Climate Leadership Index (CLI) 2006

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As in the previous two FT500 CDP reports written by Innovest (CDP2 and CDP3), they have again this year developed an index comprised of the "best in class" responses to the CDP questionnaire. Innovest have made improvements to this year's CLI by focusing exclusively on company disclosure, reducing the scope of the index to the 10 highest carbon-impact clusters1, and by better clarifying the methodology used to populate the index2.

The CLI reveals for investors which high-impact FT500 companies have the most comprehensive climate-change disclosure practices in place, judging by each company's response to the CDP questionnaire. The CLI is comprised of 50 companies3.

This year we used a 100 point scale to grade company responses to the CDP questionnaire4.

Almost by definition, each of the companies in the CLI is among the sector leaders in its responses to the climate change challenge. Not surprisingly, some industry sectors have more "best in class" respondents than others. Three caveats are, inevitably, in order:

  • The analysis is based on self-reported, non-verified responses.

  • The choice of 50 as the cut-off point for inclusion in the CLI was an arbitrary one. As with any effort made to "draw the line" at a particular point, a number of well-qualified firms have been excluded5.

  • Survey responses to the CDP are not necessarily an indication of a company's carbon disclosure through traditional corporate publication channels (e.g. annual reports, environmental reports and SEC and other regulatory filings), nor are they necessarily accurate accounts of companies' actual carbon performance.

    • The CDP4 Climate Leadership Index

    Sector Companies Total CHG Emissions
    Reported in CDP4**    		 2005 Sales
    (Millions USD)    		 CLI Score
    Automobiles and Auto Components BMW
    Ford Motor
    Renault
    Toyota Motor
    Daimler Chrysler
    		 1,169,786*
    8,400,000*
    753,133
    6,400,000
    7,800,000    		 55,034
    177,089
    48,761
    173,444
    177,365    		 85
    80
    80
    75
    75
    Banks (Asia, Europe, North America and UK & Ireland) and Diversified Financials (Asia, Europe and North America) HSBC
    Credit Suisse
    UBS
    Westpac Banking
    ANZ Banking
    ABN Amro Holding
    Barclays
    Citigroup
    Fortis
    HBOS
    ING
    		 663,126
    388,300
    531,462
    135,508
    166,698
    346,459
    207,651
    1,351,755
    143,926
    105,956
    322,000
    		 87,594
    71,379
    76,266
    14,248
    15,885
    54,665
    46,640
    119,750
    104,070
    72,275
    84,245
    		 95
    90
    90
    90
    90
    85
    85
    80
    80
    80
    80
    Beverages & Tobacco, Food Products and Food & Drug Retailing Unilever
    Cadbury Schweppes
    Diageo
    Tesco    		 3,373,059
    1,085,299
    748,000
    2,026,037    		 46,565
    11,173
    12,061
    65,424    		 95
    85
    85
    85
    Chemicals (Diversified and Specialty) Bayer
    Dow Chemical
    Praxair
    BASF
    E I du Pont de Nemours (DuPont)    		 3,900,000
    32,500,000
    13,100,000
    24,785,000
    13,550,000    		 32,300
    46,307
    7,656
    50,421
    27,516
    		 90
    85
    85
    75
    70
    Electric Power - North America FPL Group
    Entergy Corp
    Exelon
    American Electric Power
    		 66,989,986
    33,200,000
    13,607,771
    146,509,428
    		 11,846
    10,106
    15,357
    12,111
    		 85
    80
    75
    70
    Electric Utilities - International RWE
    CLP Holdings
    Kansai Electric Power
    Iberdrola
    Scottish Power    		 151,233,000
    41,478,000
    51,650,190
    22,664,394
    15,448,000    		 n/a
    4,976
    24,434
    13,846
    12,941    		 95
    90
    90
    85
    85
    Industrial Conglomerates and Industrial Machinery Siemens
    General Electric    		 2,699,000
    12,420,000
    		 90,960
    148,019    		 90
    75
    Insurance (Asia, Europe, North America and UK & Ireland) Allianz
    Swiss Re
    Marsh & McLennan
    Munich Re    		 694,000
    504,947
    192,354
    30,857*    		 109,930
    26,559
    11,652
    55,847
    		 90
    90
    85
    85
    Integrated Oil & Gas BP
    Repsol YPF
    Suncor Energy
    Total
    Royal Dutch / Shell
    Chevron    		 91,900,000
    27,580,000
    10,756,000*
    70,300,000
    105,000,000
    59,700,000    		 249,465
    n/a
    8,605
    144,638
    290,393
    184,922
    		 95
    85
    85
    85
    85
    85
    Metals & Mining and Steel Rio Tinto
    BHP Billiton
    Anglo American
    Nippon Steel
    Posco    		 27,400,000
    52,112,190
    32,400,000
    61,000,000*
    62,800,000    		 18,019
    28,513
    27,866
    31,688
    26,019
    		 95
    90
    85
    85
    85

    * Indicates data are for 2004. Unless otherwise mentioned, data are for 2005.
    ** Includes Scope 1, 2 and 3 emissions under the GHG Protocol
    Companies in red are new to the CLI in CDP4

     1We used a proprietary carbon risk model to analyze the net carbon exposure of all industry sectors represented in the FT500. On the basis of this analysis, we selected the ten industry clusters with the highest exposure to carbon risks and opportunities. While the Banks/Diversified Financial and Insurance clusters have relatively small direct emission levels, these sectors have significant exposure to climate change-driven credit risk, insurance losses and downstream liability concerns.

    2The methodology used to score company responses to CDP4 can be found in Appendix II of this online report

    3In terms of the number of companies allocated per sector, we began with 5 companies in each sector and subsequently adjusted the allocation to take into account a) the representation of the sector in the FT500; and b) the percentage of companies in each sector that responded to the questionnaire.

    4We have scored the responses of all companies that answered the CDP4 questionnaire; the scores can be found in Appendices I and II of this online report. The methodology can be found in the online version of this report.

    5Superior carbon disclosure is not necessarily an indicator of low risk exposure. Investors are urged to use performance-based and management-quality carbon research when making determinations about company or portfolio exposure to carbon risks and opportunities.