Carbon Disclosure Project Report 2007 Asia ex-japan

Transcription

1 Report 2007 Asia ex-japan On behalf of 315 investors with assets of $41 trillion Report written by ASrIA by ASrIA with Analysis by Trucost ASrIA project work funded by ASrIA project work funded by The Sigrid Rausing Trust Carbon Disclosure Project (CDP) Paul Dickinson The Sigrid Rausing Trust

2 Carbon Disclosure Project 2007 This report is based on submissions of the Asia80 companies in response to the fifth information request sent by the Carbon Disclosure Project (CDP5) on 1st February This summary report, the full report and all responses from corporations are available without charge from The contents of this report may be used by anyone providing acknowledgment is given. CDP Members 2007 In 2007, CDP launched a Membership option for signatories. CDP Membership allows signatories to have a leading role in the development of CDP and gives the ability to perform improved comparative analysis of company responses through the new online database. The following investors are CDP Members in 2007: ABN AMRO Bank N.V. Netherlands ABP Investments Netherlands AIG Investments U.S. ASN Bank Netherlands AXA Group France BlackRock U.S. BNP Paribas Asset Management (BNP PAM) France BP Investment Management Limited UK Caisse de Dépôts et Placements du Québec Canada Caisse des Dépôts France California Public Employees Retirement System U.S. California State Teachers Retirement System U.S. Calvert Group U.S. Canada Pension Plan Investment Board Canada Catholic Super Australia Ethos Foundation Switzerland Folksam Sweden Generation Investment Management UK Hermes Investment Management UK HSBC Holdings plc UK KLP Insurance Norway London Pensions Fund Authority UK Merrill Lynch U.S. Morgan Stanley U.S. Morley Fund Management UK Neuberger Berman U.S. Newton Investment Management Limited UK Pictet Asset Management Switzerland Rabobank Netherlands Robeco Netherlands SAM Group Switzerland Schroders UK Signet Capital Management Ltd UK Sompo Japan Insurance Inc. Japan Swiss Reinsurance Company Switzerland The Ethical Funds Company Canada The RBS Group UK Zurich Cantonal Bank Switzerland Association for Sustainable & Responsible Investment in Asia

3 CDP Signatories investors were signatories to the CDP5 information request dated 1st February 2007 including: Aachener Grundvermogen Kapitalanlagegesellschaft mbh Germany Aberdeen Asset Managers UK ABN AMRO Bank N.V. Netherlands ABP Investments Netherlands ABRAPP - Associação Brasileira das Entidades Fechadas de Previdência Complementar Brazil Acuity Investment Management Inc Canada Aegon N.V. Netherlands Aeneas Capital Advisors U.S. AIG Investments U.S. Alcyone Finance France Allianz Group Germany AMP Capital Investors Australia AmpegaGerling Investment GmbH Germany ANBID - National Association of Brazilian Investment Banks Brazil ASN Bank Netherlands Astra Investimentos Ltda Brazil Australia and New Zealand Banking Group Limited Australia Australian Ethical Investment Limited Australia Australian Reward Investment Alliance (ARIA) Australia Aviva plc UK AXA Group France Baillie Gifford & Co. UK Banco Bradesco S.A. Brazil Banco do Brazil Brazil Banco Fonder Sweden Banco Pine S.A. Brazil Bank Sarasin & Co, Ltd Switzerland Barclays Group UK BayernInvest Kapitalanlagegesellschaft mbh Germany BBC Pension Trust Ltd UK Beutel Goodman and Co. Ltd Canada BlackRock U.S. BMO Financial Group Canada BNP Paribas Asset Management (BNP PAM) France Boston Common Asset Management, LLC U.S. BP Investment Management Limited UK Brasilprev Seguros e Previdencia S.A. Brazil British Coal Staff Superannuation Scheme UK British Columbia Investment Management Corporation (bcimc) Canada BT Financial Group Australia BVI Bundesverband Investment und Asset Management e.v. Germany CAAT Pension Plan Canada Caisse de Dépôts et Placements du Québec Canada Caisse des Dépôts France Caixa Economica Federal Brazil California Public Employees Retirement System U.S. California State Teachers Retirement System U.S. California State Treasurer U.S. Calvert Group U.S. Canada Pension Plan Investment Board Canada Canadian Friends Service Committee Canada Carlson Investment Management Sweden Carmignac Gestion France Catholic Superannuation Fund (CSF) Australia CCLA Investment Management Ltd UK Central Finance Board of the Methodist Church UK Ceres U.S. CERES-Fundação de Seguridade Social Brazil Cheyne Capital Management (UK) LLP UK Christian Super Australia CI Mutual Funds Signature Funds Group Canada CIBC Canada Citizens Advisers Inc U.S. ClearBridge Advisers Social Awareness Investment U.S. Close Brothers Group plc UK Comité syndical national de retraite Bâtirente Canada CommerzbankAG Germany Connecticut Retirement Plans and Trust Funds U.S. Co-operative Insurance Society UK Credit Agricole Asset Management France Credit Suisse Switzerland Daegu Bank South Korea Daiwa Securities Group Inc. Japan Deka FundMaster Investmentgesellschaft mbh Germany Deka Investment GmbH Germany DekaBank Deutsche Girozentrale Germany Delta Lloyd Investment Managers GmbH Germany Deutsche Bank Germany Deutsche Postbank Privat Investment Kapitalanlagegesellschaft mbh Germany Development Bank of Japan Japan Development Bank of the Philippines (DBP) Philippines Dexia Asset Management France DnB NOR Norway Domini Social Investments LLC U.S. DPG Deutsche Performancemessungs- Gesellschaft fur Wertpapierportfolio mbh Germany DWS Investment GmbH Germany Environment Agency Active Pension Fund UK Epworth Investment Management UK Erste Bank der Oesterreichischen Sparkassen AG Austria Ethos Foundation Switzerland Eureko B.V. Netherlands Eurizon Capital SGR Italy Evli Asset Management Finland F&C Asset Management UK FAELCE - Fundação Coelce de Seguridade Social Brazil FAPES - Fundação de Assistencia e Previdencia Social do BNDES Brazil Fédéris Gestion d Actifs France FIPECq - Fundação de Previdência Complementar dos Empregados e Servidores Brazil First Affirmative Financial Network, LLC U.S. First Swedish National Pension Fund (AP1) Sweden FirstRand Ltd. South Africa Five Oceans Asset Management Pty Limited Australia Folksam Sweden Fondaction Canada Fonds de Reserve pour les Retraites - FRR France Fortis Investments Belgium

