With a backdrop of regulatory uncertainty delaying strategic investment decisions, senior management are calling for greater visibility on climate change related policy in order to better anticipate the impact of regulation driven carbon markets and carbon prices.

Despite the uncertainty with regard to regulation the majority of global companies are acting to reduce their emissions. 74% are now reporting emissions reduction targets, showing companies are increasingly taking climate change mitigation seriously.

The findings published by the CDP, which represents some 385 institutional investors with $57 trillion in assets under management, also revealed the Utilities sector to be the most transparent in their reporting of greenhouse gas emissions, with 93% responding to CDP. In contrast the Oil and Gas sector (an early adopter of carbon reporting) performed relatively poorly with a response rate of just 69%.

Carbon disclosure and climate change reporting is becoming critical for investors to fully assess their risks, liabilities and opportunities within their portfolios.

"We can see from 2008 responses to CDP a marked increase in levels of engagement from companies, with more companies reporting than ever before. With increased regulation on the horizon, investors are requiring this information to better understand the credit worthiness of companies in their portfolio and how climate change might affect their profitability" said Paul Dickinson, CEO of CDP.

The report, containing analysis by Pricewaterhouse Coopers (PwC) of 1550 responses from Global 500 and US S and P 500 companies will be launched at the New York headquarters of Merrill Lynch, one of CDP's global sponsors. The event will also feature a debate between senior climate change policy advisors to presidential candidates Barack Obama and John McCain.

Global 500 (FTSE Global Equity Index Series) Findings
The overall response rate among Global 500 companies was maintained at 77% in 2008. European and North American companies set the pace among constituents of the 'Global 500' with response rates to CDP's annual Questionnaire of 81% and 78% respectively.

This compares to a response rate of just 41% in respect of Asian constituents of the Global 500. Out of the 383 companies that completed the Questionnaire, 58 companies (15%) were responding to CDP for the first time.

Business Risks and Opportunities
The majority of the 77% of Global 500 constituent companies that reported to CDP cited regulation as a key risk factor. A background of regulatory uncertainty has, for many companies, translated into a 'wait and see' policy which, in turn, has served to delay strategic investment decisions.

Regulation is also perceived as a catalyst for opportunities to:

+ Commercialize new products and services;

+ Generate additional income from emissions reduction programs via carbon credits; and

+ Invest in renewable energy projects.

The construction industry cites energy efficient buildings and energy upgrades as representing opportunities. The Technology, Media and Telecoms industry sees climate change bringing opportunities for travel substitution through teleconferencing and mobile devices to reduce greenhouse gas emissions.

Financial services firms recognize the long term impact climate change will have on the capital markets and cite the need to finance and invest in initiatives that could encourage ground-breaking changes in energy transmission and create a low carbon economy.

They also cite reputation and the credit worthiness of investments in the portfolio as key risk areas.

Numerous sectors describe physical risk factors as material. The Manufacturing sector cites temperature changes, flooding, increased storm intensity, water shortages, spread of disease and change in local weather patterns as significant physical risks.

Water supply was cited as a critical risk by the Raw Material, Mining, Paper and Packaging sector, as well as the Utilities sector, which also saw consumers becoming more aware of greenhouse gases due to rising fuel prices, which could lead to a decrease in demand.

Response rates across sectors varied and reveal that certain sectors are significantly better versed than others in disclosure practice and in the comprehension of what climate change means for their business.

Response rates across sectors ranged from:

Utilities: 93%

Retail and Consumer: 88%

Chemicals and Pharmaceuticals: 84%

Manufacturing: 77%

Technology, Media and Telecoms: 75%

Financial Services: 75%

Transport and Logistics: 73%

Raw Materials, Mining, Paper and Packaging: 72%

Oil and Gas: 69%

Construction and Building Products: 64%

Hospitality Leisure and Business Services: 60%

Reduction Targets
The majority of companies (74%) reporting stated they had emissions reductions targets in place. Within Retail, more than 90% of companies report such targets, with 75% in Chemicals and Pharmaceuticals and 68% in Oil and Gas. Within the Technology, Media and Telecoms industry, 68% have reduction targets and 44% have absolute targets (rather than intensity targets).

There are a wide range of plans for reducing emissions. The transport sector is focusing on investments in new technologies, changing travel patterns, energy efficiency and workforce education. The Utilities sector will invest further in renewables or low carbon fuel sources and improved efficiency of existing fossil fuelled plants.

The Technology, Media and Telecoms sector aims to reduce business travel, energy use and the type of energy purchased and the Hospitality, Leisure and Business Services Sector will primarily aim to reduce emissions at ship or hotel level.

Carbon Disclosure Leadership Index
PwC scored all responses based on climate change disclosure and governance practices. Global 500 companies with 'leading' disclosure practice are highlighted in the Carbon Disclosure Leadership Index (CDLI). The highest scoring companies in the CDLI include:

+ BASF; Bayer (Chemicals and Pharmaceuticals);

+ Exelon; Iberdrola; Scottish and Southern (Utilities);

+ Nissan Motor (Manufacturing);

+ Barclays; Merrill Lynch and Co., Inc; Munich Re; National Australia Bank (Financial Services) and EMC (Technology).

S and P 500 Findings
Out of the 500 US listed S and P constituent companies invited to complete CDP's Sixth Questionnaire, responses were received from 321 (64%) companies. This represents a year on year increase from 47% in 2006, through 56% in 2007. Increases in the number of responses and in the amount of detail contained in the responses from constituents of the S and P 500 is a signal that many US corporations are preparing for the possible introduction of new regulation under the next administration.

Climate change governance
A total of 248 companies (79%) reported that climate change risks require appropriate leadership. The number of companies that confirmed that a Director or executive-level officer has overall responsibility for climate change management rose to 204 (65%) compared with 141 (50%) responding companies last year. A total of 94 responding companies (30%) report some degree of linkage between employee incentives and goals related to climate change.

Action lags behind awareness
Although 254 companies (81% of respondents) perceive climate change as a risk, only 102 respondents (33%) have GHG emission reduction targets in place. This demonstrates that overall many US companies are still lagging behind their global counterparts. The gap between acknowledgement of the risks posed by climate change and positive action designed to reduce emissions needs to be closed.

Carbon Disclosure Leadership Index
US companies were also graded and the top scorers within the US Carbon Disclosure leadership Index were:

+PPG Industries (Chemicals and Pharmaceuticals);

+Exelon (Utilities);

+Citigroup; Merrill Lynch and Co., Inc. (Financial Services);

+Cisco; EMC (Technology, Media and Telecoms); and

+Prologis (Hospitality, Leisure and Business Services).

Carbon Disclosure Leadership Index: 67 Global 500 companies feature in the Global CDLI showing distinction in their responses to the Carbon Disclosure Project Questionnaire based on their reporting of greenhouse gas emissions, associated risks and opportunities and emissions reduction targets. The Global CDLI includes the top 34 companies in the non carbon intensive sectors and the top 33 in the carbon intensive sectors.

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