Contacts

Carbon Disclosure ProjectPaul DickinsonChief Executive Officer+44 (0) 20 7415 7112paul.dickinson@cdproject.net40 Bowling Green LaneLondonEC1R 0NEUnited Kingdomwww.cdproject.net

BVI Bundesverband Investmentund Asset Management e. V.Rudolf SiebelManaging Director+49 69 154090-0rudolf.siebel@bvi.deEschenheimer Anlage 2860318 Frankfurt am MainGermanywww.bvi.de

Professor Dr. Alexander BassenUniversität Hamburg+49 40 42 838 4046alexander.bassen@wiso.uni-hamburg.deVon-Melle-Park 920146 HamburgGermany

Bundesverband Investment und Asset Management e.V.Eschenheimer Anlage 28 · 60318 Frankfurt am MainTelefon 0 69/15 40 90-0 · Telefax 0 69/5 9714 06info@bvi.de · www.bvi.de

WWFMatthias KoppProjektleiter Finanz- und Energiesektor+49 30 3087 4217Kopp@wwf.deGroße Präsidentenstraße 1010178 BerlinGermanywww.wwf.de

Carbon Disclosure ProjectReport 2008GermanyOn behalf of 385 institutional investors with assets of 57 trillion US Dollars

CARBON DISCLOSURE PROJECT

The information included herein this report is based on that provided in respondent submissions, which the authors and publishersbelieve to be reliable, but the authors and publishers do not guarantee its accuracy or completeness. The authors and publishers makeno assurance, representation or warranty express or implied, concerning the fairness, accuracy, or completeness of the information andopinions contained herein. All opinions expressed herein are based on the authors and publishers judgment at the time of publishing thisreport and are subject to change without notice due to economic, political, industry and firm-specific factors. The report makes allattempts to adhere to the disclosure permission requests of the individual company respondents. Comprehensive and unedited informa-tion from the original submissions is available at www.cdproject.net. The authors and publishers and their affiliated companies, or theirrespective shareholders, directors, officers and/or employees, may have a position in the securities discussed herein. The securitiesmentioned in this document may not be eligible for sale in some states or countries nor suitable for all types of investors; their value andthe income they produce may fluctuate and/or be adversely affected by exchange rates. The contents of this report may be used by any-one providing acknowledgment is given.

Report written by Prof. Dr. Alexander Bassen, University of HamburgOctober 2008

© BVI Bundesverband Investmentund Asset Management e.V.

Eschenheimer Anlage 2860318 Frankfurt am MainTelefon 0 69/15 40 90-0Telefax 0 69/5 9714 06info@bvi.dewww.bvi.de

Author: Prof. Dr. Alexander Bassen, University of Hamburg

Print and Design: Druck- und Verlagshaus Zarbock GmbH & Co. KG, Frankfurt am Main

This brochure has been printed in a FSC certified company,using a recycling paper consisting of 100 percent recovered paper.

ISBN 978-3-937790-25-1

Imprint

ABRAPP – AssociaçãoBrasileira das EntidadesFechadas de PrevidênciaComplementar Brazil

Aegon N.V. Netherlands

APG InvestmentsNetherlands

ASN Bank Netherlands

ATP Group Denmark

AXA Group France

Banco Real Brazil

BlackRock U.S.

BP Investment Management Limited United Kingdom

Caisse de dépôt et placementdu Québec Canada

Caisse des Dépôts France

California Public Employees’Retirement System U.S.

California State TeachersRetirement System U.S.

Calvert Group U.S.

Canada Pension PlanInvestment Board Canada

Catholic Super Australia

CIBC Canada

Ethos FoundationSwitzerland

Folksam Sweden

Fortis Investments Belgium

Generation InvestmentManagement United Kingdom

ING Netherlands

KLP Insurance Norway

Legg Mason, Inc. U.S.

Carbon DisclosureProject 2008This report and all of the public responsesfrom corporations are available to down-load free of charge fromwww.cdproject.net. The contents of this report may be usedby anyone providing acknowledgement isgiven.

London Pensions FundAuthority United Kingdom

Merrill Lynch & Co.,Inc. U.S.

Mitsubishi UFJ FinancialGroup (MUFG) Japan

Morgan Stanley InvestmentManagement U.S.

Morley Fund ManagementUnited Kingdom

National Australia BankLimited Australia

Neuberger Berman U.S.

Newton InvestmentManagement LimitedUnited Kingdom

Pictet Asset Management SASwitzerland

Rabobank Netherlands

Robeco Netherlands

SAM Group Switzerland

Schroders United Kingdom

Signet Capital ManagementSwitzerland

Sompo Japan Insurance Inc.Japan

Standard Chartered PLCUnited Kingdom

Sun Life Financial Inc.Canada

Swiss Reinsurance CompanySwitzerland

The Ethical Funds CompanyCanada

The RBS Group United Kingdom

The Wellcome Trust United Kingdom

Zurich Cantonal BankSwitzerland

CARBON DISCLOSURE PROJECT

MEMBERS 2008

3

CDP Members 2008

BankInvest Denmark

Barclays Group United Kingdom

BayernInvest KapitalanlagegesellschaftmbH Germany

BBC Pension Trust Ltd United Kingdom

Beutel Goodman and Co. Ltd Canada

BlackRock U.S.

BMO Financial Group Canada

BNP Paribas Investment Partners France

Boston Common Asset Management, LLCU.S.

BP Investment Management Limited United Kingdom

Brasilprev Seguros e Previdência S/A.Brazil

British Coal Staff Superannuation SchemeUnited Kingdom

British Columbia Investment ManagementCorporation (bcIMC) Canada

BT Financial Group Australia

BVI Bundesverband Investment und AssetManagement e.V. Germany

CAAT Pension Plan Canada

Caisse de dépôt et placement du QuébecCanada

Caisse des Dépôts France

Caixa Beneficente dos Empregados daCompanhia Siderurgica Nacional – CBSBrazil

Caixa de Previdência dos Funcionários doBanco do Nordeste do Brasil (CAPEF)Brazil

Caixa Econômica Federal Brazil

Caixa Geral de Depósitos Portugal

California Public Employees’ RetirementSystem U.S.

California State Teachers RetirementSystem U.S.

California State Treasurer U.S.

Calvert Group U.S.

Canada Pension Plan Investment BoardCanada

Canadian Friends Service CommitteeCanada

CARE Super Pty Ltd Australia

Carlson Investment Management Sweden

Carmignac Gestion France

Catherine Donnelly Foundation Canada

Catholic Super Australia

CCLA Investment Management Ltd United Kingdom

Central Finance Board of the MethodistChurch United Kingdom

Ceres U.S.

CERES-Fundação de Seguridade SocialBrazil

Cheyne Capital Management (UK) LLPUnited Kingdom

China Investment Corporation China

CDP Signatories 2008385 investors (including the 41 germanbased corporations as shown below inred) with assets of over 57 trillion US dollars were signatories to the CDP6 infor-mation request dated 1st February 2008including:

AACHENER GRUNDVERMÖGENKapitalanlagegesellschaft mbH Germany

Abax Global Capital United Kingdom

Aberdeen Asset Managers United Kingdom

ABRAPP – Associação Brasileira dasEntidades Fechadas de PrevidênciaComplementar Brazil

Acuity Funds Canada

Aegon N.V. Netherlands

Aeneas Capital Advisors U.S.

AGF Management Limited Canada

AIG Investments U.S.

Alberta Teachers Retirement Fund Canada

Alcyone Finance France

Allianz Group Germany

Altshuler Shacham LTD Israel

AMP Capital Investors Australia

AmpegaGerling Investment GmbHGermany

ANBID – National Association of BrazilianInvestment Banks Brazil

APG Investments Netherlands

ASB Community Trust New Zealand

ASN Bank Netherlands

ATP Group Denmark

Australia and New Zealand Banking GroupLimited Australia

Australian Ethical Investment LimitedAustralia

Australian Reward Investment Alliance(ARIA) Australia

Aviva plc United Kingdom

AXA Group France

Baillie Gifford & Co. United Kingdom

Banco Sweden

Banco Bradesco S.A. Brazil

Banco do Brazil Brazil

Banco Itaú Holding Financeira Brazil

Banco Pine S.A. Brazil

Banco Real Brazil

Banco Santander, S.A. Spain

Banesprev – Fundo Banespa de SeguridadeSocial Brazil

Bank Sarasin & Co, Ltd Switzerland

Bank Vontobel Switzerland

Christian Super Australia

CI Mutual Funds’ Signature AdvisorsCanada

CIBC Canada

Citizens Advisers, Inc. U.S.

Clean Yield Group, Inc. U.S.

ClearBridge Advisors, Socially Aware Investment U.S.

Close Brothers Group plc United Kingdom

Colonial First State Global AssetManagement Australia

Columbia Management U.S.

Comité syndical national de retraiteBâtirente Canada

Commerzbank AG Germany

Companhia de Seguros Aliança do BrasilBrazil

Connecticut Retirement Plans and TrustFunds U.S.

Co-operative Financial Services (CFS)United Kingdom

Credit Agricole Asset Management France

Credit Suisse Switzerland

Daegu Bank South Korea

Daiwa Securities Group Inc. Japan

DEGI Deutsche Gesellschaft fürImmobilienfonds mbH Germany

Deka FundMaster InvestmentgesellschaftmbH Germany

Deka Investment GmbH Germany

DekaBank Deutsche Girozentrale Germany

Deutsche Bank Germany

Deutsche Postbank Privat Investment Kapitalanlagegesellschaft mbH Germany

Development Bank of Japan Japan

Development Bank of the Philippines (DBP)Philippines

Dexia Asset Management France

DnB NOR Asset Management Norway

Domini Social Investments LLC U.S.