4 Fourth Swedish National Pension Fund, AP4 Sweden Frankfurt Trust Investment-Gesellschaft mbh Germany Frankfurter Service Kapitalanlage- Gesellschaft mbh Germany Franklin Templeton Investment Services GmbH Germany Frater Asset Management South Africa FUNCEF Brazil Fundação Assistencial e Previdenciária da Extensão Rural no Rio Grande do Sul- FAPERS Brazil Fundação Atlântico de Seguridade Social Brazil Fundação Banrisul de Seguridade Social Brazil Fundação CESP Brazil Fundação Codesc de Seguridade Social Brazil Fundação Copel de Previdência e Assistência Social Brazil Fundação Corsan - dos Funcionários da Companhia Riograndense de Saneamento Brazil Fundação Real Grandeza Brazil Fundação Rede Ferroviaria de Seguridade Social - Refer Brazil Fundação São Francisco de Seguridade Social Brazil Fundação Vale do Rio Doce de Seguridade Social - VALIA Brazil Gartmore Investment Management plc UK Generation Investment Management UK Genus Capital Management Canada Gjensidige Forsikring Norway Goldman Sachs & Co. U.S. Green Century Capital Management U.S. Green Kay Asset Management UK Groupe Investissement Responsable Inc. Canada Guardians of New Zealand Superannuation New Zealand Hastings Funds Management Limited Australia Helaba Invest Kapitalanlageggesellschaft mbh Germany Henderson Global Investors UK Hermes Investment Management UK HESTA Super Australia Hospitals of Ontario Pension Plan (HOOPP) Canada HSBC Holdings plc UK I.DE.A.M - Integral Development Asset Management France Ilmarinen Mutual Pension Insurance Company Finland Indexchange Investment AG Germany Industry Funds Management Australia ING Investment Management Europe Netherlands Inhance Investment Management Inc Canada Insight Investment Management (Global) Ltd UK Instituto Infraero de Seguridade Social - INFRAPREV Brazil Instituto Sebrae De Seguridade Social - SEBRAEPREV Brazil Interfaith Center on Corporate Responsibility U.S. Internationale Kapitalanlagegesellschaft mbh Germany Jarislowsky Fraser Limited Canada Jupiter Asset Management UK KBC Asset Management NV Belgium KLP Insurance Norway KPA AB Sweden La Banque Postale AM France LBBW - Landesbank Baden-Württemberg Germany Legal & General Group plc UK Libra Fund U.S. Light Green Advisors, LLC U.S. Local Authority Pension Fund Forum UK Local Government Superannuation Scheme Australia Lombard Odier Darier Hentsch & Cie Switzerland London Pensions Fund Authority UK Macif Gestion France Maine State Treasurer U.S. Man Group plc UK Maryland State Treasurer U.S. Meag Munich Ergo Kapitalanlagegesellschaft mbh Germany Meeschaert Asset Management France Meiji Yasuda Life Insurance Company Japan Meritas Mutual Funds Canada Merrill Lynch U.S. Metzler Investment Gmbh Germany Midas International Asset Management South Korea Mitsubishi UFJ Financial Group (MUFG) Japan Mitsui Sumitomo Insurance Co Ltd Japan Mizuho Financial Group, Inc. Japan Monte Paschi Asset Management S.G.R. - S.p.A Italy Morgan Stanley Investment Management U.S. Morley Fund Management UK Munchner Kapitalanlage AG Germany Munich Re Group Germany National Australia Bank Limited Australia National Bank of Kuwait Kuwait National Pensions Reserve Fund of Ireland Ireland Natixis France Nedbank Group South Africa Needmor Fund U.S. Neuberger Berman U.S. New York City Employees Retirement System U.S. New York City Teachers Retirement System U.S. New York State Common Retirement Fund U.S. Newton Investment Management Limited UK NFU Mutual Insurance Society UK Nikko Asset Management Co., Ltd. Japan Norinchukin Zenkyouren Asset Management Co., Ltd Japan Northern Trust U.S. Old Mutual plc UK Ontario Municipal Employees Retirement System (OMERS) Canada Ontario Teachers Pension Plan Canada Opplysningsvesenets fond (The Norwegian Church Endowment) Norway Oregon State Treasurer U.S. Orion Energy Systems, Ltd U.S. Pax World Funds U.S. Pension Plan for Clergy and Lay Workers of the Evangelical Lutheran Church in Canada Canada PETROS - The Fundação Petrobras de Seguridade Social Brazil PGGM Netherlands Phillips, Hager & North Investment Management Ltd. Canada Association for Sustainable & Responsible Investment in Asia

