATION
AND DISTRIBUTION
10. DOWNSTREAMLEASED ASSETS
14. FRANCHISES15. INVESTMENTS
8. UPSTREAMLEASED ASSETS6. BUSINESS
TRAVEL
5. WASTEGENERATED INOPERATIONS
7. EMPLOYEECOMMUTING
UPSTREAM ACTIVITIES DOWNSTREAM ACTIVITIESREPORTINGCOMPANY
SCOPE 1DIRECT
ET CARBON RANKING METHODOLOGY
KNOW YOUR ‘SCOPES’
Scope 1 Emissions – direct emissions from a company’s operational activities.
Scope 2 Emissions – indirect emissions generated from the purchase of electricity.
Scope 3 Emissions – all other emissions over which the company has influence but not control, such as distribution of goods, transportation of purchased goods, transportation of waste, disposal of waste, employee commuting, business travel or investments.
The Greenhouse Gas Protocol, developed by the World Resources Institute and the World Business Council on Sustainable Development, sets the global standard for how to measure, manage, and report greenhouse gas emissions. Figure 19 shows how greenhouse gases are broken down into three ‘Scopes’.
FIGURE 19:GREENHOUSE GAS PROTOCOL SCOPE 1, 2 AND 3 EMISSIONS.
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
Disclosure categories
1. Public, complete Scope 1 and 2 data, third-party assurance
2. Public, complete Scope 1 and 2 data, no third-party assurance
3. Incomplete Scope 1 and 2 data, no third-party assurance
4. No public data
ET CARBON RANKING METHODOLOGY
Definitions
• Complete data is defined as data covering at least 95% of a company’s worldwide Scope 1 and 2 emissions within an appropriately chosen reporting boundary. Where there is only partial data available, the ET Carbon Ranking methodology accepts a company reporting extrapolated data to achieve 100% coverage for their operations, as this is permissible under the GHG Protocol Corporate Standard, providing the end result is a faithful reflection of a company’s emissions.
• Incomplete data is defined as data which represents less than 95% of a company’s worldwide operations; data that is expressed as an intensity metric, such as the amount of CO2 emitted per product produced, rather than as an absolute figure; or data which is not reported clearly under the GHG Protocol definition of Scopes 1, 2 and 3.
Greenhouse Gas Emissions are expressed in terms of carbon dioxide equivalent (CO2e). To compare companies of different sizes within one ranking, a company’s total greenhouse gas emissions figure is divided by its revenue to provide an intensity metric for each company (CO2e/$ revenue). In other words, companies are ranked according to the carbon efficiency of their operations.
• Assured data is defined as having a bona fide independent assurance statement without significant qualification.
• Public data is defined as freely available information reported in a company’s sustainability report, annual report, or sustainability-related section of its website (or any other relevant section of the company’s website).
• Third-party reporting on behalf of a company, which may involve restrictions or permissions (e.g. reporting to the CDP), is not defined as publicly and freely available.
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ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
ET CARBON RANKING METHODOLOGY
SPOTLIGHT ON SCOPE 3
Calculating Scope 3 emissions in a cost-effective manner
The Scope 3 Evaluator is a free, web-based tool from Greenhouse Gas Protocol and Quantis that makes it easy for companies to measure, report, and reduce emissions throughout their value chain. www.ghgprotocol.org
Scope 3 emissions can represent the majority of a company’s emissions. This is confirmed within the ET Carbon Rankings data set and is echoed by other groups, including the GHG Protocol.41 It is often among the most challenging areas of carbon accounting. Suppliers in the value chain may, for example, have data confidentiality concerns, and the complexity of a corporation’s value chain means it can be difficult and expensive to find accurate primary data.42
Yet, understanding Scope 3 emissions enables a corporation to pursue the most cost-effective carbon mitigation strategies.43 Accounting for and disclosing Scope 3 enables companies to understand their activities better.44 It also enables companies to benchmark themselves against their peers.
Whilst the number of companies reporting some or all elements of Scope 3 is now increasing, it lags behind those reporting Scope 1 and 2, and few corporations calculate and disclose all 15 Scope 3 categories. However, this is likely to improve rapidly with the proliferation of the Science Based Targets initiative, which makes carrying out a complete assessment of each of the 15 Scope 3 categories a mandatory requirement.
The notion of materiality is central to Scope 3 accounting. Guidance from the GHG Protocol states that companies may exclude categories if their calculation is not feasible, relevant, or material. Currently, most corporations that report Scope 3 only report a few categories as evidenced by the Scope 3 data highlighted in this report. The objective of the full assessment for the purposes of Science Based Targets and for the purposes of the ET Carbon Rankings is to enable a data-driven assessment of which Scope 3 categories are material to a particular business. Without
performing an assessment of all categories it is difficult to identify which categories are material for any given sector.