DPG Deutsche Performancemessungs-Gesellschaft für Wertpapierportfolio mbhGermany

DWS Investment GmbH Germany

Economus Instituto de Seguridade SocialBrazil

ELETRA – Fundação Celg de Seguros ePrevidência Brazil

Environment Agency Active Pension fundUnited Kingdom

Epworth Investment ManagementUnited Kingdom

Erste Bank der Oesterreichischen Sparkassen AG Austria

Ethos Foundation Switzerland

Eureko B.V. Netherlands

Eurizon Capital SGR Italy

Evli Bank Plc Finland

4

Carbon Disclorsure Project 2008

Generation Investment ManagementUnited Kingdom

Genus Capital Management Canada

Gjensidige Forsikring Norway

GLG Partners LP United Kingdom

Goldman Sachs & Co. U.S.

Governance for Owners United Kingdom

Groupe Investissement Responsable Inc.Canada

Guardian Ethical Management Inc Canada

Guardians of New Zealand SuperannuationNew Zealand

Hang Seng Bank Hong Kong

Harrington Investments U.S.

Harvard Management Company U.S.

HANSAINVEST Hanseatische InvestmentGmbH Germany

Hazel Capital LLP United Kingdom

Health Super Fund Australia

Helaba Invest KapitalanlagegesellschaftmbH Germany

Henderson Global Investors United Kingdom

Hermes Investment ManagementUnited Kingdom

HESTA Super Australia

Hospitals of Ontario Pension Plan (HOOPP)Canada

Housing Development Finance CorporationLimited (HDFC Ltd.) India

HSBC Holdings plc United Kingdom

I.B.I. Investments House Ltd. Israel

IDEAM – Integral Development AssetManagement France

Ilmarinen Mutual Pension InsuranceCompany Finland

Industrial Bank China

Industry Funds Management Australia

ING Netherlands

Inhance Investment Management IncCanada

Insight Investment Management (Global)Ltd United Kingdom

Instituto Infraero de Seguridade Social –INFRAPREV Brazil

Insurance Australia Group Australia

Interfaith Center on CorporateResponsibility U.S.

Internationale KapitalanlagegesellschaftmbH Germany

Investec Asset Management United Kingdom

Jarislowsky Fraser Limited Canada

JPMorgan Asset Management U.S.

Jupiter Asset Management United Kingdom

KAS Investment Servicing GmbH Germany

KBC Asset Management NV Belgium

F&C Management Ltd United Kingdom

FAELCE – Fundação Coelce de Seguridade Social Brazil

FAPERS – Fundação Assistencial ePrevidenciária da Extensão Rural do RioGrande do Sul Brazil

FAPES – Fundação de Assistencia ePrevidencia Social do BNDES Brazil

Fédéris Gestion d’Actifs France

First Affirmative Financial Network U.S.

First Swedish National Pension Fund (AP1)Sweden

FirstRand Ltd. South Africa

Fishman & Co. Israel

Five Oceans Asset Management PtyLimited Australia

Florida State Board of Administration (SBA)U.S.

Folksam Sweden

Fondaction Canada

Fonds de Réserve pour les Retraites – FRRFrance

Fortis Investments Belgium

Forward Funds/Sierra Club Funds U.S.

Fourth Swedish National Pension Fund(AP4) Sweden

Frankfurter Service Kapitalanlage-Gesellschaft mbH Germany

FRANKFURT-TRUST Investment Gesellschaft mbH Germany

Franklin Templeton Investment ServicesGmbH Germany

Frater Asset Management South Africa

Front Street Capital Canada

Fukoku Capital Management Inc Japan

FUNCEF – Fundação dos EconomiáriosFederais Brazil

Fundação AMPLA de Seguridade Social –Brasiletros Brazil

Fundação Atlântico de Seguridade SocialBrazil

Fundação Banrisul de Seguridade SocialBrazil

Fundação Codesc de Seguridade Social –FUSESC Brazil

Fundação Corsan – dos Funcionários daCompanhia Riograndense de SaneamentoBrazil

Fundação São Francisco de SeguridadeSocial Brazil

Fundação Vale do Rio Doce de SeguridadeSocial – VALIA Brazil

FUNDIÁGUA – Fundação de Previdência daCompanhia de Saneamento e Ambiental doDistrito Federal Brazil

Gartmore Investment Management LtdUnited Kingdom

GEAP Fundação de Seguridade SocialBrazil

Generali Investments DeutschlandKapitalanlagegesellschaft mbH Germany

KCPS and Company Israel

KfW Bankengruppe Germany

KLP Insurance Norway

Kyobo Investment Trust Management Co.,Ltd. South Korea

La Banque Postale Asset ManagementFrance

LBBW – Landesbank Baden-WürttembergGermany

Legal & General Group plc United Kingdom

Legg Mason, Inc. U.S.

Libra Fund U.S.

Light Green Advisors, LLC U.S.

Living Planet Fund Management CompanyS.A. Switzerland

Local Authority Pension Fund ForumUnited Kingdom

Local Government Superannuation SchemeAustralia

Lombard Odier Darier Hentsch & CieSwitzerland

London Pensions Fund AuthorityUnited Kingdom

Macif Gestion France

Macquarie Group Limited Australia

Maine State Treasurer U.S.

Man Group plc United Kingdom

Maple-Brown Abbott Limited Australia

Maryland State Treasurer U.S.

MEAG MUNICH ERGO Asset ManagementGmbH Germany

MEAG MUNICH ERGOKapitalanlagegesellschaft mbH Germany

Meeschaert Gestion Privée France

Meiji Yasuda Life Insurance CompanyJapan

Merck Family Fund U.S.

Meritas Mutual Funds Canada

Merrill Lynch & Co.,Inc. U.S.

METZLER INVESTMENT GMBH Germany

Midas International Asset ManagementSouth Korea

Mirae Investment Asset ManagementSouth Korea

Mistra, Foundation for Strategic Environmental Research Sweden

Mitsubishi UFJ Financial Group (MUFG)Japan

Mitsui Sumitomo Insurance Co.,Ltd. Japan

Mizuho Financial Group, Inc. Japan

Monega Kapitalanlagegesellschaft mbHGermany

Monte Paschi Asset Management SGRS.p.A Italy

Morgan Stanley Investment ManagementU.S.

Morley Fund Management United Kingdom

5

CDP Signatories 2008

Carbon Disclorsure Project 2008

6

Pension Fund for Danish Lawyers and Economists Denmark

Pension Plan of the Evangelical LutheranChurch in Canada Canada

PETROS – The Fundação Petrobras deSeguridade Social Brazil

PGGM Netherlands

Phillips, Hager & North InvestmentManagement Ltd. Canada

PhiTrust Active Investors France

Pictet Asset Management SA Switzerland

Pioneer InvestmentsKapitalanlagegesellschaft mbH Germany

Portfolio 21 Investments U.S.

Portfolio Partners Australia

Porto Seguro S.A. Brazil

PREVI Caixa de Previdência dosFuncionários do Banco do Brasil Brazil

Prudential Plc United Kingdom

PSP Investments Canada

QBE Insurance Group Limited Australia

Rabobank Netherlands

Railpen Investments United Kingdom

Rathbones/Rathbone GreenbankInvestments United Kingdom

Real Grandeza Fundação de Previdência eAssistência Social Brazil

REDEPREV – Fundação Rede dePrevidência Brazil

RREEF Investment GmbH Germany

Rei Super Australia

Rhode Island General Treasurer U.S.

RLAM United Kingdom

Robeco Netherlands

Rock Crest Capital LLC U.S.

Royal Bank of Canada Canada

SAM Group Switzerland

Sanlam Investment Management South Africa

Santa Fé Portfolios Ltda Brazil

Sauren Finanzdienstleistungen Germany

Savings & Loans Credit Union (S.A.) LimitedAustralia

Schroders United Kingdom

Scotiabank Canada

Scottish Widows Investment PartnershipUnited Kingdom

SEB Asset Management AG Germany

Second Swedish National Pension Fund(AP2) Sweden

Seligson & Co Fund Management PlcFinland

SERPROS Fundo Multipatrocinado Brazil

Service Employees International Union Benefit Funds U.S.

Seventh Swedish National Pension Fund(AP7) Sweden

Motor Trades Association of AustraliaSuperannuation Fund Pty Ltd Australia

Münchner Kapitalanlage AG Germany

Munich Re Group Germany

Natcan Investment Management Canada

Nathan Cummings Foundation U.S.

National Australia Bank Limited Australia

National Bank of Kuwait Kuwait

National Grid Electricity Group of theElectricity Supply Pension Scheme United Kingdom

National Grid UK Pension Scheme TrusteeLtd United Kingdom

National Pensions Reserve Fund of IrelandIreland

Natixis France

Nedbank Group South Africa

Needmor Fund U.S.

Nest Sammelstiftung Switzerland

Neuberger Berman U.S.

New Alternatives Fund Inc. U.S.

New Jersey Division of Investment U.S.

New Jersey State Investment Council U.S.

New Mexico State Treasurer U.S.

New York City Employees RetirementSystem U.S.

New York City Teachers Retirement SystemU.S.

New York State Common Retirement Fund(NYSCRF) U.S.