5 PhiTrust Active Investors France Pictet Asset Management Switzerland Pioneer Investments Kapitalanlagegesellschaft mbh Germany Portfolio 21 and Progressive Investment Management U.S. Portfolio Partners Australia Prado Epargne France PREVI Caixa de Previdência dos Funcionários do Banco do Brasil Brazil Prudential Plc UK PSP Investments Canada Rabobank Netherlands Railpen Investments UK Rathbone Investment Management / Rathbone Greenbank Investments UK Reynders McVeigh Capital Management U.S. RLAM UK Robeco Netherlands Rock Crest Capital LLC U.S. Royal Bank of Canada Canada SAM Group Switzerland Samsung Investment Trust Management Co., Ltd. South Korea Sanlam Investment Management South Africa Sauren Finanzdienstleistungen GmbH & Co. KG Germany Savings & Loans Credit Union (S.A.) Limited. Australia Schroders UK Scotiabank Canada Scottish Widows Investment Partnership UK SEB Asset Management AG Germany Second Swedish National Pension Fund (AP2) Sweden Seligson & Co Fund Management Plc Finland Service Employees International Union U.S. Seventh Swedish National Pension Fund (AP7) Sweden Shinhan Bank South Korea Shinkin Asset Management Co., Ltd Japan Shinsei Bank Japan Siemens Kapitalanlagegesellschaft mbh Germany Sierra Club Mutual Funds U.S. Signal Iduna Gruppe Germany Signet Capital Management Ltd UK SNS Asset Management Netherlands Société Générale France Société Générale Asset Management UK UK Sompo Japan Insurance Inc. Japan Standard Chartered PLC UK Standard Life Investments UK State Street Corporation U.S. State Treasurer of North Carolina U.S. Storebrand Investments Norway Stratus Banco de Negócios Brazil Sumitomo Mitsui Financial Group Japan Sumitomo Trust & Banking Japan Superfund Asset Management GmbH Germany Swedbank Sweden Swiss Reinsurance Company Switzerland Swisscanto Switzerland TD Asset Management Inc. and TD Asset Management USA Inc. Canada Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA- CREF) U.S. Terra Kapitalforvaltning ASA Norway TfL Pension Fund UK The Bullitt Foundation U.S. The Central Church Fund of Finland Finland The Collins Foundation U.S. The Co-operative Bank UK The Co-operators Group Ltd Canada The Daly Foundation Canada The Dreyfus Corporation U.S. The Ethical Funds Company Canada The Local Government Pensions Institution (LGPI)(keva) Finland The RBS Group UK The Russell Family Foundation U.S. The Shiga Bank, Ltd (Japan) Japan The Standard Bank Group Limited South Africa The Travelers Companies, Inc. U.S. The United Church of Canada - General Council Canada The Wellcome Trust UK Third Swedish National Pension Fund (AP3) Sweden Threadneedle Asset Management UK Tokio Marine & Nichido Fire Insurance Co., Ltd. Japan Trillium Asset Management Corporation U.S. Triodos Bank Netherlands Tri-State Coalition for Responsible Investing U.S. UBS AG Switzerland Unibanco Asset Management Brazil UniCredit Group Italy Union Asset Management Holding Germany Unitarian Universalist Association U.S. United Methodist Church General Board of Pension and Health Benefits U.S. Universal Investment Gesellschaft mbh Germany Universities Superannuation Scheme (USS) UK Vancity Group of Companies Canada Vermont State Treasurer U.S. VicSuper Proprietary Limited Australia Vital Forsikring ASA Norway Wachovia Corporation U.S. Walden Asset Management, a division of Boston Trust and Investment Management Company U.S. Warburg-Henderson Kapitalanlagegesellschaft mbh Germany West Yorkshire Pension Fund UK WestLB Mellon Asset Management (WMAM) Germany Winslow Management Company U.S. YES BANK Limited India York University Pension Fund Canada Zurich Cantonal Bank Switzerland

6 Executive Summary The goal of the Carbon Disclosure Project is to facilitate a dialogue, supported by quality information, from which a rational response to climate change will emerge. In 2007, this dialogue between Asian companies and global investors took a significant step forward. CDP5 includes responses from 44 Asia ex-japan companies and, for the first time, offers compelling insights into Asian companies emerging policy responses to climate change. This is meaningful because most of these companies do not have the benefit of government policy guidance or carbon trading markets which would create transparent price incentives for action. Instead, they are responding to a range of pressures from customers, competitors, investors, and global regulators which promise to shape their long-term competitiveness. In CDP5, the most important trends reflect the growing breadth and depth of the responses In CDP5, the most important trends reflect the growing breadth and depth of the responses. Although Asia continues to have the lowest regional response rate within the CDP universe at 26%, our new sample in 2007 attracted responses from a range of leading Asian companies. Stated simply, it will matter to the Asian climate change debate what companies like Posco, TSMC, ICBC, Cathay Pacific, Siam Cement, and Infosys decide to do about their carbon emissions. They are country champions and important global brand names. For investors, the key conclusions to emerge from ASrIA s analysis of the 2007 CDP responses are: Rising Materiality A range of Asian companies are providing more material responses which describe strategic business initiatives to curtail carbon emissions or develop new process and product strategies; New Industry Resources Companies working on climate change strategies often rely on industry associations and global NGOs to provide guidance on carbon disclosure and policy options; Governance Matters Corporate governance and the degree of top management engagement are critical determinants in the management and disclosure of carbon emissions and the development of formal initiatives; Watch Korea and India Korean companies are the Asian leaders in more comprehensive carbon reporting while Indian companies were the largest group of new respondents; and Tech and Telecoms Lead, Banks and Utilities Lag The quality and quantity of responses from Asia s tech and telecoms companies is notable, while Asia s banks and utilities lag their global counterparts in responding to CDP. CDP5 also provides some valuable insights into future Asian climate change reporting and strategy development. In particular, thanks to the increase in the Asian sample in 2007, we have more tools to assess peer group competition on carbon fundamentals. With initial responses from a sample of Chinese stateowned enterprises in 2006 and 2007, it appears that the CSR reporting process Association for Sustainable & Responsible Investment in Asia