As Carbon Clear highlighted in their September 2016 report ‘Sustainability Reporting Performance of the FTSE 100’, the highest number of companies to date (66) are now reporting some Scope 3 emissions (with over 70% of these reporting beyond business travel alone) and yet: “Only a quarter of companies in the FTSE 100 are performing materiality assessments of their Scope 3 emissions, suggesting that in many cases the reported Scope 3 categories may be the ones that are the most readily available, rather those which are most significant within the businesses.” 45
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ET INDEX RESEARCH 2016 CARBON RANKINGS REPORT
ET CARBON RANKING METHODOLOGY
TREATMENT OF SCOPE 3 IN THE ET CARBON RANKING METHODOLOGY
Since Scope 3 is material from a carbon risk exposure point of view, and typically represents the greatest component of a company’s carbon footprint, the objectives of the ET Carbon Rankings in this regard are:
OVERCOMING THE LACK OF DATAIn the case where a company is reporting a carbon emissions figure for a Scope 3 category, e.g. business travel, this number is accepted. In the case where a company is reporting each of the 15 Scope 3 emissions disclosure categories, each of these emissions figure totals are accepted.
In the case where a company is not reporting a carbon emissions number for any given Scope 3 emissions category, the ET Index Research inference system is applied. The highest reported Scope 3 emissions-intensity figure for that Scope 3 category, within the most granular industry level possible, is applied to the non-disclosing company.
This is the same logic that is applied across the universe for Scope 1 and 2 emissions and is designed to make use of as much reported Scope 3 data as possible. It also enables Scope 3 data to be included in the overall calculation of a company’s carbon footprint, even though the data disclosed is not yet perfect across the board.
The only Scope 3 category where no data was available was in the Financials sector where
there was no meaningful data disclosed for Scope 3 category 15: Investments. Several companies completed a partial inventory for this category but acknowledged that it was far from complete.
Where no data is available for a given Scope 3 category at the sector level, the highest reported emissions intensity for that category, from any company in the Rankings Universe, is used. This is irrespective of the sector.
In the case of Financials, a Scope 3 Investment category emissions-intensity of 285.8 tCO2e/$m Revenue was applied, which was the highest reported Investment category emissions-intensity in the ET Carbon Ranking Universe (disclosed by a company in the Resource Transformation sector). By way of comparison, the average Scope 1 and 2 emissions intensity across the entire universe, which is a realistic representation of the global economy in which financial firms invest, was 173.9 tCO2e/$m Revenue.
1. To include Scope 3 emissions in the assessment of a company’s total GHG emissions; rather than ignore them altogether.
2. To encourage complete Scope 3 disclosure across all 15 GHG Protocol categories with a view to having a data driven assessment of which Scope 3 categories are material for any given sector.
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ET INDEX RESEARCH2016 CARBON RANKINGS REPORT
ET CARBON RANKING METHODOLOGY
DISCLOSURE REQUIREMENTS, CURRENT EMISSIONS AND INTENSITY
From a technical point of view, the ultimate metric for investors to consider when incorporating carbon risk into their valuations of companies would be the net present value of emissions over time. That is, the expected discounted value of the change in cash flows, relative to business as usual, of a company due to its GHG emissions exposure.
The current emissions-intensity of a company is a key input into the equation for this net present value of emissions, just as an estimate of a company’s current dividend amount is a core parameter in the dividend discount model of stock prices.46 While analysts may debate the right dividend growth rate number or the right emissions cost growth rate, the current dividend amount and the current emissions-intensity of a company are observable. These observable quantities set the starting point for forecasts of future dividends and future emissions amounts, respectively.
To assess the current emissions-intensity of a company, information on the current emissions of that company is required. This must include all relevant Scope 1, 2 and 3 emissions, so that both direct and indirect costs can be estimated.
ET Index Research asserts that the process of calculating and publishing Scope 1, 2 and 3 emissions-intensities is consistent with the seven fundamental principles identified by the FSB Task Force on Climate-related Financial Disclosures to:47
• present relevant information;
• be specific and complete;
• be clear, balanced, and understandable;
• be consistent over time;
• be comparable among companies within a sector, industry, or portfolio;
• be reliable, verifiable, and objective; and
• be provided on a timely basis.
The ET Carbon Rankings seek to enhance the disclosure of accurate Scope 1, 2 and 3 emissions data to an ever-higher standard each year across all public companies.