Newton Investment Management LimitedUnited Kingdom

NFU Mutual Insurance Society United Kingdom

NH-CA Asset Management South Korea

Nikko Asset Management Co., Ltd. Japan

Nissay Asset Management CorporationJapan

Norfolk Pension Fund United Kingdom

Norinchukin Zenkyouren Asset Management Co., Ltd Japan

North Carolina State Treasurer U.S.

Northern Ireland Local GovernmentOfficers’ Superannuation Committee(NILGOSC) United Kingdom

Northern Trust U.S.

Oddo & Cie France

Old Mutual plc United Kingdom

Ontario Municipal Employees RetirementSystem (OMERS) Canada

Ontario Teachers Pension Plan Canada

Opplysningsvesenets fond (The Norwegian Church Endowment)Norway

Oregon State Treasurer U.S.

Orion Energy Systems, Inc. U.S.

Pax World Funds U.S.

SH Asset Management Inc. South Korea

Shinhan Bank South Korea

Shinkin Asset Management Co., Ltd Japan

Shinsei Bank Japan

Siemens Kapitalanlagegesellschaft mbHGermany

Signet Capital Management LtdSwitzerland

Skandia Nordic Division Sweden

SNS Asset Management Netherlands

Société Générale France

Sompo Japan Insurance Inc. Japan

SPF Beheer bv Netherlands

Standard Chartered PLC United Kingdom

Standard Life Investments United Kingdom

State Street Corporation U.S.

Storebrand ASA Norway

Sumitomo Mitsui Financial Group Japan

Sumitomo Trust & Banking Japan

Sun Life Financial Inc. Canada

Superfund Asset Management GmbHGermany

Sustainable World Capital U.S.

Svenska Kyrkan, Church of SwedenSweden

Swedbank Sweden

Swiss Reinsurance Company Switzerland

Swisscanto Holding AG Switzerland

TD Asset Management Inc. and TD AssetManagement USA Inc. Canada

Teachers Insurance and Annuity Association – College Retirement EquitiesFund (TIAA-CREF) U.S.

Telstra Super Australia

Tempis Capital Management South Korea

Terra fondsforvaltning ASA Norway

TfL Pension Fund United Kingdom

The Bullitt Foundation U.S.

The Central Church Fund of Finland Finland

The Collins Foundation U.S.

The Co-operators Group Ltd Canada

The Daly Foundation Canada

The Dreyfus Corporation U.S.

The Ethical Funds Company Canada

The Local Government Pensions Insitution (LGPI) (keva) Finland

The RBS Group United Kingdom

The Russell Family Foundation U.S.

The Shiga Bank, Ltd. Japan

The Standard Bank of South Africa Limited South Africa

The Travelers Companies, Inc. U.S.

The United Church of Canada –General Council Canada

CDP Signatories 2008

7

The Wellcome Trust United Kingdom

Third Swedish National Pension Fund (AP3)Sweden

Threadneedle Asset ManagementUnited Kingdom

Tokio Marine & Nichido Fire Insurance Co., Ltd. Japan

Trillium Asset Management CorporationU.S.

Triodos Bank Netherlands

Tri-State Coalition for Responsible InvestingU.S.

TrygVesta Denmark

UBS AG Switzerland

Unibanco Asset Management Brazil

UniCredit Group Italy

Union Asset Management Holding AGGermany

Unitarian Universalist Association U.S.

United Methodist Church General Board ofPension and Health Benefits U.S.

Universal-Investment-Gesellschaft mbHGermany

Universities Superannuation Scheme (USS)United Kingdom

Vancity Group of Companies Canada

Vårdal Foundation Sweden

VERITAS INVESTMENT TRUST GmbHGermany

Vermont State Treasurer U.S.

VicSuper Pty Ltd Australia

Victorian Funds Management CorporationAustralia

Visão Prev Sociedade de PrevidenciaComplementar Brazil

Wachovia Corporation U.S.

Walden Asset Management, a division ofBoston Trust and Investment ManagementCompany U.S.

WARBURG-HENDERSONKapitalanlagegesellschaft für ImmobilienmbH Germany

West Yorkshire Pension Fund United Kingdom

WestLB Mellon Asset Management (WMAM)Germany

Winslow Management Company U.S.

XShares Advisors U.S.

YES BANK Limited India

York University Pension Fund Canada

Youville Provident Fund Inc. Canada

Zurich Cantonal Bank Switzerland

Mankind is currently facing huge challenges: climate change, drastically increasingresource consumption worldwide and rapidly rising resource and energy prices arethreatening the ecological and economic foundations of our lives. In the case ofmajor global problems, economic, ecological and social aspects have becomeintrinsically linked. How we produce and how we manage our natural resources hasbecome a crucial issue that affects the whole of mankind. It is not only the state ofthe climate and environment, but also the state of the financial markets that makeclear: business as usual is not an option for the future.

At the same time, the need for change also brings with it major opportunities forgrowth. We at the Federal Environment Ministry have responded with the concept ofecological industrial policy. Companies that take account of these megatrends in theirstrategies avoid possible risks, make active use of new opportunities and recognisetheir social responsibility. Corporate social responsibility (CSR) is a key strategicinstrument for companies to secure their competitiveness for the long term. Theactive participation of a number of large companies in the carbon disclosure project isproof that energy efficiency and climate protection are no longer side issues on thefinancial markets!

Globalisation increases expectations regarding corporate responsibility. The public,consumers and financial markets no longer only ask how high company profits areand how companies use their profits, they also ask how these profits are made.

I therefore wish you every success and broad participation in your project.

Sigmar GabrielFederal Minister for the Environment, Nature Conservation and Nuclear Safety

Foreword of the Federal Minister for the Environment, Nature Conservation and Nuclear Safety,Sigmar Gabriel (MdB),

for the Third German Report of the “Carbon Disclosure Project (CDP)”

9

Table of Contents

�

11

Table of Contents

CDP Signatories 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Foreword of the Federal Minister for the Environment, Nature Conservation and Nuclear Safety, Sigmar Gabriel (MdB) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

1 Executive Summary

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

2 The Carbon Disclosure Project (CDP)

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

CDP in the future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Improved access to CDP data via CORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Partners to the CDP6 Report for Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

3 Climate change from the perspective of auditors and investment professionals

Climate change from the perspective of auditors – Interview with the largest auditing companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

CO2 risks and valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Introduction 28Valuation 28CO2 emissions as a value driver in practical analysis 29Indicator approach: from CO2 intensity to CO2 risk 30Objectifiable, quantifiable indicators for review 31Market-based reviewing using multipliers 31Summary and outlook 31

4 Analysis of the answers of german companies in the CDP6

Responses 33Transparency 33Methodology 34

Company-specific risks and opportunities of climate change . . . . . . . . . . . . . . . . . . 35Risks of climate change 35Regulatory risk 35Physical risk 35General risk 36Risk management 36Company-specific opportunities arising from climate change 37General opportunities 37Regulatory opportunities 38Physical opportunities 38

Investments due to the consequences of climate change . . . . . . . . . . . . . . . . . . . . . 39

GHG emissions reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Emissions reporting in the CDP 40Scope and distribution of emissions 41Meeting targets 42Emissions intensity 43

Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44Responsibility and individual performance 44Communication 45

Emissions – a value driver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

5 Appendix

CDP6 Questionnaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Response of the 200 largest companies in Germany . . . . . . . . . . . . . . . . . . . . . . . . . 54

The most important trends from the other regional and sector-based CDP reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Key to abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

1Executive SummaryThis year, the globally active CarbonDisclosure Project (CDP) was carriedout in Germany for the third time. Intotal 109, 55 percent of Germany’s200 largest companies participated inthe project. These represent over 90percent of market capitalisation.

Overall, the companies’ reporting onthe significance of climate change fortheir respective business modelsappears to be much improved in com-parison with previous years.

�

Table 1: Climate trends of the year 2007/2008

Executive Summary

13

transport and logistics companies see thephysical risks as being the most signifi-cant.

A level of standardisation can be recog-nised in the reporting on greenhouse gas(GHG) emissions. 32 percent of the com-panies already use the Greenhouse Gas(GHG) Protocol. The level of transparencyregarding the companies’ own emissionshas also seen a significant increase; justunder 60 percent of the companies canquantify their emissions. There is, howev-er, considerable scope for development indifferentiating according to type andregion. There are particular deficienciesregarding emissions produced by theadded value chain and product use. 49percent of the companies use emissionstargets as a means of ensuring a reduc-tion in their emissions. This reductionshould primarily be achieved through anincrease in energy efficiency.