7 which China s leading companies are beginning to embrace may provide new disclosures on carbon emissions. And finally, the 2007 responses offer initial data points on the growing impact of supply chain carbon reporting initiatives and global sector initiatives affecting sectors like airlines and technology. Taken together, these developments suggest that CDP continues to act as a valuable catalyst and to identify important leading indicators. CDP5 Asian Metrics Companies surveyed 166 Response rate 26% Highest response rate by country India 42% Korea 36% Highest response rate by sector Telecoms 50% IT 45% Country with largest # of new respondents Country with largest # of emissions disclosures India Korea Respondents discussing CDM projects 17 Respondents with strategic initiatives 9 Most comprehensive response Largest new respondent CLP ICBC

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9 Contents Investment Trends From 1-D to 2-D Asian Responses Becoming More Strategic Industry Associations and NGOs Providing the Key Resources Top Management Engagement in Issues Only Just Emerging Country Focus Quantity versus Quality Sector Focus Two Leaders, Two Laggards Asian Bankers Waiting for Guidance Asian Utilities Hiding Under a Cloud Asia s Tech Players New Carbon Sophistication Can You Hear Us Now? Country Regulations Data Analysis Veteran and New Participation Market Capitalization Regional Assessment Sector Assessment India versus Korea Governance Matters Quantitative Disclosure The Carbon Disclosure Project Appendices Appendix I CDP5 Questionnaire Appendix II Glossary Appendix III Asia ex-japan Companies

10 The better respondents in 2007 provided clear examples of a move from awareness to action, with comprehensive carbon policies driving investment, new products, and technology development.

11 Investment Trends Materiality Rising In 2006, our CDP Asia report highlighted the crucial role of country-specific government policy in shaping carbon disclosure trends, Korea's positive and relatively distinct policy initiatives, and the reporting challenges faced by Asia's conglomerates. In 2007, with an expanded sample, we see greater dispersion in the results both in terms of response quality and in terms of materiality. The most positive trend is that a meaningful sub-set of respondents in countries like Korea are producing increasingly strategic responses which link carbon reporting disciplines to more fundamental business decisions. Asian companies are also beginning to respond to a broader range of catalysts for carbon reporting, including a new focus on customer concerns, which have the potential to spur new investment and product development trends. While Asian governments retain a powerful role in establishing incentives for carbon emissions reporting, local and global industry associations are emerging as a critical source of guidance for Asian companies seeking to respond to climate change issues responses link carbon reporting to business decisions At the country level, Korean respondents continue to demonstrate broad-based programs. The Indian portion of our sample saw the highest increase in response rates, but many represent an initial and incomplete effort. At the sector level, responses by Asian financials lag their global counterparts by a large margin with low response rates and a limited understanding of the role which the finance sector can play in shaping a country's sustainability footprint. By contrast, Asia's leading tech and telecom companies are developing carbon policies as a natural extension of their environmental management systems (EMS) and reporting strategies. Asia's largest emitters thermal power generators are largely absent from this year's sample with the exception of a handful of higher level reporters such as Hong Kong's CLP Holdings. Responding companies in CDP5, Asia ex-japan China China Unicom Hong Kong CNOOC Ltd Hang Seng Bank Ltd Industrial & Commercial Bank of China, Asia Ltd Cathay Pacific Airways Ltd MTR Corp Swire Pacific Ltd CLP Holdings Hong Kong Electric Holdings Ltd India Maruti Udyog Ltd ITC Ltd Oil & Natural Gas Corporation Ltd ICICI Bank Ltd Housing Development Finance Corporation Ltd Reliance Capital Punj Lloyd Ltd Wipro Ltd Bharat Heavy Electricals Ltd Infosys Technologies Ltd Tata Steel Ltd Bharti Airtel Ltd National Thermal Power Indonesia PT Astra International Sector Telecommunication Services Energy Financials Financials Air Transport Industrials Industrials Utilities Utilities Consumer Discretionary Consumer Staples Energy Financials Financials Financials Industrials Information Technology Industrials Information Technology Materials Telecommunication Services Utilities Consumer Discretionary 1

