Top European Companies Not Managing Climate Change Risks

Monday, 11 January 2010
By Susan Drury

Leading European companies with a total market capitalisation of €1.2 trillion are failing to address the climate change risks to which they are exposed, according to a major new report from EIRIS the responsible investment research specialists.

Climate change has the potential to seriously impact shareholder value and affects businesses across all sectors of the economy.

The EIRIS 2010 European Climate Change Tracker, focuses on key parameters enabling investors to understand the extent to which efforts to tackle climate change are embedded within a company's culture. These parameters include product impacts, long-term targets, executive remuneration and disclosure.

The report highlights a number of key findings:

  • A third of Europe's biggest 300 companies are having significant climate change impact, of these around two-thirds are inadequately managing the climate change risks they face. Moreover corporate responses to climate change vary between European countries. The best performers are from the most economically powerful European countries - the UK, Germany and France.
  • Although 97% of those European companies with potential product impact have a product policy committment, only 10% have these targets in place to address impacts arising from products.
  • Performance-based compensation can incentivise company leaders to improve corporate climate change performance - 62% of high climate change impact companies are already linking performance-based remuneration with emissions reduction initiatives.
  • Long-term targets are a key to effective climate change management - 55% of large climate change impact companies in the FTSE Eurofirst 300 have long-term targets in place.
  • High impact industries like oil & gas and electricity contain the lowest proportion of companies with long-term climate targets in place.

"We urge investors to exert their influence and engage for long-term targets, identify and respond to portfolio risk, encourage companies to consider product strategies and their product impact on climate change and increase their investment in climate change solutions," said Peter Webster, Executive Director at EIRIS.

There are some improvements though with evidence that regulation and the increasing engagement activity of investors on climate change is driving companies to focus more attention on the climate change risks and opportunities they face.

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