Although the risk was generally judged tobe similar to the previous year’s results,risk is assessed very differently accordingto industry sector and also variously pre-sented from company to company. Fur-thermore, the regulatory risk is seen as themost meaningful risk, while the physicalrisk is of equal importance to insurancecompanies and transport and logisticsbusinesses. However, 75 percent of com-panies indicate that they have implement-ed a form of risk management. This year,the companies once again viewed theopportunities presented by climatechange as being greater than the risks.Opportunities are generated by new prod-ucts, in particular those which aim to saveenergy. Particularly financial servicesproviders and capital goods producerssee a heavy bias towards opportunities asopposed to risks. Energy providers, on theother hand, see a bias towards regulatoryrisks rather than opportunities, while

Developments over thelast 12 months

Results

Scientific

Consequences (examples)

New research on the current statusof climate change

• Nasa Chief Climate Scientist James Hansen et al. use newevaluation methods to reach the conclusion that climatechange can only be held within tolerable boundaries ifglobal emissions reduction targets of around 350ppm CO2in the atmosphere are adhered to. Previously, research(IPCC 2007) had acted on the assumption of stabilisationat around 450ppm CO2.Today, the concentration is alreadyover 385ppm CO2

The limits for stabilisation (2015–2020) and global CO2emissions reduction (50–85 percent by 2050 worldwide) for-mulated by the Intergovernmental Panel on Climate Changeare too broad, orientation towards maximum limits is neces-sary. The goal must be a CO2-free society by the middle ofthe century and significant efforts to lower emissions in theshort to medium-term by 2020

The UN Climate Change Confer-ence of December 2007 culminat-ed in the “Bali Roadmap”

• By 2009 a treaty to succeed the Kyoto protocol is to beratified on the basis of the fourth IPCC report, i. e. 450ppm

• Developing countries and the USA have joined thisprocess

• Transfer of technology and finance will play a far moreexplicit and key role in this

• “Uncertainty over the future framework conditions” isreduced, a global successor treaty to Kyoto is probable

• Global CO2 regulation is becoming likely

• New business opportunities will arise, financing modelsare becoming relevant for private-sector stakeholders inaddition to development banks

Global politics

A highly sophisticated model has devel-oped in relation to the positive economiceffect of emissions. This effect varies to alarge degree depending on the industry;naturally, energy providers, transport, rawmaterials, consumables and supplies areparticularly affected. However, this is alsodue to the fact that these companies havesupplied insufficient information aboutemissions resulting from the added valuechain and product use, meaning that ithas, so far, not been possible to takethese risks into account.

The following table gives an overview ofimportant new developments that haveinfluenced the discussion on climatechange and examples of resulting conse-quences.

Australia ratifies Kyoto protocol • Australia becomes one of the last industrialised countriesto accept the obligations outlined in the Kyoto protocol

• CO2 regulation foreseeable

• Emission trading system discussed in Australia

• Product limitations announced, for example prohibition ofconventional light bulbs from 2010

G8 summit in Japan agrees tohalve global greenhouse gas emis-sions by 2050

• The G8 heads of government approve the Bali process

• G5 states agree on the most stringent reduction scenariosof the IPCC report as a global guideline

• CO2 regulations are foreseeable

• Statements from the emerging countries (G5) indicate thatthey will also introduce regulation

Developments over thelast 12 months

Results

Global politics

Consequences (examples)

EU energy and climate changepackage (EU package) approved

• Concrete reduction targets approved using 1990 as abasis: 20 percent unilateral reduction by 2020 and 30 per-cent by 2020 through multilateral activities

• This package introduces concrete building blocks forthese targets to be reached in all economic areas

• European emission trading rules introduced for the period2013–2020 within the scope of the EU package:

- Full auctioning of emissions certificates for the electricitysector, in other sectors an increasing proportion of auc-tioning

- Quota of permitted reduction certificates from CDM/JIprojects significantly limited

- Air traffic integrated into emission trading from 2012

• Clear reduction targets, energy efficiency targets, renew-able energy targets, supporting or demanding a clear inte-gration of CO2 costs or opportunities in reviews of activi-ties and giving incentives for minimising CO2

• Political framework conditions for CO2-minimisingeconomies begin to take shape

• Germany’s EU reduction target is 14 percent, German tar-get for renewable energy is 18 percent by 2020

• Electricity producers will have to carry the actual costs ofCO2 emissions and plan power plant investments with thisin mind

• Emissions will become a real cost factor for airlines for thefirst time, which will have an indirect impact on aircraftmanufacturers and also, for example, on transport costs

Integrated climate and energypackage of the German FederalGovernment (IKEP)

• Germany implements a climate target of 40 percent by2020 with a concrete package of measures that addressesa comprehensive range of economic areas

• CO2 is established as a driving force for political measures,renewable energy and cogeneration (KWK Gesetz (Cogen-eration Law), EEG Gesetz (Renewable Energies Law), EE-Wärmegesetz (Renewable Energies Heating Law)), build-ings, traffic etc. are addressed

• Many sectors are still exempt, however further steps in thisdirection can be expected as the measures are probablyinsufficient for reaching the target of 40 percent (CO2 auto-mobile tax, energy efficiency specifications for productsetc. have been announced)

Key emerging countries announceclimate programmes or actionplans

• South Africa, India, China and other countries announcedetails of concrete national climate programmes and insti-tutionalise them

• South Africa aims to achieve stabilisation by 2020, Indiaorganises sector-specific measures and China establishesan explicit climate programme

Although they have rather more the basic character of adeclaration of intent, these announcements point to signifi-cant changes in dynamics – for the first time, emergingcountries are displaying their own initiative regarding regula-tion and drawing up clear institutional methods for imple-mentation

European and German politics

Inclusion of air traffic in emissiontrading as of 2012

• Limitation at 97 percent of average emissions of2004–2006

• 15 percent of emissions certificates auctioned

• Airlines have to broaden their efforts to increase efficiency(e.g. by also using biofuel), however it is difficult to presentreductions with the current business model; particularlycost-sensitive business models could be appropriate

• Increasing emissions growth tends to require follow-upsteps (possibly kerosene tax etc.) – the new influencingfactors on the business model should be taken intoaccount

Pan-European CO2 regulation forautomobiles with consumption lev-els above the manufacturers’ fleetaverage is imminent (there arealready fees for CO2 emissions, forexample France already has apunitive tax on cars >160g/km,200 Euro – 2600 Euro surcharge)

• Voluntary commitment not fulfilled in 2008, binding regula-tion with set limits is to be introduced, 120 g CO2/km isexpected from 2012 with special regulations

• CO2 is now a factor when drawing up business strategies(in many cases as a reactive step)

• As a result, automobile manufacturers are striving to intro-duce innovations, in particular electricity-powered vehicles

• The sector’s inaction has led to political regulation encom-passing labelling, advertising etc.

• Companies with unsuitable product strategies will sufferfinancial difficulties (from sales slumps to large-scale writ-ing off of unsuccessful innovations)

14

Carbon Disclorsure Project 2008

Developments over thelast 12 months

Results

Politics in the USA

Consequences (examples)

Both presidential candidates aregoing into the election campaignwith climate programmes – USA’snational/international position willchange

• McCain has set a targeted reduction of > 60 percent by2050, Obama has a long-term reduction target of 80 per-cent by 2050

• Both candidates put forward a cap and trade emissiontrading system

• CO2 regulation foreseeable within the scope of a cap andtrade system

• Morgan Stanley/Citi/JP Morgan’s Carbon Principles com-mit them to increased “due diligence” regarding invest-ment plans for energy providers due to future CO2 restric-tions

USA – regional emission tradingsystem in development regardlessof election result

• North-eastern states (Regional Greenhouse Gas Initiative)to start in 2009

• California (to start in 2012)

• Forthcoming regulation via cap and trade system hasresulted, for example, in banks adopting an alternative duediligence approach and utility companies placing greateremphasis on CO2 issues

Carbon markets

Australia plans cap and trade sys-tem (to start in 2011):

New Zealand introduced tradingsystem in 2008

• Australia: the major features of an Australian emissiontrading system were announced in June 2007

• New Zealand: began in 2008 (in the forestry sector) and isbeing gradually expanded to cover fossil fuels (2009), sta-tionary energy and industrial emissions (2010) and agricul-ture (2013)

• A global pattern of regulation designed to limit quantities isemerging

• Implications for the value of sectors and companies mustbe reported using a wider range of methods

ICAP (International Climate ActionPartnership) between states andfederal states agreed to establish aglobal carbon market

• ICAP has been set up as a platform for establishing globalCO2 markets by states and federal states of the EU, theUSA, Canada, New Zealand and Norway

• Development of models for “linking regional markets”

• A globally acknowledged CO2 price would ensure the inter-nalisation of CO2 costs and fair competition

• An effective global price for CO2 would compel companiesand stakeholders to place the CO2 intensity of the busi-ness model at the centre of their considerations

CDP Supply Chain Leadership Collaboration (SCLC) established

• Multinational enterprises attempt to increase the CO2transparency of their added value and supply chain

• Increases the relevance of CO2 intensity as a success factor

• The pressure to recognise CO2 intensities and sourcesincreases, even for smaller companies, in the absence of abinding CO2 standard

CO2 product labelling entered themarket across Europe alongsidepractical developments to deter-mine product-related greenhouseeffects (Product Carbon Footprints(PCF))

• Great Britain: second wave of new CO2 labelling on con-sumer products as an information source, e.g. Tesco’slabel, split into 5 categories, is displayed on 20 differentproducts

• Germany: amongst other measures, a pilot project hasbeen carried out by nine companies to find an agreedmethodology, BMU (German Federal Ministry for the Envi-ronment) project for finding a universal methodology

• France: various CO2 labelling schemes on products inchain stores including Casino

• Switzerland: Migros provide labelling on own brands etc.