12 From 1-D to 2-D Asian Responses Becoming More Strategic New disclosures on investment, products, and technology development The most positive trend in this year's Asian CDP responses was the shift toward disclosure of more strategic corporate policies linked to climate change. The better respondents in 2007 provided clear examples of a move from awareness to action, with comprehensive carbon policies driving investment, new products, and technology development. The underlying theme is that although climate change remains a relatively new policy area in Asia, leading companies are now taking the initiative and positioning themselves to capitalize on a shift in policy and growing consumer awareness. Posco Posco is poised to significantly lower the carbon-intensity of its future steel-making facilities with the commercialization of its FINEX and strip casting steel production methods, which are significantly more energy efficient than conventional methods. The FINEX and strip casting technologies have been the focus of heavy R&D investment since 1989 and the first facility with the new streamlined production process is now in operation. Swire Pacific Swire reports that in conjunction with the government of Hong Kong, it has been running a pilot program at several landfill sites to capture methane and direct it to the local power grid. Already successful on one of its landfills, Swire is currently exploring ways to make use of methane from other landfills under its management for power generation. Cathay Pacific Cathay Pacific Airlines, a subsidiary of Swire, plans to address climate change by offering purchasable carbon offsets to its customers and developing more energyefficient flight paths. With a limited palette of emissions reduction approaches in the airline industry, these two efforts underscore Cathay s growing focus on welldefined initiatives. Offering credits to customers has the potential to be a tangible, Responding companies in CDP5, Asia ex-japan Korea Hyundai Motor Company Ltd S-Oil Corp Shinhan Financial Group Company Ltd Hynix Semiconductor Inc LG Philips LCD Samsung Electronics Co Ltd Posco KT Corp SK Telecom Company Ltd Korea Electric Power Corp Malaysia Malayan Banking Singapore CapitaLand Ltd Overseas Chinese Banking Singapore Airlines Ltd Taiwan Acer Inc. Delta Electronics Taiwan Semiconductor Manufacturing Co Ltd United Microelectronics Chunghwa Telecom Co Ltd Thailand PTT Public Company Ltd Siam Cement Consumer Discretionary Energy Financials Information Technology Information Technology Information Technology Materials Telecommunication Services Telecommunication Services Utilities Financials Financials Financials Air Transport Information Technology Information Technology Information Technology Information Technology Telecommunication Services Energy Materials 2 Association for Sustainable & Responsible Investment in Asia

13 easy access method that would permit consumers to partner with Cathay to reduce their carbon footprint. By contrast, developing more direct flight paths through international efforts is an operational solution with a lower profile but of greater value to underlying emissions reduction. CapitaLand CapitaLand, one of Singapore's leading property developers, has established a range of green building initiatives. Under the auspices of the company's Green Committee, the Green Building Program has implemented guidelines that promote best practices throughout the lifecycle of each project undertaken by CapitaLand. These guidelines focus on improved energy efficiency through more environmentally friendly design, architecture, and environmental management systems (EMS). With new green building standards on the way in Singapore, CapitaLand's demonstrated track record in green design has the potential to provide a strategic edge. While the companies above stood out for their initiatives to develop innovative products, services, and technologies, a second tier of respondents is poised to progress in coming years as their systems and analytical efforts mature. Although commentary was often limited, it is evident that a number of respondents are in the early stages of implementing or assessing CDM projects, evaluating investments in renewable energy, and establishing environmental management systems to address potential methods to respond to shifting consumer needs. Still in the preliminary phase of the process, the responses of these companies were not necessarily data-rich. They do, however, indicate the incremental stages necessary to system-wide climate change engagement. A second tier of respondents is building project capacity Table 1. Company Climate Change Initiatives 3

14 Industry Associations and NGOs Providing the Key Resources Industry associations filling the policy gap One new trend clearly apparent in the CDP5 is a growing reliance by Asian respondents on industry associations for guidance on carbon reporting and management strategies. The industry associations appear to be filling a vacuum created by limited government initiatives with a growing body of global research on best practice responses at the industry level in regards to climate change. Companies in Asia typically lack consistent drivers for responding to climate change and resources to clarify emerging standards. By contrast, in the EU, companies seeking to respond to climate change issues benefit from high levels of disclosure, stronger regulatory incentives, heavy monitoring requirements and growing shareholder feedback. Under the Kyoto Protocol, Asian countries, as developing markets, are recognized as being vulnerable to adverse economic impacts of climate change and are therefore not required to meet carbon emissions caps. As a result, only Japan faces binding emissions reduction targets and is included in the rules which support international emissions trading. Most Asian government policies, directives, and regulatory systems related to carbon emissions and climate change are embryonic, featuring headline policy statements but limited signs of implementation. In addition, initial policy frameworks typically have a flexible timeframe and are often overlooked if the policy focus shifts to industrial development, which may conflict with efforts to restrict the growth of carbon emissions or improve energy efficiency. Tech and building materials companies linking up with global initiatives As a result, Asian companies, especially those in globally competitive export sectors such as technology and building materials are increasingly relying on industry associations to shape their emerging carbon emissions policy responses. Some of the more frequently named associations are local, but there is strong representation from international groups, many of which can provide a tested roadmap for sector-specific carbon emissions reporting. The World Business Council for Sustainable Development (WBCSD) has emerged as one common resource for companies developing a response to climate change issues. Eight different companies from China, Hong Kong, Korea, Thailand and Taiwan make reference to either being members of WBCSD, following its guidelines, or using its carbon calculation methodology. This represents 18% of the responding sample. For example, the president of PTT Public Company in Thailand is a council member of the Thailand Business Council for Sustainable Development (TBCSD) and is, as a result, committed to advocating BCSD policy positions, co-chairing working groups, and ensuring the adoption of sustainable management practices within PTT. Notable references to participation in industry groups appeared in the following responses: Siam Cement (WBCSD Cement Initiative) Siam Cement Group (SCG) notes that the Thai government has not yet established policies and regulatory requirements directly related to climate change. Nonetheless, SCG has implemented voluntary specific net greenhouse gas (GHG) reduction targets in order to track internal performance and respond to concerned stakeholders such as local NGOs, WBCSD, and the government. SCG participates in the WBCSD Cement Sustainability Initiative which requests all members to set direct carbon emissions reduction targets. TSMC and UMC (TSIA) Four of CDP5's five Taiwan responses are from technology companies, three of which referenced participation in industry group efforts. Both Taiwan Semiconductor Manufacturing Co. Ltd (TSMC) and United Microelectronics (UMC), the two largest semiconductor companies in Taiwan are members of the Taiwan Semiconductor Industrial Association (TSIA), which is a member of the World Semiconductor Council (WSC). 4 Association for Sustainable & Responsible Investment in Asia