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APPENDIX: REGIONAL RESULTS
TABLE 13: ET ASIA-PACIFIC 300 CARBON LEADERS
TABLE 14: ET BRICS 300 CARBON LEADERS
ET Asia-Pacific 300 Carbon Rank Company name
Scope 1, 2 & 3 Intensity (tCO2e/$m Revenue)
Scope 1 & 2 Intensity (tCO2e/$m Revenue) SICS sector
1 Astellas Pharma Inc 75 22 Health Care
2 CSL Ltd 99 43 Health Care
3 Nomura Research Institute Ltd 107 26 Technology and Communications
4 Aeon Co Ltd 124 20 Consumption II
5 Mitsubishi Corp 141 48 Consumption II
6 Woolworths Ltd 151 61 Consumption II
7 Ricoh Co Ltd 154 25 Technology and Communications
8 Wesfarmers Ltd 154 77 Consumption II
9 Seven & i Holdings Co Ltd 172 78 Consumption II
10 Olympus Corp 207 149 Health Care
ET BRICS 300 Carbon Rank Company name
Scope 1, 2 & 3 Intensity (tCO2e/$m Revenue)
Scope 1 & 2 Intensity (tCO2e/$m Revenue) SICS sector
1 Dairy Farm International Holdings Ltd 229 135 Consumption II
2 Magnit PJSC 229 135 Consumption II
3 Jardine Strategic Holdings Ltd 229 135 Consumption II
4 China Grand Automotive Services Co 294 118 Consumption II
5 Suning Commerce Group Co Ltd 294 118 Consumption II
6 Jardine Matheson Holdings Ltd 294 118 Consumption II
7 Sanlam Ltd 306 6 Financials
8 Cielo SA 317 1 Financials
9 Housing Development Finance Corp Ltd 324 5 Financials
10 China Taiping Insurance Holdings Co 328 28 Financials
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TABLE 15: ET EUROPE 300 CARBON LEADERS
TABLE 16: ET NORTH AMERICA 300 CARBON LEADERS
ET Europe 300 Carbon Rank Company name
Scope 1, 2 & 3 Intensity (tCO2e/$m Revenue)
Scope 1 & 2 Intensity (tCO2e/$m Revenue) SICS sector
1 UCB SA 73 15 Health Care
2 Proximus SADP 92 19 Technology and Communications
3 Telefonica SA 110 32 Technology and Communications
4 METRO AG 129 35 Consumption II
5 Carrefour SA 131 37 Consumption II
6 Kingfisher PLC 132 25 Consumption II
7 Koninklijke KPN NV 133 5 Technology and Communications
8 Jeronimo Martins SGPS SA 133 72 Consumption II
9 Tesco PLC 142 48 Consumption II
10 Deutsche Telekom AG 176 57 Technology and Communications
ET North America 300 Carbon Rank Company name
Scope 1, 2 & 3 Intensity (tCO2e/$m Revenue)
Scope 1 & 2 Intensity (tCO2e/$m Revenue) SICS sector
1 Oracle Corp 34 10 Technology and Communications
2 Biogen Inc 40 5 Health Care
3 Adobe Systems Inc 41 9 Technology and Communications
4 Amgen Inc 74 17 Health Care
5 Kroger Co/The 153 59 Consumption II
6 Wal-Mart de Mexico SAB de CV 186 41 Consumption II
7 Home Depot Inc/The 208 32 Consumption II
8 Wal-Mart Stores Inc 219 43 Consumption II
9 Loblaw Cos Ltd 224 135 Consumption II
10 Sysco Corp 229 135 Consumption II
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TABLE 17: ET US 250 CARBON LEADERS
TABLE 18: ET UK 100 CARBON LEADERS
ET US 250 Carbon Rank Company name
Scope 1, 2 & 3 Intensity (tCO2e/$m Revenue)
Scope 1 & 2 Intensity (tCO2e/$m Revenue) SICS sector
1 Oracle Corp 34 10 Technology and Communications
2 Biogen Inc 40 5 Health Care
3 Adobe Systems Inc 41 9 Technology and Communications
4 Amgen Inc 74 17 Health Care
5 Kroger Co/The 153 59 Consumption II
6 Home Depot Inc/The 208 32 Consumption II
7 Wal-Mart Stores Inc 219 43 Consumption II
8 Sysco Corp 229 135 Consumption II
9 Target Corp 229 53 Consumption II
10 Lowe's Cos Inc 294 118 Consumption II
ET UK 100 Carbon Rank Company name
Scope 1, 2 & 3 Intensity (tCO2e/$m Revenue)
Scope 1 & 2 Intensity (tCO2e/$m Revenue) SICS sector
1 J Sainsbury PLC 129 36 Consumption II
2 Kingfisher PLC 132 25 Consumption II
3 Tesco PLC 142 48 Consumption II
4 Marks & Spencer Group PLC 188 12 Consumption II
5 Bunzl PLC 189 13 Consumption II
6 Prudential PLC 294 2 Financials
7 Legal & General Group PLC 294 1 Financials
8 St James's Place PLC 295 1 Financials
9 Aviva PLC 296 2 Financials
10 Direct Line Insurance Group PLC 305 4 Financials
APPENDIX
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APPENDIX
In order to enhance a company’s position in the Carbon Ranking, ET Index recommends the following:
• Companies publish emissions data for Scope 1, 2 and 3 in a clear and accessible manner, either on the company website, in the sustainability report, integrated report, annual report or across all of the sources mentioned.