• CO2 emissions as a product performance indicator isbecoming relevant across the entire added value chain,CO2 can become a differentiating factor and allowsimproved availability of CO2 data

• Standardised methods are being discussed, companieshave a basis on which to quantify PCFs

• Customers can recognise the environmental friendliness ofproducts and use this in their buying behaviour

Company level

15

Executive Summary

Financial and capital market-driven activities

CalPERS (important US pensionfund) and others demand bindingclimate risk reporting

In October 2007, US investor groups, NY Attorney GeneralCuomo and California Public Employees’ Retirement System(CalPERS) called on the US Securities and Exchange Com-mission to obligate listed stock corporations to submit areport on climate-related risks

• Market participants demand the creation of an informationbasis for a comprehensive company assessment: physicalemissions, emissions management, climate risks (physical,regulatory, reputation, operational and resulting risks)

• Companies have to prepare for the demands of internaland external reporting

Financial analyses of the influenceof climate change on businessmodels

• For example: industry studies on the effects of climatechange on individual sectors by CA Cheuvreux and others

• Business models of entire industries face upheaval

• Capital allocation will also depend on CO2 in future

Developments over thelast 12 months

Results

Financial and capital market-driven activities

Consequences (examples)

BVI integrates CDP responsebehaviour of companies in sug-gested voting behaviour at generalmeetings

• BVI offers service for its member companies in the case ofnon-participation in the German CDP survey with regard tothe voting behaviour or critical questioning at generalmeetings

• Investors have to use the best available instruments tounderstand a company’s CO2 intensity

Increasingly climate-related prod-ucts/indices on the market

• Merrill Lynch, Société Générale, UBS and Barclays Capital,for example, have floated commodity-linked indices asproducts (based on Kyoto or EU ETS certificates)

• Fund products increasingly incorporate CO2 as a key factor

• Visibility of climate as an factor influencing investment

• The lack of a methodical and reporting basis for the com-prehensive review of CO2 risks prevents effective integra-tion into mainstream analysis and investment

Banks quantify the “footprints” oftheir portfolios and loan books

• Individual financial institutions have examined their stockportfolios for CO2 intensity, ASN Bank from the Nether-lands is the first bank to publish these results – Individualbanks also develop methods for assessing the CO2 inten-sity of credit portfolios

• In future, companies will firstly be assessed in this catego-ry and secondly subject to greater transparency demands– Internally, these steps lead to an improved understandingof the financial services providers regarding their own cli-mate risk; integration in mainstream methods is a logicalnext step

In Great Britain, compulsory com-pany reporting is part of the pro-posed Climate Change Bill

• British companies are facing compulsory CO2 reportingrequirements

• Availability of CO2 data, continuity and quality shouldimprove, possibility of link with financial reporting

Reporting

16

Carbon Disclorsure Project 2008

17

Executive Summary

�

Introduction: The CarbonDisclosure ProjectCDP’s mission is to facilitate a dialoguebetween investors and corporations,supported by high quality informationfrom which a rational response to cli-mate change will emerge.

2

OverviewThe Carbon Disclosure Project is thelargest investor coalition in the world:more than 385 signatory investors, witha combined asset base of 57 trillion USdollars, signed CDP’s sixth annualrequest for information in 2008 (CDP6)which was sent to over 3000 companiesworldwide.

The CDP annual information request issent to the Chair of the Board of theworld’s largest companies by marketcapitalization. It covers four principalareas:

1) Management’s views on the risks andopportunities that climate changepresents to the business;

2) Greenhouse gas emissions accounting;

3) Management’s strategy to reduceemissions/minimize risk and capital-ize on opportunity; and

4) Corporate governance with regard toclimate change.

The CDP6 information request can beviewed in the Appendix.

The responses from companies to CDP’sannual requests for corporate data pro-vide investors with vital informationregarding the current and prospectiveimpact of climate change on their portfo-lios, and therefore represents an importantresource for investment decisions. Thefact that CDP’s requests are made onbehalf of investors serves to raise theawareness of senior management that cli-mate change is a business issue thatrequires serious strategic focus.

After eight years of consecutive growth,CDP currently runs projects in more than20 countries, with new projects launchedin China, Korea, Latin America, theNetherlands and Spain in 2008. CDP hasalso entered into a key strategic relation-

NewZealand

Australia

Japan

HongKong

Korea

Indonesia

ItalyUSASpain

Mexico

Chile

Singapore

India

Brazil

Argentina

Switzerland

France

SwedenNorway

Canada

SouthAfrica

Germany

Finland

Iceland

UK

Malaysia

China

Taiwan

Netherlands

Denmark

Thailand

EuropeNorth America South AmericaAsiaAustralia Africa

Figure 1: CDP6 signatory location by region

8% 1%

7%

47%

27%

10%

Figure 2: The countries in which CDP currently runs projects

19

The Carbon Disclosure Project (CDP)

ments in the UK including the Foreign andCommonwealth Office and the Office ofGovernment Commerce in HM Treasury tounderstand supply chain emissions, risksand opportunities.

CDP acts as secretariat for the ClimateDisclosure Standards Board (CDSB),which aims to promote and advance cli-mate-change-related disclosure in main-stream reports through the developmentof a global framework for corporatereporting on climate change. This frame-work will elicit comprehensive, consistentand comparable information for investors,as well as offering greater certainty on dis-closure requirements for corporations, andthereby provide an influential model foruse by national regulators.

By working with information users, theiradvisors, regulators and public interestgroups, as well as the four leadingaccountancy majors and the associatedaccountancy bodies CDSB aims to sup-port, harmonize and strengthen existingclimate-change-related reporting initia-tives and standards. Rather than creatinga new standard, the aim is to bring togeth-er and enhance current best practice inthe form of a single consistent frameworkthat can be used for disclosure in main-stream reports.

ship with Merrill Lynch and has appointedPricewaterhouseCoopers as its globaladvisor. These associations will supportgrowth over the next three years.

We are pleased to report that CDPreceived a record number of companyresponses to its 2008 annual request –more than 1550 in total. This demon-strates an increasing understanding by theworld’s largest corporations of the impor-tance of climate change and its relation tobusiness strategy and shareholder value.Analysis of this year’s responses showsan advance in greenhouse gas emissionsaccounting with scope 3, or indirect emis-sions reporting, registering an increasesince 2007.

CDP is currently conducting furtherresearch into how investors use CDP data in order to improve its under-standing of the investment community’srequirements. The results to date showsignatory investors using companyresponses to CDP in:

• Company engagement;

• Qualitative checking;

• Sell-side research;

• The filing of shareholder resolutions; and

• The creation of new products and indices.

This year more than 2,000 additional com-panies were brought into CDP’s systemthrough the new CDP Supply Chain Proj-ect. More than 30 companies, includingTesco, HP, Kellogg and Vodafone now usethe CDP system to collect climate changerelevant data from their suppliers. Thisrepresents a significant achievement bythe corporate community, demonstratinghow collaboration is key to better under-stand climate change and its impacts onprocurement.

Carbon disclosure has assumed height-ened importance on the political agendaand the CDP process has received sup-port from political leaders globally. Gov-ernment and public sector organizationsalso understand the importance of meas-uring their own carbon risks and emis-sions. More than 30 cities in the U.S. arecurrently working together to reportthrough the CDP system, a developmentthat will yield a much better understandingas to how cities are preparing for the lowcarbon economy. CDP is also workingwith central and local government depart-

Carbon Disclorsure Project 2008

20

The Carbon Disclosure Project (CDP)

21

“The Carbon Disclosure Projectis vital, and we’ve got to geteverybody to participate in it.”

Bill Clintonformer U.S. President

“Before CDP we had no com-prehensive data on corporategreenhouse gases. But withCDP, policy makers, investorsand companies themselves cantake better informed decisions.”

Fredrik ReinfeldtSwedish Prime Minister

“The Carbon Disclosure Projectis independent and impartial, itis a clear and transparent mech-anism for anyone to see our carbon footprint and to judgeour performance at reducing it.”

Sir Terry LeahyChief Executive, Tesco plc

“The CDP supports AIG Invest-ments’ efforts to assess andanalyze trends in risks andopportunities associated withclimate change and its mitiga-tion. Climate change continuesto be a major financial andinvestment concern for us andour clients.”

Win J NeugerChief Executive, AIG Investments

CDP in the future:• CDP is continuously working to

improve the quality and quantity ofreporting on climate change. CDP isalso improving its online reporting sys-tem and providing extensive guidanceon what should be measured andreported;

• CDP will refine its offering to investorsthrough the provision of more bespokedata to service the requirements ofindividual investment institutions. CDPis also working to expand the availabili-ty of its information through profession-al data distribution channels;

• CDP plans to continue its expansionaround the globe and aims to launchprojects in Russia and other locationsin 2009;

• CDP has recently launched a new proj-ect, ‘CDP Finance’, working with banksto better understand the opportunities,risks and liabilities with relation to cli-mate change across their client base,including the lending and private equityportfolios;

• CDP is also developing strategic rela-tionships with a range of organizationsto further expand CDP’s work andreach in the future;

• CDP is working towards a unified glob-al business response to climate changeand through its associations withinvestors, corporations, governmentsand the other key stakeholders, willcontinue to help catalyze a sustainable,low carbon economy.

Improved access toCDP Data via COREIn September 2008 CDP launched theCORE 2.0 database. CORE stands forCOrporate REsponses and it is theenhanced access function for presenta-tion and analysis of the CDP data, allow-ing all the CDP responses to be searchedand sorted by index, geography, sector orCDP question. The results are displayedon screen via a web interface and can bedownloaded to Microsoft Excel.

CORE 2.0 is designed to enable the userto efficiently manipulate the CDP data totheir requirements. The CORE 2.0 systemhas been built utilizing feedback from oursignatory members in 2007.

For more information about CORE 2.0please see www.cdproject.net or contactDaniel Turner at the CDP London office:daniel.turner@cdproject.net

Partners to the CDP 6Report for Germany The partners to the CDP6 report for Ger-many are BVI Bundesverband Investmentund Asset Management e.V. and the WorldWide Fund For Nature (WWF). The authorof the report is Professor AlexanderBassen.