15 A key program of the WSC calls for members to reduce perfluorocarbon (PFC) emissions by at least 10% by 2010, even as semiconductor production is increasing. PFCs have 6,500 times the greenhouse warming potential of carbon dioxide (IPCC 2001). As a result, Taiwan's largest semiconductor players are committed through the TSIA and WSC to the PFC reduction program and the external verification of PFC emissions data. Cathay Pacific (IATA) Cathay Pacific is a member of the International Air Transport Association (IATA) which advocates a global carbon trading scheme for aviation. In response to an estimate by IATA that inefficient air traffic management is responsible for losses amounting to 12% of total fuel consumption, Cathay states that it works closely with IATA, the Mainland Chinese authorities, and partners in the airline industry to help optimize airspace and flight procedures in the region. Cathay also supports IATA's fuel efficiency goals and has a representative on IATA's Environmental Committee. CNOOC (API) CNOOC, the third largest National Oil Company (NOC) in China and the leader in petroleum exploration and production, uses the American Petroleum Institute's (API) SANGEA software to measure and report GHG emissions. Originally developed by Chevron Texaco and donated to the API, this program is designed to assist petroleum companies with estimating, managing, and reporting GHG emissions by aggregating the GHG data received and providing an industry-wide snapshot of emissions levels for reporting entities. GHG calculator developed by Chevron and used by CNOOC Korea A Model of Government-Industry Collaboration Many of CDP5's Asian responses reference industry collaboration but not clear government guidance. A more integrated model has emerged in Korea, which is similar to the pattern common in Japan where the government has worked alongside the industry associations to build capacity. Coordinated by the Ministry of Commerce, Industry & Energy (MoCIE), eight task forces address heavy energy consuming sectors such as power generation, iron and steel, petrochemicals, cement, pulp and paper, semiconductor, automobile, and refining. Each task force is comprised of representatives from companies, respective industry associations, and the government. These task forces have been focusing on: (1) guidelines for measuring CO 2 emissions and sector-specific strategies for climate change; (2) voluntary reduction targets and disclosure processes; and (3) planning for voluntary emissions trading which is slated to be launched in The industry task forces have been the focal point for the Voluntary Agreement for Energy Saving & GHG Emissions Reduction, which was initiated by the government in January Out of approximately 1,100 companies participating in the voluntary agreement, more than 60% reported energy efficiency improvements amounting to 1.8m tonnes of oil equivalent and cuts in CO 2 emissions of 1.4m tonnes of carbon between 1998 and Based on the achievements of these task forces, MoCIE plans to upgrade government-industry collaboration with the formation of a Government-Industry Panel on Climate Change Initiatives sometime in The goal of this initiative will be to ensure even more effective implementation of carbon-linked policies. The Korean government has also played an active role in supporting industry-level carbon performance commitments. In the CDP5 responses, for example, Hyundai Motor indicated that the government played an important role in finalizing the voluntary agreement with the three major automobile manufacturers' associations in the EU to reduce CO 2 emissions targets to 140g/km, from current levels of 186g/ km, by 2009 for the newly registered passenger cars in the EU Community. Samsung Electronics also mentioned that the government entered into a voluntary agreement with the World Semiconductor Council (WSC) in 1999 to reduce PFC emissions by 10% by 2010 from a 1997 baseline. 5

16 Top Management Engagement in Issues Only Just Emerging The CDP Asia sample presents high variability in the extent to which top management is addressing issues of reporting and strategy. This is an important subject because corporate governance is a critical variable in assessing long-term corporate environmental performance. To track this variable, the CDP questionnaire sought information on board committees and executive management structures used to provide oversight on corporate climate change issues. Based on data available in the 2007 responses, however, in many instances it would be difficult to conclude that the responses given can be regarded as an official statement of corporate policy. Active engagement vs. statements of intention critical to credibility One aspect of this variability is exemplified by the brevity of some submissions. Such responses are unlikely to accurately represent corporate policy on these complex issues, and it is therefore difficult to gauge the ongoing level of engagement with climate change. This is not to say that such responses were representative of the sample as a whole; variability is also apparent in more detailed responses which appear to demonstrate a high level of engagement. However, the variability of the sample presented persistent issues of reliability and scope, making uniform assessment of the sample a challenge. Indeed, common metrics mask huge differences in the quality of the responses. One of the key differences in responses throughout the sample was evidence of active engagement as compared to statements of intention. For example, many responses reported recently established planning committees, initiatives under consideration, and possible future reduction targets. While some of these responses may represent a management that has recently become genuinely engaged in addressing carbon emissions, it could also be that management commitments are still tentative. It is also possible that that lower level management or operational staff submitted responses with little direct upper management oversight. Among the responses providing useful indications of management involvement, Acer and Hyundai Motors offered interesting insights into the intersection between climate governance and corporate strategy: Companies looking past home country standards Acer Acer's response indicates that top management views climate change as an issue which must be evaluated in terms of the global footprint of their operations. Rather than framing its strategies in terms of its home country standards, it is developing policies which are consistent with the GHG reduction policy framework in the various countries in which it operates. For Acer, this will likely mean that trends in the EU and North American markets will be particularly influential. Its response also stresses a commitment to transparency, not just domestically but internationally, with a new policy to ask suppliers to disclose environmental performance data including carbon emissions and energy consumption. Hyundai Motors Hyundai Motors reports ongoing engagement with policymakers both domestically and internationally. Hyundai's products are subject to CO 2 emissions standards in the United States, California (with particular regulations), Europe, Canada, and China. As a result, the company has established a special executive management team which reports to the board on climate change issues. As part of the corporate planning office, an environmental management team has also been created to handle monitoring and reporting of climate change issues. It also supervises technical issues including research on financial planning tools which will make it possible to take climate change into account for capital expenditure. In addition, managers responsible for performance on energy use and carbon emissions targets are recognized through the job appraisal and promotion process. 6 Association for Sustainable & Responsible Investment in Asia

