Jun 19, 2023
CDP is a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts.
Ninety One hosted the CDP UK Signatory Day in our London offices in May. Fascinating discussions took place on the importance of comprehensive environmental disclosure to spur action by companies.
You can learn more about CDP here.
How do professional investors and asset management firms use emissions data? And how does sustainability reporting need to evolve to meet the needs of today’s investors? Members of the Ninety One team shared their insights and experiences at a ‘CDP Signatory Day’ in May. We highlight seven key takeaways below.
The discussion featured Sam Anthony, Analyst, Sustainable Equity; Annika Brouwer, Sustainability Specialist; Stephanie Niven, Portfolio Manager, Sustainable Equity; Daisy Streatfeild, Sustainability Director.
A core element of Ninety One’s net-zero strategy is to work with the highest-emitters in our portfolios. We use CDP carbon data to help us evaluate these companies’ transition plans, compare them against peers, and develop engagement strategies. Specifically, CDP data is a key input into our proprietary Transition Plan Assessment tool, through which we can assess companies on three key principles: level of net-zero ambition, credibility of transition plan, and implementation of plan.
There is less carbon data available in emerging markets generally, and CDP reporting is less common (though developed market reporting is still far from perfect). The existing data is still extremely useful – it’s a valuable input into our analysis of companies in emerging markets, just as it is in developed markets. But the continued growth of CDP reporting in emerging markets will help investors get a clearer picture of carbon risks and potential opportunity in regions that have more significant data gaps – and that the world needs to transition successfully to net zero.
Completing CDP reporting can be time-consuming and expensive, especially for a company collecting data for the first time and where a company may conduct a variety of activities in multiple countries. To close the carbon-data gap between developed and emerging nations, the Ninety One team suggests that a more incremental approach to CDP disclosure may be beneficial – whereby companies could report increasing detail over time.
Because it is detailed and consistent, CDP data is often more useful than companies’ own sustainability and annual reports for Ninety One’s investment professionals. Members of Ninety One’s Sustainable Equity team, for example, often use CDP carbon data in their research – both to evaluate companies’ carbon-risk exposure, and to identify companies that are positively exposed to structural-growth tailwinds linked to decarbonisation.
Having access to structured data for carbon avoided – also known as Scope 4, a measure of how much a company’s products and/or services save emissions relative to the traditional alternative – is becoming increasingly useful. Specifically, it helps Ninety One’s investment professionals to identify companies that are enabling the net-zero transition and to evaluate their contribution to decarbonisation.
Ninety One’s investment teams increasingly use CDP data on forests, water and other aspects of sustainability beyond carbon to inform their investment analysis. The Sustainable Equity team finds that having qualitative data alongside the quantitative data in the CDP reports is particularly valuable in these areas. For example, just knowing the number of hectares of land a company has conserved may not be valuable without also knowing why the company chose to conserve that area. Unlike companies’ own publications, CDP reporting consistently provides qualitative detail supporting the quantitative elements.
Care is needed not to overload companies with unnecessary requests to provide vast amounts of data. This is particularly true for reporting on nature and biodiversity, the materiality of which is often sector, region or even company-specific. The development of a ‘materiality approach’ to CDP reporting (and sustainability reporting more broadly), whereby companies only report on the areas relevant to their businesses, would help to strike a balance between generating valuable data and making the CDP reporting process viable for more companies.