• Companies should ensure this information has been externally verified to a reasonable standard of assurance, ideally against a specific GHG standard such as ISO 14064-3, but at least against a general assurance standard such as ISAE 3000.
INFORMATION FOR REPORTING COMPANIES
• Companies should calculate and publish comprehensive Scope 3 emissions data according to the GHG protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard. This includes explaining and justifying any Scope 3 categories which have not been included. The latest information on verification of Scope 3 can be found at the GHG Protocol and ISO websites.
• Make sure that any verification statement is publicly available and is included in the company sustainability report, integrated report or annual report or can be found easily on the company’s website.
ET Index Research offers a service for companies wishing to improve their public reporting and to showcase the actions they are taking on climate change to their stakeholders, including benchmarking against competitors. Please email [email protected] for further information about this service.
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APPENDIX
SUSTAINABLE INDUSTRY CLASSIFICATION SYSTEM (SICS) TAXONOMY
Level 1Thematic Sectors
Level 2 Sub-Sectors
Level 3 Industries
Non-Renewable Resources
Oil & Gas Oil & Gas – Exploration & Production
Oil & Gas – Midstream
Oil & Gas – Refining & Marketing
Oil & Gas – Services
Coal Coal Operations
Metals & Mining Iron & Steel Producers
Metals & Mining
Construction Materials Construction Materials
Renewable Resources & Alternative Energy
Alternative Energy Biofuels
Solar Energy
Wind Energy
Fuel Cells & Industrial Batteries
Forestry & Paper Forestry & Logging
Pulp & Paper Products
Resource Transformation
Chemicals Chemicals
Industrials Aerospace & Defense
Electrical & Electronic Equipment
Industrial Machinery & Goods
Containers & Packaging
Consumption
Food Agricultural Products
Meat, Poultry, & Dairy
Processed Foods
Beverages Non-Alcoholic Beverages
Alcoholic Beverages
Tobacco Tobacco
Retailers Food Retailers & Distributors
Drug Retailers & Convenience Stores
Multiline and Specialty Retailers & Distributors
E-commerce
Apparel & Textiles Apparel, Accessories & Footwear
Consumer Discretionary Products Appliance Manufacturing
Household & Personal Products
Building Products & Furnishings
Toys & Sporting Goods
Technology and Communications
Technology Electronic Manufacturing Services & Original Design Manufacturing
Software & IT Services
Hardware
Semiconductors Semiconductors
Telecommunications Telecommunications
Internet Media & Services Internet Media & Services
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Level 1Thematic Sectors
Level 2 Sub-Sectors
Level 3 Industries
Services
Consumer Services Education
Professional Services
Hospitality & Recreation Hotels & Lodging
Casinos & Gaming
Restaurants
Leisure Facilities
Cruise Lines
Media Advertising & Marketing
Media Production & Distribution
Cable & Satellite
Infrastructure
Utilities Electric Utilities
Gas Utilities
Water Utilities
Waste Management Waste Management
Infrastructure Engineering & Construction Services
Real Estate Home Builders
Real Estate Owners, Developers and Investment Trusts
Real Estate Services
Transportation
Automobiles Automobiles
Auto Parts
Car Rental & Leasing
Air Transportation Airlines
Air Freight & Logistics
Marine Transportation Marine Transportation
Land Transportation Rail Transportation
Road Transportation
Financials
Banking & Investment Banking Commercial Banks
Investment Banking & Brokerage
Asset Management & Custody Activities
Specialty Finance Consumer Finance
Mortgage Finance
Security & Commodity Exchanges
Insurance Insurance
Health Care
Biotechnology & Pharmaceuticals Biotechnology
Pharmaceuticals
Medical Technology Medical Equipment & Supplies
Health Care Providers Health Care Delivery
Health Care Distributors
Managed Care
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APPENDIX
THE ET CARBON RANKING QUALITY ASSURANCE PANEL
The Quality Assurance Panel consists of professionals from different disciplines and backgrounds who review the ET Carbon Ranking methodology, assisting the process of integrating new rules as and when they become feasible and appropriate.
The Panel meets at least once a year to discuss, review and vote on any changes made to the methodology. The Panel also has a responsibility to deal with submissions under the ET Carbon Ranking Appeal Procedure.