The BVI represents the interests of 89companies, which are active in assetmanagement. Our members manage over1.6 trillion Euro in investment funds anddiscretionary portfolios on behalf of morethan 15 million private and institutionalinvestors. 45 BVI members support theCDP directly as “Signatory Investors”.

The WWF is one of the world’s largestconservation organisations. It has sup-ported the work of the CDP in compellingcapital markets and companies toimprove transparency on man-made cli-mate change globally since 2001 and inGermany since 2006.

The BVI and the WWF support the CDP inorder to increasingly ensure the consider-ation of the effects of climate change onthe economic situation of listed compa-nies and the German economy as a wholein investment research. Holistic analysis ofthe opportunities and risks presented byclimate change must be engaged in bycompanies of all sectors and should notbe limited to obvious emitters of green-house gases. Improved transparencyaccelerates the necessary systematicintegration of climate risks in investmentdecisions on the part of investors.

Prof. Alexander Bassen, University ofHamburg, Chair for Management andCapital Markets, is the author of the CDP6Report for Germany. Prof. Bassenresearches, teaches and consults on theeffect of corporate governance, corporateresponsibility, climate change and investorrelations on the capital market.

“CDP is one of the most valuable tools we have to helpus evaluate climate risk acrossour whole portfolio.”

Brian RiceInvestment Officer, CalSTRS

“The Carbon Disclosure Projectis an excellent tool for increasingthe exchange of climate infor-mation between companies andtheir institutional investors.”

Bendt BendtsenDanish Minister for Economic and Business Affairs

“The specialist focus of the Carbon Disclosure Project provides a suitably rigorousstructure for an overview of acompany’s response to climatechange, and the survey templateis a very helpful managementtool for us to assess climate-related risks and opportunities inour own business. It also allowsus to benchmark our practicesagainst peers.”

Sir Tom McKillopChairman, Royal Bank of Scotland Group

Carbon Disclorsure Project 2008

22

Das Carbon Disclosure Projekt (CDP)

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�

Climate Changefrom the Perspec-tive of Auditorsand InvestmentProfessionals

3

René Bräunig (KPMG)

Michael Werner (PwC)

Gerd Lützeler (Ernst & Young)

Joachim Ganse (Deloitte)

Climate Change fromthe Perspective ofAuditors – Interviewwith the largest Audit-ing Companies

1. Authorities have particularly beeninterested in a standardization and reg-ulation of the GHG emissions reporting.Based on your experience, what do youthink about the latest development ofGHG emission reporting and the rele-vance for the financial reporting of acompany?

Joachim Ganse:

The European-wide, operative minimumstandard “EU Monitoring guidelines” existfor the European Emission Trading System(EU-ETS) and is realised in 27 EU-coun-tries in line with the specific national con-ditions. The general approach in Europe issimilar; however, there are certain nationalvariations and deviations in realisation. Sofar, the Kyoto Protocol mechanisms CleanDevelopment Mechanism (CDM) and JointImplementation (JI) were considerably lessregulated than the European emissiontrading within the EU-ETS. More and moreproblems regarding the quality of theprocesses but also the stringency of theaudits by the auditors and authoritieswere identified. This led, as from May2008 to a massive rise in regulation, whichpartially exceeds the level of EU-ETS.

Greenhouse gas emissions e. g. the finan-cial value of acquired or saleable emissioncertificates is directly disclosed in form ofa balance sheet item. So, the certificatesare part of the current assets or liabilities.Further, they must be taken into accountwhen reporting the balance sheet risk,which bases on the uncertainty of the cer-tificate origin and is reflected as operativerisk.

Gerd Lützeler:

In our field of expertise we see a range ofassurance statements, which not alwayscover the proper subjects or information.Best practices or minimum requirementscould help to address short comes.

Michael Werner:

From our experience with auditing greenhouse gas (GHG) data, we see at timesconsiderable potential for improvement inthe collection and reporting of GHG data.For this reason, GHG data often may inour opinion lack credibility if there is noexternal audit.

Given the scope for interpretation withinthe framework of currently applied meth-ods, a comparison of GHG data from dif-ferent companies is very difficult. Compa-nies can currently choose between arange of boundaries: e. g. a control vs. anequity approach, measuring CO2 emis-sions vs. GHG emissions as a whole,including or excluding upstream activities.Moreover, they are given a lot of freedomin choosing the accuracy of measure-ments and calculation principles for GHGemissions, as well as underlying emis-sions factors As a result, direct compari-son between two companies is not alwaysmeaningful.

The communication of data on green-house gas emissions by companies hasincreasing implications on their evaluationby the financial market. This is com-pounded by the introduction of the Emis-sions Trading Scheme (ETS) within the EUand its planned extension to cover othersectors, as well as the increased attentionthat the general public pays to in climatechange. Moreover, GHG emissions areincreasingly being published in companymanagement reports, resulting in a trendtowards a heightened significance of suchdata.

René Bräunig:

Up to now there has been no standard forthe reporting of GHG-related data whichleads to variances in the completenessand accuracy of GHG data reporteddepending on the approach adopted.This can result in, for example, inconsis-tent valuations as a result of differenttreatment with respect to the scope of theentities under review (e. g. subsidiaries,sites without production). There could alsobe varying approaches regarding thesources and types of emissions to be con-sidered during the determination of therelevant GHG emissions as well as withrespect to the degree of consideration ofindirect emissions. In addition, in terms ofthe accuracy of GHG emissions, therealso exists the risk of differing methods of

25

Climate Change from the Perspective of Auditors and Investment Professionals

Carbon Disclorsure Project 2008

data evaluation. As a result the emissionsthemselves could be determined different-ly (measurement, calculation, estimate) orthe calculation of the CO2 equivalentscould be based on different conversionfactors.

The above described problems, which canarise from the lack of a uniformly appliedstandard, can also have consequences forthe financial reporting of a company. Hav-ing said that, with regard to the emissiontrading, which in Germany accounts forapproximately 50 percent of GHG emis-sions, there are partially already Europeanstandards regarding CO2 emissions.

2. Do you think that the current practiceof the GHG reporting covers the specif-ic risk? Please, specify a potentialimprovement within the reportingscheme.

Joachim Ganse:

Improvement opportunities arise in partic-ular with respect to the compliance withaccuracy requirements when determininggreenhouse gas emissions. Also the miss-ing operative practice of new rules andsometimes also history-based oppositionin the companies are obvious, which mustbe appropriately addressed.

Still a lot of the greenhouse gas emissionauditors have a too low level of formationand experience. While almost all auditorshad a technical formation, the fiscalknowledge is often missing. On the otherhand, a similar situation is given at theresponsible persons on the customer side,as these often also origin from the opera-tive technical management. Regarding theKyoto mechanisms CDM/JI, this signifi-cant weakness is currently approached bymassive standardisation efforts of theUnited Nations.

Gerd Lützeler:

Please, specify a potential improvementwithin the reporting scheme. According tothe accreditation rules for EA 6-03, ILAC 4and ISO 17020 a risk assessment has tobe made by the verification body. Thisassessment however can be set up by theverification body itself. Guidelines or atemplate could help to assure that all riskshave been addressed.

Michael Werner:

We see two types of GHG-related risks:on the one hand, risks resulting from theimpending climate change ( e. g. high-water, droughts) (risk type 1) and on theother hand risks resulting from (future)regulations or changes in demand (risktype 2).

In our experience, type 1 risks (directeffects of climate change) are only seldomraised as central topics by companies –but reporting of GHG emissions is only oflimited use for assessing these risks.

An analysis of type 2 risks requires notonly GHG emissions but also other infor-mation on a company’s business activi-ties. With the exception of ETS compa-nies, such indirect risks are difficult toquantify in our opinion. A potential forimprovement with regard to type 2 risksexists in particular in an improvement inthe comparability of GHG data (cf. answerquestion 1) and the development of gen-erally accepted models for risk analysis.

René Bräunig:

As mentioned above, the application ofinconsistent standards and the use of dif-fering criteria during the evaluation ofGHG emissions can potentially result inunclear and inconsistent reporting. Thesetting of binding standards would there-fore be a positive step in the right direc-tion. In any case, the standards and crite-ria used should be disclosed as part of thereporting to ensure comparability withother companies.

3. Which requirements (e. g. compara-bility, standardization, integration to thefinancial reporting, materiality) do youthink provide a proper reporting of GHGemissions?

Joachim Ganse:

The future requirements shall clearly focuson a stronger linking of the technical andfinancial spheres. The auditors shall notonly handle the technical level but alsoassess the fiscal effects. Therefore, expe-rience and expertise on the field of green-house gas relevant investment analyses,the respective accounting of greenhousegas emissions and their derivatives as well

as knowledge on financial risk manage-ment processes are indispensable for theauditors (also the accountants).

Concerned companies shall include thegreenhouse gas risk in their financial man-agement. The experience shows that thishas so far hardly done. In addition, theauditors should be personally qualifiedand responsible, so that no qualitativeprotection is given over a parent company,in order to reduce the latent risk of qualityprocrastination.

The minimum requirement put on thequalification of the responsible auditorshould be the experience of at least 20greenhouse gas audit projects. Otherwiseexperience shows that a good work can-not be guaranteed. The very high com-plexity of emission audits shows that ahuge operative range of experience isnecessary. Finally, the standardisation ofthe audit procedures should be made ineach case through all involved parties, i. e.through the inclusion of customers, audi-tors and authorities. Otherwise we wouldhave objections regarding too excessiveinfluences of the authorities, which wouldput into question the legal independencyof the audit procedures.