17 Country Focus Quantity versus Quality Thanks to the increase in the sample size, this year's Asian CDP offers a more realistic picture of trends at the country level. Indeed, it is becoming easier to form a picture of a "Korean" response versus a "Singaporean" response. This should not be surprising as reporting norms are usually set at the country level. Nonetheless, the increase in sample size and a new contingent of first-time reporters has brought much greater diversity in the quality of responses with some meeting international best practice standards and others just touching the surface. In general, material reporting continues to lag in nations with few drivers, while improvement is evident in countries where leading companies have a more international footprint. Quality rests on government drivers and multinational aspirations Veteran Respondents Responses from veteran respondents set the standard for quality submissions across the region. This is consistent with our finding that repeated participation coincides with capacity building within companies to establish internal monitoring and reporting systems. For example, veteran participants were much more likely to submit quantitative, verified information suitable for global comparison. In general, the higher quality responses originated from Korea, Hong Kong, Taiwan and India. Not only did these better responses report on specific emissions, but many also cited plans to move toward carbon neutrality and to invest in CDM projects. This likely reflects the fact that companies from Korea, Hong Kong, and Taiwan have long operated in global markets and are more likely to perceive climate change as an issue which will shape long-term operations and customer perceptions. Of the four high quality Indian responses, three came from veteran respondents, with significant international exposure or brand equity: Infosys, Bharti Airtel and ITC. New Participants In most instances, responses from new participants in CDP Asia reflected an initial effort to address the climate change dialogue. Responses from Indian companies, which represented half of all new participants, tended to be brief and in some instances expressed a preliminary understanding of the risks and direct impacts posed by climate change to their business. Other responses from new participants reflected stronger foundations, typically due to existing environmental management or community engagement efforts. In many cases, however, internal mechanisms for carbon reporting were not documented or remain under development. More references to CDM and environmental management systems Two Hong Kong listed companies ICBC and Cathay Pacific were the only new participants that submitted quantitative carbon data. ICBC, one of China's "big four" banks and the world's largest IPO in 2006, submitted a solid first-time report which indicated a commitment to the development of energy efficiency strategies. Cathay Pacific's response was a reflection of ongoing work conducted by parent company Swire Pacific to develop internal systems for carbon monitoring and programs to address specific carbon emissions impacts. While this was the initial submission for Cathay Pacific and Swire, it is clear that their failure to respond to CDP in previous years was not an indication that they were standing still. New Respondents Participation in CDM projects, concern about brand equity, and preparation for incremental country-level policy development were some drivers mentioned by companies previously invited to participate in the CDP who responded for the first time this year. One new respondent, Oil & Natural Gas Company (ONGC), already has two existing CDM projects, 11 DNA approved projects, and 15 more in development. It is the leading central government-controlled company active in developing CDM projects in India. 7

18 Concern about brand equity and consumer sentiment is clearly beginning to play a more significant role in the development of climate change policies by Asian CDP respondents. New respondents in the 2007 sample featured numerous references to rising environmental awareness by consumers and potential implications for operations and long-term profitability. Over the past year, there have been few new broad climate change commitments announced by Asian governments. Nonetheless, incremental policy steps are creating incentives for more focused companies prepared to assume a leadership role. 40% of the respondents which provided improved disclosure indicated that forthcoming regulation was an impetus for new corporate policies on carbon emissions. Hong Kong and China companies moving torwards global norms Country Focus Hong Kong and China Responses from Hong Kong and China reflect a relatively mature understanding of climate change, potential impacts on business, and relevant industry specific requirements. Given the sophistication of the Hong Kong corporate sector, it should not be surprising that these responses increasingly reflect global peer group standards. In keeping with broader sustainability reporting trends, it is also not surprising that the Hong Kong sample is dominated by companies which are either government-regulated or sensitive to consumer perceptions, such as local power companies, CLP Holdings and Hongkong Electric, the MTR Corporation (Hong Kong's subway operator) and air carrier Cathay Pacific. Hong Kong companies, because of their regional and global exposure, have often faced reporting challenges common to conglomerates operating in diverse businesses and markets. This is especially true where there are varied ownership and control structures which can inhibit access to comparable operating data. CLP's response sets a high standard both in terms of detail on emissions and a range of relevant policy developments in its different markets. First-time respondent Swire Pacific also offers an encouraging snapshot of energy savings projects and CDM work which is underway in its high profile property and beverages businesses. CDP Asia had three responses from Chinese companies in 2007 China National Offshore Oil (CNOOC), China Unicom, and ICBC. Due to the dominant size of ICBC's Hong Kong listing, however, it was counted as a Hong Kong company. Of the three, banking sector leader ICBC was unusual, as a first-time respondent, in providing preliminary carbon emissions figures based on energy consumption and business travel. The second notable respondent, CNOOC, failed to disclose its emissions but is pursuing CDM projects as one strategic response to its carbon footprint. India leads with biggest increase in new respondents India India was the standout growth country in the CDP Asia sample in It was not only the country with the most companies new to the process, but Indian companies also represented 50% of new responses in general. With increased representation in the Asia ex-japan universe, responses from India were also the most diverse of any other nation, representing every industry sector in the project. The positive response rate trend must be balanced against the fact that a high percentage of new respondents are clearly at the early stages of developing a thorough understanding of the issues and global reporting norms. While responses from the Indian telecom and consumer staples sectors compared favorably with their regional peers, respondents from other sectors displayed a less mature understanding of the issues. If patterns from elsewhere in Asia hold true, this gap in response quality should be remedied over time as regulatory drivers increase and the domestic audience for more sophisticated reporting becomes more vocal. 8 Association for Sustainable & Responsible Investment in Asia