ET Index Research distinguishes between issues of methodology and issues of data accuracy. In the case of a methodology submission, such as comments on disclosure categories or the inference methodology employed, these will be presented to the Panel for review and determination.
In the case of a Data Appeal where a company feels its publicly reported information has been inaccurately represented in the Carbon Rankings (e.g. a decimal place is in the wrong place) the Chairman of the Panel will act as the arbiter in any case where ET Index Research and the company in question cannot resolve the issue under the existing Appeal Procedure.
Michael Mainelli, Panel Chair
Alderman Professor Michael Mainelli is Emeritus Mercers’ School Memorial Professor of Commerce at Gresham College, having held the chair from 2005 to 2009. His first degree was in Government from Harvard, followed by mathematics and engineering studies at Trinity College Dublin and a PhD from the London School of Economics in chaotic systems, where he was also a Visiting Professor.
Professor Mainelli is Executive Chairman of Z/Yen, the City of London’s leading commercial think-tank and venture firm, which he co-founded in 1994 to promote societal advance through better finance and technology. A qualified accountant (FCCA), securities professional (FCSI), computer specialist (FBCS) and management consultant (FIC), Michael began his career as a research scientist in aerospace (rockets) and computing (architecture & mapping). He later became a senior partner with accountants BDO Binder Hamlyn directing global consulting projects. During the 1990s he worked for the UK Ministry of Defence as Corporate Development Director for Europe’s then largest R&D firm, the Defence Evaluation & Research Agency leading to two privatisations. Career highlights include directing Z/Yen’s Long Finance initiative with Gresham College and the City of London Corporation asking “when would we know our financial system is working?” as well as creating the Global Financial Centres Index, Global Intellectual Property Index, London Accord and Farsight Award. Michael also conceived and produced the first complete digital map of the world in 1983, Mundocart (a 1980’s Google Earth), and the $20 million Geodat consortium cartography project.
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Michael is non-executive Director of the United Kingdom Accreditation Service (UK’s national body for standards and laboratories) and AIM-listed Wishbone Gold Plc.
Adam Rose, Panel Secretary
An LSE (London School of Economics and Political Science) economic geography graduate, with postgraduate qualifications in management, marketing and corporate governance. Adam is an experienced provider of research services for government, corporate bodies and the investment sectors and has specialized in Risk Management and Socially Responsible Investment research techniques for over 10 years. He has built up several research teams, has been a freelance consultant and research advisor for the SERM Rating Agency, and is now currently corporate governance executive and ratings officer at Pensions Investment Research Consultants Ltd (PIRC). He is co-author of The Handbook of Business Risk Management: A sustainable approach (CIMA/Elsevier), and is contributor to The Due Diligence Handbook (CIMA/Elsevier). He is currently writing on the subject of corporate governance risk and developing training material for a Sustainable Enterprise Risk Management framework. Adam is also an Affiliate Member of the Institute of Chartered Secretaries and Administrators.
Cary Krosinsky, panel member
Cary Krosinsky is Executive Officer of the Network for Sustainable Financial Markets. He is lead editor of Evolutions in Sustainable Investing, (along with NSFM participants Nick Robins & Stephen Viederman), a recent book (Wiley, 2012) on the positive strands of SRI, including 15 case studies, regional perspectives and thought leadership from Dan Esty, Paul Hawken, Rory Sullivan, Roger Urwin and a host of others. Cary is also co-editor of a previous book on this subject – Sustainable Investing: the Art of Long Term Performance, also with Nick Robins (Earthscan, 2008).
Until October 2012, Cary was Senior Vice President & member of the Management team for Trucost. He also teaches sustainability & investing at Columbia University’s Earth Institute, and an MBA course on the same subject at the University of Maryland’s Robert H. Smith School of Business, and is a frequent speaker on the intersection of sustainability & ownership. He was a member of the Expert Group that helped create the United Nations Principles for Responsible Investment.
Cynthia Cummis, panel member
Cynthia Cummis is the Deputy Director of GHG Protocol within WRI’s Climate and Energy Program. In this role she manages GHG Protocol’s corporate work which includes activities related to the Corporate, Scope 3 and Product Life Cycle Standards.
Cynthia is a well-known expert in GHG accounting and brings more than 15 years of experience working on the issue of global climate change. Prior to WRI, Cynthia was the Director of Carbon Management at Clear Carbon Consulting where she managed carbon quantification and management projects for multiple Fortune 500 clients as well as large public institutions. Ms. Cummis was the Founding Director of U.S. EPA’s Climate Leaders Program, a voluntary program that partnered with businesses to develop corporate-wide greenhouse gas inventories and reduction goals. For more than 5 years, she led the design and implementation of the program and oversaw the growth of the program to more than 90 corporate Partners.