Gerd Lützeler:

To our opinion materiality, comparabilityand standardisation would surely help tointegrate GHG emissions in a financialreport. In fact we see integration of sus-tainability reports (approved according toISAE 3000 and GRI) integrated in financialreports. Since GHG information is part ofa normal sustainability report integrationof activities is taking place already.

Michael Werner:

In view of the increasing relevance of theemission data for the financial market,GHG reporting is increasingly required tomeet the financial market’s requirements:

• Reliable systems (integrated, automated,reliable IT solutions instead of spread-sheet analyses with numerous manualinputs) that can supply valid data

• Clearly defined processes (controls,approval procedures, documentation)

• A defined organisational structure withclear role descriptions and responsibili-ties.

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Climate Change from the Perspective of Auditors and Investment Professionals

René Bräunig (KPMG):

Essential with regard to the reporting ofGHG emissions are the principles of com-pleteness and accuracy. To illustrate this,if for example in the case of two alumini-um producers one included the emissionsgenerated by the external electricity sup-plier in its calculation of GHG emissionsand the other did not, then the two wouldnot be comparable. Also the use of differ-ent emission factors would reduce thecomparability.

In order to avoid such inconsistencies inreporting, whilst at the same time,enhancing the comparability of availabledata, we recommend a standardisation ofrelevant criteria.

The same applies to the so called corner-stones of reporting, namely “Integration inFinancial Reporting” and “Materiality”.

4. What are the main issues of GHGreporting?

Joachim Ganse:

The extreme complexity requires profes-sional knowledge. Currently, the existingknow-how in economy is still too low or ofan unfavourable structure. The assess-ment of measurement uncertainties ofmeasurement devices and calculationresults, required in emission trading, wasso far unusual in practice. So, not only thesole balancing leads to a result, but alsothe consideration of the error propagation.

The executing authorities try a one-sidedlaw-making although they are constitu-tionally not responsible for this. Reasonsfor this are the sometimes rather impre-cise or also missing rules, providing ahuge area of discretion.

Regarding the CDM/JI projects, the publicliability of the UNO authority is missing.Substantial remedies against authoritativedecisions and a too slow working mannerare not possible or international legislationis applied, respectively.

Gerd Lützeler:

Information on the amount of CO2 emis-sions is missing, accuracy and findingsare not always reported. It is not always

27

transparent what has been reviewed andwhat improvements could be made.

Michael Werner:

The greatest problem and source of errorsin reporting GHG emissions are mostly thelack of processes and inadequate organi-zation in the systematic collection of data:The emission data must be collected,checked and approved by a standardizedprocess throughout the complete compa-ny. A comprehensible documentation ofdata and processes is a mandatory taskfrom an auditor’s point of view.

To date, GHG data is often still gatheredusing a collection of spreadsheet analy-ses. Special software packages that alsocover the usual adequacy requirementsare slowly starting to be used.

Incomplete/Missing data and inadequatedata precision influence the quality ofemission reporting and may impair thecredibility of the company in the eyes ofstakeholders.

Differing methods of collection of emis-sion data as well as a heterogeneous databasis make comparability of companyinformation more difficult (see answer toquestion 1).

René Bräunig:

We refer to the points made above.

5. Do industrial differences exist in thereporting of emissions? Have youalready anticipated these differenceswithin sectors? How do you takeregional and industrial differences intoaccount? From your point of view is theannouncement of operational risksrelated to climate change a generalobligation of companies or just an obli-gation of specific industries? In whatway do you expect a monetary quantifi-cation of the risks due to climatechange and the consequences withinthe external and internal financialreporting?

Joachim Ganse:

In European emission trading (EU-ETS)exist only slight differences between the

industries. However, it can be stated thatthe energy industry has the biggest finan-cial impact, as it sets the CO2 price andalso directly the energy price.

Regarding CDM/JI, a considerable diversi-fication of the specific risks can beobserved, depending on the project typeand the experience of the auditors. This isreflected in the wide range of results aswell as in the relatively high refusal rate ofproject activities through the UN.

This is a general duty without any excep-tion. The topic is the linking of the finan-cial markets with the carbon market –therefore the same quality requirementsshall apply for both market sectors.

We anticipate a full integration of thegreenhouse gas risk management in theusual risk management.

One basic idea is the following: the CO2certificates overtake the function ofmoney as universal exchange mean forthe markets carbon and energy efficiency.For the financial management they can becontrolled as a foreign currency might be,under maximum application of the existingfinancial reporting and risk management.

Gerd Lützeler:

Monetary quantification will help toaddress business risks. Our expectation isthat this part will need and get more atten-tion and therefore knowledge is neededon this level to support companies withthe financial consequences.

Michael Werner:

Sector-related differentiation is of majorimportance due to the different GHG-related risks for individual sectors. Of par-ticular importance is a differentiation ofemissions that are covered by ETS andthose that are not

General climate change risks (type 1 – seeanswer to question 2) can be isolatedfrom the GHG emissions of the companybecause of their global nature. For thisreason, we regard the naming of risks inthis area as separate from the reporting ofGHG emissions.

A monetary quantification of GHG emis-sions in the case of ETS companies canbe made using the EUA market price. Asfar as other companies (not subject toETS) are concerned, we expect a quantifi-

In these cases the balance sheet value ofthe assets collapses and write-downs onaccount of insufficient project quality leadto a failure of the investment projects.

Gerd Lützeler:

Apparently self-regulation gives too muchroom for interpretation. Since the EU ETSis one European legislation equally imple-mented (or should be implemented equal-ly) the approach on verification should beequal as well to achieve equal competi-tion.

Michael Werner:

There are adequate provisions for ETSemissions in the monitoring guidelines ofthe EU Commission and the further guide-lines on national level. Nevertheless, wesee the definite need for clear guidelinesfor non-ETS companies and emissionsources, to allow a valid external analysisof THG data as well as benchmarking ofdifferent companies. Such guidelines neednot be set forth by the legislator. Guidingprinciples and standards from associationinitiatives (corresponding to numerousguidelines regarding accounting) shouldbe adequate in our opinion.

René Bräunig:

Legislative standards for sections of theGHG emissions can be expected in thefuture and already partially exist ( e. g. EUEmission Trading Directive). Whether themarket will introduce self-regulation inconjunction with the standardisation ofGHG emissions will primarily depend onwhether investors in the future base theirinvestment decisions on GHG emissionsreporting and hence demand such regula-tion. Another factor is the extent to whichcompanies themselves consider they canbenefit from their environmental stanceand provide evidence of this through theapplication and disclosure of such gener-ally accepted standards. Such a develop-ment is likely to vary from sector to sector.

cation of GHG reduction targets, e. g.using own reduction measures (that comeat a price), purchase of “green” electricityor purchase of voluntary emission reduc-tion certificates.

René Bräunig:

In general, with regard to the reporting ofGHG emissions, we would recommenddistinguishing between industry sectors,as emissions can vary significantly acrosssuch groups. For example, the energyconsumption and the CO2 emissions ofthe previously mentioned aluminium pro-ducers constitute significant economic aswell as ecologic issues. In contrast, theseissues would normally be rather negligiblefor retail companies, with the exception offood retailers (i. e. cold chain).

In our view, a quantification of risks asso-ciated with the internal and externalreporting of GHG emissions is in general asensible idea. This would require, howev-er, a clear definition of the valuation stan-dards to be applied.

6. Do you think a standard set by anauthority is necessary or do you ratherbelieve in self-regulative capabilities ofthe market?

Joachim Ganse:

Operative standards do already exist andare currently tightened. Meanwhile a gapstill exists in the ruled linking between theoperative and the financial risk manage-ment world. This will be a field of moremature discussions in the next years andmight result in respective regulations.

A regulation over the market takes alreadyplace in markets, whose main business isthe carbon market: e. g. financial institu-tions, which require solvency and riskadditions for certain projects/emissioncertificates and project developers. So, anumber of insolvencies can be currentlyobserved amongst CDM/JI project devel-opment companies and portfolio houses.

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CO2 Risks and Valuation1

Introduction

A major goal of the Carbon DisclosureProject is to ensure transparency regard-ing the opportunities and risks presentedby companies’ own GHG emissions. Thisshould allow investors to take this infor-mation into account when making invest-ment decisions. However, the interfacebetween information preparation andinformation use has still to be clearlydefined. This section therefore introducesthe various approaches and methods forincorporating CO2 risks into the companyreview for the purposes of the capital mar-ket. Alongside theoretical considerations,the spotlight falls on how the variousmodels are presented by investmenthouse analysts. In particular, the analysesof Bernstein, CA Cheuvreux, Citigroup,Goldman Sachs, JP Morgan, Merrill Lynchand Société Générale are referred to here.The evaluation results of the analyses aresummarised later.

Valuation

Capital market-orientated valuation helpsto determine the fair value of a company.The idea of this valuation procedure is todiscount future cash flows of a companyusing a risk-adjusted adequate discountrate. Theoretical capital market modelsare typically used to determine this risk-adjusted discount rate. The Capital AssetPricing Model (CAPM) is used for this pur-pose. This equilibrium model determines afair remuneration for taking on risks on thecapital market and derives the equity cap-ital costs of a company.

