A record number of investors are targeting companies to report on key sustainability issues like climate change, forestry and water, with environmental disclosure platforms CDP finding that companies are more likely to disclose information when directly engaged by financial institutions rather than coalitions or groups. Source: Timberbiz
That is the key message from CDP’s 2022 Non-Disclosure Campaign, which explored the impact that investor engagement has on companies and how willing they are to disclose environmental information.
The Non-Disclosure Campaign was launched in 2017 and CDP states that a record 260 financial institutions with nearly US$30trn in assets participated last year. This is a 56% increase compared with 2021 levels.
The investors noted that direct engagement with corporates can lead to better disclosure returns. Investors engaged with almost 1,500 companies across 30 countries to report on key issues like climate change, forests and water security. The latest data found that 26% of companies responded and that companies covered every sector, ranging from manufacturing to fossil fuels and hospitality to health care.
While this level seems low, CDP notes that this direct route of engagement is leading to better disclosure from corporates. Around 90% of companies that were asked to disclose in 2021 and did so, for example, responded again in 2022.
Companies were also 2.3 times more likely to respond when directly engaged by financial institutions compared with a control group.
While emissions-related disclosure is becoming more common for corporates with science-based targets, CDP’s new data has found that more financial institutions are asking for data on water and forestry.
The number of companies asked to report on forests and water security increased by 35% and 51% respectively last year. Disclosure rates across these categories were also up, with companies targeted on forests being 3.2 times more likely to respond and 2.2 times for water security.
“This campaign shows the power of direct engagement. Financial institutions are more aware of their role in tackling the economic threats posed by the climate and nature crises,” CDP’s global director of capital markets Claire Elsdon said.
“By pushing companies in their portfolio to disclose – some of which have huge environmental impacts – they can kickstart a fundamental and positive change in how businesses operate.”
CDP also revealed its annual ‘A-Lists’ of corporates leading on environmental disclosures for 2022. Some 330 businesses were on the ‘A-Lists’ for 2022.
The ‘A-Lists’ recognise the businesses that are leading the way in terms of disclosing and reducing their climate, forest and water impacts. More than 18,700 businesses report information on at least one of these topics through the CDP platform.
However, CDP noted that almost 30,000 large businesses, collectively worth US$25trn, failed to answer its requests for information last year.
There was only a 4% increase in the number of forest A-List companies this year and the number of water security A-Listers actually decreased from 118 in 2021 to 103 this year. Only 1.3% of the companies asked to disclose climate, forests and water-related information received a mention on all three A-Lists.