Cynthia holds a MPA in environmental policy from Columbia University in New York City and a B.S. from Cornell University in Ithaca N.Y.
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APPENDIX
Stanislas Dupré, panel member
Stanislas Dupré initiated the 2° Investing Initiative and now serves as Director.
Previously Stanislas Dupré was Executive Director of Utopies (a CSR consultancy) after a career as CSR consultant and R&D manager. Stanislas has been working on 2° investing topics since 2007 when he developed the first assessment methodology for ’financed emissions’ of banks and diversified portfolios (for Caisse d’Epargne/Natixis, the ADEME, WWF and Friends of the Earth). In 2010, he wrote a book about the role of financial institutions in financing the energy transition.
Stanislas is also Non-Executive Director of a green private equity fund (NEF-CEM), lecturer at Paris-Dauphine University and member on the expert committees of the NYSE-Euronext Low-Carbon Index and Novethic. He holds stakes in several specialized consultancy firms.
Julie Raynaud, panel member
Julie Raynaud is a senior sustainability analyst in Kepler cheuvreux’s ESG team, specialising in environmental research. Prior to this, she was a research analyst for Trucost helping organisations measure and manage the environmental impacts associated with their own operations, supply chains and investment portfolios.
Julie is an expert in greenhouse gas emissions accounting, assurance and Life Cycle Assessments. She has worked with Puma to produce an environmental profit and loss account, quantifying and valuing in financial terms the cradle-to-gate environmental damages of 19 products and the cradle-to-grave environmental damages of 6 products. She has regularly performed limited assurances (AA1000) of GHG emissions for reporting to the Carbon Disclosure Project, and has screened Life Cycle Assessments in partnership with NSF and the Carbon Fund for GHG compensation and offsetting. Julie was responsible for the data analysis, quality control and communication with 65+ largest companies by market capitalization within the consumer good
sectors for the Newsweek Green Ranking which had 1.5 million hits on its webpage.
Matthew Brander, panel member
Matthew is a Senior Research Fellow at the Centre for Business and Climate Change at the University of Edinburgh’s Business School. He has moved to academia from a career in consultancy, with over seven years’ experience in greenhouse gas accounting and climate change policy appraisal.
He has worked on projects for the UK’s Department for Energy and Climate Change (DECC), the Department for Transport, the Scottish Government, and the Government of Norway, as well as for numerous corporate clients. He is on the peer-review panel for Defra’s conversion factors for company reporting.
Matthew is a member of two GHG Protocol technical working groups, one for the forthcoming Policy and Actions Standard, and the second on green power accounting.
He has a MSc in Environmental Sustainability from the University of Edinburgh, an MSc by research in philosophy, and an MA in philosophy. He is currently undertaking his doctoral research on the application of consequential methods to corporate greenhouse gas accounting.
Julian Poulter, panel member
Julian Poulter is the Founder and Executive Director of the Asset Owners Disclosure Project. He is also Business Director of research and advocacy group The Climate Institute, based in Australia. Julian is an experienced business executive with his primary experience in strategy and change consulting combined with several CEO and director roles. He has managed companies and projects in many diverse industries including investment, finance, manufacturing, energy, oil and gas, distribution, retail, telecoms, IT, tourism, transportation, commercial property, and media. He is a stakeholder council member of the Global Reporting Initiative and Chair of the GRI Investor Working Group.
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References
1 Carbon Tracker (2015) Coal: Caught in the EU Utility Death Spiral. Available at: http://www.carbontracker.org/report/eu_utilities/; Randall, T. (2015) The Latest Sign That Coal Is Getting Killed. Bloomberg July 13, 2015. Available at: http://www.bloomberg.com/news/articles/2015-07-13/the-latest-sign-that-coal-is-getting-killed; HSBC (2015) Stranded Assets, what next? Available at: http://www.businessgreen.com/digital_assets/8779/hsbc_Stranded_assets_what_next.pdf.
2 The Law Commission (2014) ‘Fiduciary Duties of Investment Intermediaries:’ http://www.lawcom.gov.uk/wp-content/uploads/2015/03/lc350_fiduciary_duties.pdf; Six Pump Court Chambers (2016) ‘Ignoring climate risk risks liability for pension fund trustees and fund managers:’ http://www.6pumpcourt.co.uk/2016/07/ignoring-climate-risk-risks-liability-for-pension-fund-trustees-and-fund-managers-3/; Center for International Environmental Law (2016) ‘Fiduciary Duty, Divestment and Fossil Fuels in an Era of Climate Risk:’ http://www.ciel.org/wp-content/uploads/2016/09/Pensions-4Pagerv4.pdf
3 ET Index Research (2015) Special Report 01: The Emerging Importance of Carbon Emission-Intensities and Scope 3 (Supply Chain) Emissions in Equity Returns. Available at: http://etindex.com/images/assets/ET_Index_Special_Report_01_Emerging_Importance_of_Carbon_and_Scope_3_in_Equity_Returns.pdf
4 https://www.fsb-tcfd.org/publications/#
5 The fines exceeding $15 billion that Volkswagen has agreed to pay for falsifying emissions related to use of their product are also an example of the importance of value chain. Note though that emissions Volkswagen falsely reported were not GHG emissions. Nevertheless, the scale of the response to their falsification of NOx emissions, indicates the potential future scale of the response to false GHG emissions information.