Investment banks review companies usingso-called Discounted Cash Flow models(DCF). The Weighted Average Cost ofCapital (WACC) method, which is com-monly used internationally for valuation,capitalises the cash flows of a companyusing a weighted interest rate that takesinto account the capital structure, taxeffects, capital costs for debt and theopportunity costs affecting shareholders’equity.2 In addition to the reason and pur-

1 By Prof. Alexander Bassen (University of Hamburg)/Dr. Hendrik Gartz (head of the DVFA Committee Non-Financials)/Sebastian Rothe (University of Hamburg)/Felix Schnella (head of the DVFA Committee Non-Financials).

2 See Koller, T./Goedhart, M./Wessels, D.: Valuation – Measuring and Managing the Value of Companies, 4th edition, New Jersey 2005, p. 106.

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pose for the calculation, the industry-spe-cific features must be taken into accountin order to determine a fair companyvalue.3

CO2 emission trading represents a theo-retical and practical challenge for deter-mining the risks to the company valuearising from CO2 emissions within theframework of capital market theory andintegrating this into the review process.This affects the entire added value chainof a company as well as its direct CO2emissions.

CO2 Emissions as a Value Driver inPractical Analysis

The shareholder value approach highlight-ed by RAPPAPORT (1999) identifies thecompany-specific value drivers4 for deter-mining the economic value of a company,which play a key role in determining thecompany value. The strengths of individ-ual value drivers exert a direct influenceon the cash flow of a company and there-fore require in-depth analysis.5 The dia-gram (Figure 3) shows a simple value driv-er structure with a direct effect on theprofit and loss accounts of a company.Empirical studies come to the conclusionthat taxes, interest costs, overheads andrevenue are the parameters that influencecompany value to the greatest degree.

The potential for increasing a company’svalue is determined by growth and theReturn on Invested Capital (ROIC). Thelatter is derived from quotients of NetOperating Profit Less Adjusted Taxes(NOPLAT) and invested capital. As long asthe total of the growth rate and the ROICexceeds the company’s cost of capital,added value is created. The extent of theROIC is mainly dependent on the size ofthe “revenue”, “costs” and invested “capi-tal”. From the perspective of valuation,CO2 emissions influence the value drivers“revenue” and “costs” and thus have alasting impact on the financial perform-ance and the company value. Alongsidethis influence on the success of a compa-ny, the DCF model allows the influence onthe discounting factor to be identified. A

heightened risk arising from GHG emis-sions increases the beta coefficient7 andthe company value falls.

However, the influence is not merely limit-ed to producers which release emissionsduring the course of the productionprocess: growing costs for energy, rawmaterials and for implementing new tech-nologies result in a so-called “downsiderisk”. Looking at the “revenue” value driv-er from the above diagram, we can drawthe conclusion that – depending on theprice elasticity of a commodity – anincrease in CO2 costs can only be partiallypassed on to customers, if at all. The price

and quantity structure of the company tobe reviewed should be analysed individu-ally. In addition, the “operating profit mar-gin” of a company falls if, all other thingsbeing equal, cost increases relating toCO2 regulation cannot be fully passed onto the customers.

If a company does not have enough emis-sions certificates, this can be compensat-ed for by purchasing emissions rights onthe market. This brings about a price andvolume risk, as emissions certificates aretraded on the stock exchange and pricestherefore vary over time. Alongside theguideline for emissions reduction targets,the price of emissions rights certificates isinfluenced by other factors. In detail,these are the allocative mechanism, the

Figure 3: Value Drivers affecting Profit and Loss Accounts6

Value

Growth

ROIC* Cost

Capital

Revenue

* ROIC – Return on Invested Capital

3 See Drukarczyk, J.: Unternehmensbewertung, Munich 2003, p. 129.

4 RAPPAPORT lists the following value drivers: revenue growth rate, operating profit margins, profits tax rate, capital expenditure on current assets, capital expendi-ture on fixed assets, cost of capital and length of forecast period.

5 See Akalu, M: Measuring and Ranking Value Drivers: A Shareholder Value Perspective, Working Paper, Rotterdam 2005, p. 1.

6 See Koller, T./Goedhart, M./Wessels, D.: Valuation – Measuring and Managing the Value of Companies, 4th edition, New Jersey 2005, p. 424.

7 The beta coefficient of a company reflects the business risk in relation to the market risk.

ed CO2 intensity is then converted into amaximum revenue-related CO2 risk. In theprocess, the product is formed from theCO2 intensity and the certificate price.

Corresponding assumptions are made forthe price trend of the emissions certifi-cates. For phase III, i. e. for the EU certifi-cate trading period from 2013 to 2020, theEuropean Commission favours the fullauctioning of emissions rights for electrici-ty producers. Experts forecast that CO2certificates will be traded in the pricerange from 20 Euro to 65 Euro in thephase after 2012.

Furthermore, freely allocated certificatesor reduction obligations must be takeninto account. These results are thenapplied to the company’s EBITDA mar-gin.15 This results in an EBITDA-relatedCO2 risk. Finally, the ability to pass oncosts resulting from the CO2 obligations tocustomers or suppliers is examined. This“cost-shifting” depends on the marketposition of the respective company, thelegal framework conditions and price sen-sitivities. If all CO2 emissions costs thatarise within the added value chain can bepassed on to customers, the prices riseby the same percentage value.

The following calculation clarifies the pro-cedure described using energy suppliersas an example.16 In the following, the cal-culated CO2 intensity of European energysuppliers is 5,431g CO2 per Euro revenue(or in tonnes per Euro, 0.005431).17 The

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market rules of the CO2 market, the trad-able quantity of emissions certificates, thenumber of Clean Development or JointImplementation projects, fuel prices andgeneral economic growth and technologi-cal progress.8 The following table 2 con-trasts examples of positive and negativedrivers of the price of CO2:9

Emissions regulation does not necessarilyhave negative effects on profits and com-pany values. Positive effects result frominnovations, participation in the develop-ment of new markets and the ability topass on costs arising from emissions reg-ulation to customers, for example.

Indicator approach: From CO2 Intensityto CO2 Risk

One approach for integrating the risk fromdamaging greenhouse gas emissions into

the review process is to form indicators asa basis for this process.

Until now, there has been no ubiquitousstandard for the CO2 intensity indicator.As a result, various definitions of this indi-cator can be found in literature, such asthe ratio between kg CO2 and kWh. Alter-

natively, direct greenhouse gas emissionscan be compared with the fixed assets ofa company.11 In the following demonstra-tions, the “CO2 intensity” indicator12 is theratio of the total volume of CO2 emissionsover the lifetime13 of a project or productto the corresponding revenue.

The formation of indicators for reviewingpurposes can be divided into five steps.

As a first step, the CO2 intensity of a com-pany is calculated. Secondly, the calculat-

8 See Gatzen, C: The Economics of Power Storage – Theory and Empirical Analysis for Central Europe, Dissertation, Schriften des Energiewirtschaftlichen Institutsan der Universität zu Köln, Munich 2008, p. 156

9 See Labatt S./White, R.: Carbon Finance – The Financial Implications of Climate Change, New Jersey 2007, p. 208.

10 The “spark spread” is the difference between the prices of electricity and gas; the “dark spread” describes the difference between the price of electricity and coal.

11 For more information, see also the following descriptions in the section “Objectifiable, quantifiable indicators for review”.

12 Many different definitions are used for the CO2 intensity indicator in previous literature. A kg CO2-kWh ratio is also possible.

13 Due to the problems in calculating emissions during a product or project lifetime, periodical emissions are sometimes also used.

14 Diagram of the CO2 risk determination process on the basis of Société Généralé (June 2007).

15 The EBITDA margin is the ratio of EBITDA to revenue.

16 Example according to Lucas-Leclin, V./Nahal, S./Lannegrace, M.-G./Ouaknine, Y.: CREAM-ing Carbon Risk exposure, Equity research report, Société Générale, 2007.

17 The CREAM-ing Carbon Risk exposure report assesses different industries according to their CO2 risks. Energy suppliers, however, differ with regard to their powerplant portfolios and therefore also their CO2 risk. This should be taken into account accordingly during corporate review.

Figure 4: CO2 Risk Determination Process14

CO2 IntensityRevenue related

CO2 risk

Freely allocated

certificates

EBITDACO2 risk

Ability of cost shifting

Bullish Signals “+”

Colder winter and warmer summer than expected

Increasing “spark spreads” and “dark spreads”10

Low supply of emissions rights from the NAP

Political action to reduce GHGs in phase III after2012

Implementation of GHG regulation in the USA andintroduction of a cap and trade emission tradingsystem

Bearish Signals “-”

Warmer winter and colder summer than expected

Decreasing “spark spreads” and “dark spreads”

Poor checks on emissions by governments

Lack of political will to extend the Kyoto specifica-tions and reduce greenhouse gas emissions

USA renunciates from multilateral climate protec-tion agreements, emissions checks and a legalframework for a market-based emission tradingsystem

Table 2: Examples of positive and negative drivers of the price of CO2

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market price of CO2 certificates is expect-ed to amount to 23 Euro per tonne. Usingthe result of the CO2 intensity and the cer-tificate price, a revenue-related, industry-specific CO2 risk of 12.5 % can be calcu-lated. If we assume that 90 % of emissionscertificates are allocated free of charge,the adjusted CO2 certificate price amountsto 2.30 Euro per tonne. The revenue-relat-ed CO2 risk is therefore reduced to 1.25 %.The EBITDA margin is used to relate theCO2 risk to financial performance indic