6 Special Report 04: The Carbon Risk Factor (EMI – ‘Efficient Minus Intensive’). Available at: http://etindex.com/images/assets/ET_Index_Special_Report_04_The_Carbon_Risk_Factor.pdf
7 For a detailed list of disclosure rules by jurisdiction, see Phase I Report of the Task Force on Cimate-Related Financial Disclosures: https://www.fsb-tcfd.org/wp-content/uploads/2016/03/Phase_I_Report_v15.pdf, at 42-43.
8 http://www.wri.org/blog/2015/12/cop21-qa-what-ghg-emissions-neutrality-context-paris-agreement
9 Current levels of global carbon dioxide emissions are decreasing annual market returns by an estimated 0.1% per year. This is a very conservative estimate as it does not account for the effect of greenhouse gases other than carbon dioxide. This drag on returns is set to increase due to the increasingly nonlinear link between emissions and an increasing global temperature (Bansal et al, 2016; Matthews et al, 2009; Myles et al, 2009; MacDougall et al, 2016; Leduc et al, 2016; Quéré et al, 2015; PBL NEAA, 2015).
10 Dietz et al. (2016) ‘Climate value at risk’ of global financial assets:’ http://www.nature.com/nclimate/journal/vaop/ncurrent/full/nclimate2972.html
11 Based on industry averages, the ET Carbon Rankings Universe is estimated to emit roughly 9.5 billion tonnes of CO2e. The European Commission estimates that total 2014 fossil fuel and industrial emissions for the United States, European Union and Canada to be 5.3, 3.4 and 0.6 billion tonnes CO2, respectively. Olivier JGJ, Janssens-Maenhout G, Muntean, M & Peters JAHW (2015) Trends in global CO2 emissions 2015 Report. The Hague: PBL Netherlands Environmental Assessment Agency; Brussels: Joint Research Centre. Available at: http://edgar.jrc.ec.europa.eu/news_docs/jrc-2015-trends-in-global-co2-emissions-2015-report-98184.pdf
12 ACCA (2011) The carbon we’re not counting. Available at: http://www.accaglobal.com/content/dam/acca/global/PDF-technical/climate-change/not_counting.pdf
13 CO2e is an abbreviation of ‘carbon dioxide equivalent’ and is the internationally recognised measure of greenhouse emissions. There are many types of greenhouse gases, but 6 such gases are controlled by the Kyoto Protocol and the Paris Agreement. This report refers to “carbon” and “greenhouse gas” interchangeably, both referring to CO2e.
14 SASB (2016) Technical Bulletin on Climate Risk. Available at: http://using.sasb.org/sasb-climate-risk-framework/
15 Clark, P (2015) Mark Carney warns investors face ‘huge’ climate change losses. Financial Times September 30, 2015. Available at: https://www.ft.com/content/622de3da-66e6-11e5-97d0-1456a776a4f5
16 sciencebasedtargets.org/companies-taking-action/
17 Wigglesworth, R & Foley, S (2016) Active asset managers knocked by shift to passive strategies FTfm April 16, 2016. Available at: https://www.ft.com/content/2e975946-fdbf-11e5-b5f5-070dca6d0a0d; Mooney, A (2016) Passive funds grow 230% to $6trn FTfm May 29 2016 Available at https://www.ft.com/content/2552ce62-2400-11e6-aa98-db1e01fabc0c
18 Marriage, M (2016) 86% of active equity funds underperform.FTfm March 20, 2016. Available at: https://www.ft.com/content/e555d83a-ed28-11e5-888e-2eadd5fbc4a4
19 Fernyhough, J (2016) Vanguard and BlackRock branded ‘hypocritical’ FTAdvisor 6 September 2016. Available at: https://www.ftadviser.com/2016/09/06/investments/vanguard-and-blackrock-branded-hypocritical-uIBVgC0QmE2gNpc5jwF90M/article.html
20 Bloomberg, ET Index Research calculations.
21 PwC (2016) Low Carbon Economy Index 2016. Avaialble at: http://www.pwc.co.uk/services/sustainability-climate-change/insights/low-carbon-economy-index.html
22 Moody’s (2016) Auto sector faces rising credit risks due to carbon transition. Available at: https://www.moodys.com/research/Moodys-Auto-sector-faces-rising-credit-risks-due-to-carbon--PR_354984; IIGCC (2016) Investor Expectations of Automotive Companies. Available at: http://www.iigcc.org/files/publication-files/IIGCC_2016_Auto_report_v13_Web.pdf; Taylor, E (2016) German push to ban combustion-engine cars by 2030 wins support Reuters October 8, 2016. Available at: http://www.reuters.com/article/us-autos-emissions-germany-idUSKCN1280G7
23 Department of Justice ‘Volkswagen to Spend Up to $14.7 Billion to Settle Allegations of Cheating Emissions Tests and Deceiving Customers on 2.0 Liter Diesel Vehicles’ (28 06 2016): https://www.justice.gov/opa/pr/volkswagen-spend-147-billion-settle-allegations-cheating-emissions-tests-and-deceiving; ‘VW Engineer Pleads Guilty in Emissions-Cheating Scandal’ (09 09 2016): http://www.wsj.com/articles/former-vw-engineer-to-plead-guilty-in-emissions-cheating-scandal-1473433341.
24 IEA (2016) IEA releases Oil Market Report for September. Available at: https://www.iea.org/newsroom/news/2016/september/iea-releases-oil-market-report-for-september.htm; Carbon Tracker (2015) Fossil fuel sector in denial over demand destruction. Available at: http://www.carbontracker.org/in-the-media/fossil-fuel-sector-in-denial-over-demand-destruction/
25 ACCA (2011) The carbon we’re not counting. Available at: http://www.accaglobal.com/content/dam/acca/global/PDF-technical/climate-change/not_counting.pdf
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26 http://uk.reuters.com/article/us-japan-carbon-idUKKCN0PR0A220150717
27 IBID Reference 15.
28 2015 Avivation emissions = 781 million tonnes of CO2e. http://www.atag.org/facts-and-figures.html
29 IBID Reference 15.
30 IBID Reference 15.
31 IBID Reference 15.
32 IBID Reference 15.
33 IBID Reference 15.
34 IBID Reference 15.
35 IBID Reference 15.
36 IBID Reference 15
37 IBID Reference 15.
38 IBID Reference 15.
39 SASB SICS Consumption II includes: Food Retailers & Distributors, Apparel, Accessories & Footwear, Drug Retailers & Convenience Stores, Appliance Manufacturing, Multiline and Specialty Retailers & Distributors, Building, Products & Furnishings, E-Commerce, Toys & Sporting Goods.
40 SASB SICS Consumption I includes: Agricultural Products, Alcoholic Beverages, Meat, Poultry & Dairy, Tobacco, Processed Food, Household & Personal Products, Non-Alcoholic Beverages.
41 The Greenhouse Gas (GHG) Protocol (2011) Corporate Value Chain (Scope 3) Accounting and Reporting Standard. Available at: http://www.ghgprotocol.org/standards/scope-3-standard; Downie, J. & Stubbs, W. (2011) Evaluation of Australian companies’ scope 3 greenhouse gas emissions assessments. Journal of Cleaner Production. 56(1): 156–163; Stechemesser, K. & Guenther, E. (2012) Carbon accounting: a systematic literature review Journal of Cleaner Production. 36:17-38
42 (Schaltegger, S. and Csutora, M. (2012) Carbon accounting for sustainability and management. Status quo and challenges. Journal of Cleaner Production. 36: 1-16
43 Schaltegger, S. and Csutora, M. (2012) Carbon accounting for sustainability and management. Status quo and challenges. Journal of Cleaner Production. 36: 1-16
44 Lesourd, J. & Schilizzi, S. (2001) The Environment in Corporate Management. New Directions and Economic Insights. Edward Elgar: London.
45 Carbon Clear (2016) Sustainability Performance of the FTSE 100. Available at: https://carbon-clear.com/files/FTSE_100_Report_2015.pdf
46 The net present value of emissions can be calculated as the discounted sum of the product of emissions-intensity, revenue and the cost of emissions at each future date. Cost of emissions scenarios play out on a global or regional scale – they are not company specific. Investors may form a view on likely emissions cost scenarios and apply this same view to calculations for all companies. The risk-adjusted discount rate and revenue numbers are very company specific, but this is a part of traditional financial disclosure and analysis, not climate-related disclosure. Thus, the only climate-related element of this equation that a company can inform is its current level of emissions-intensity and the expected changes in this level. While future changes in emissions intensities may be more forecastable than profits, they can only ever be estimates. Thus, the core climate-related disclosure information that a company can produce for these purposes are its current emissions and emissions intensities.
47 https://www.fsb-tcfd.org/publication/phase-i/#
Important Notice
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