19 Strong Indian submissions came from participants such as Bharti Airtel, Infosys, ICICI, ITC, and Wipro, all of which face global competition or changing market trends. Despite these strong responses, improved performance cannot be taken for granted. While Indian companies are open to participation in CDP, participation alone cannot always be linked to progress on carbon reporting or related business efforts, even in high impact sectors. The most positive trend in the Indian sample was clear evidence that Indian companies are making growing commitments to the development of CDM projects. In addition to ONGC, ITC, Wipro and Tata Steel mention that they are either considering CDM projects or are already in the process of setting up CDM projects. This increase in references to CDM projects is consistent with trends across Asia in 2006 as governments have implemented the critical UNCCC regulatory mechanisms for approval of CDM projects. Indonesia PT Astra, generally considered one of Indonesia's strongest reporters, made its debut in CDP in A holding company, it was unable to offer quantitative data for its overall operations. Nonetheless, reporting on a range of environmental initiatives suggests that among other things, the company is testing conversion from diesel to bio-diesel in automobiles that already meet Euro II standards. PT Astra has also set a 10% natural resource utilization reduction target as part of its Environment and Social Responsibility policy which covers its group companies. Korea Korean companies in CDP5 continue to show progress on more comprehensive and strategic responses. One important trend is an increase in companies disclosing carbon reduction targets. While only one Korean company announced targets in CDP4, Posco, S-Oil, KT Corp and Samsung Electronics provided data in this critical area. At the same time, the better respondents made tangible progress on more strategic responses to climate change threats. This was particularly evident in disclosures on specific R&D and investment initiatives by companies like Posco and S-Oil. Two companies, Hyundai Motor and Samsung Electronics, also provided useful material outlining their carbon-related governance structures and core business decision making processes. Hyundai Motor and Samsung provide specifics on governance Although Korean respondents have now established a pattern of capable responses to CDP from leading companies, it was noticeable that new entries in the overall sample tend to be lower level emitters and are less likely to respond. In CDP5, there were 16 new participants in the Korean sample, 62% (10 companies) of which were from non-manufacturing sectors such as construction, financials, internet services, and retail or trading. More importantly, only two companies, SK Energy (SK Corp) and LG Electronics, belong to the eight target industries which have been participating in the government's energy efficiency task forces. Although both companies have carbon monitoring systems in place, management policies on the disclosure of carbon-related information and strategies are yet to be finalized. Malaysia Malaysia's lone respondent in 2007 was Maybank, the country's leading bank. A repeat respondent, Maybank lacks formal programs focused on climate change but expects to focus on new lending and operational strategies in support of government policies. Singapore In keeping with Singapore's diversified market, CDP Asia's three responses are a microcosm of some of the key trends we find in the overall Asian sample in Financial sector respondents like OCBC appear to be at the early stages of addressing the broader implications of climate change on both operations and lending policies. Singapore Airlines, although less rigorous than Hong Kong's Cathay Pacific, reported emissions and may be motivated to undertake more serious work as pending EU emissions caps come into view. Property developer Capitaland, a first-time respondent, is not ready to report emissions, but did identify a range of internal and external drivers which will support its efforts to extend its Singapore responses are a microcosm of regional trends 9

20 Taiwan The Taiwan sample was predictably dominated by the leading names in Taiwan's listed technology sector. In keeping with the strong operational controls common to the tech sector, responses displayed good familiarity with the vocabulary of environmental and carbon management. Responses were divided equally between veteran and new respondents. TSMC and UMC, Taiwan's leading semiconductor companies, both referenced their participation in the TSIA program on PFCs. Only UMC's response included carbon emissions data however. Although not directly linked to the carbon discussion, Acer's response was unique in discussing a range of product design initiatives intended to cut the energy footprint of its PC products. Thailand Thailand's two CDP respondents offered useful insights into the reporting potential of Asian companies in high impact sectors. PTT, the Thai government-controlled oil and gas company, and Siam Cement, a diversified building materials company, are high profile domestic companies that will be expected to take a leadership role. The response from Siam Cement was notable for a new CDP respondent, although it has published information in previous sustainability reports. In addition to submitting third-party verified GHG emissions data, Siam Cement was able to describe a range of company initiatives which appear to reflect its participation in the WBCSD Cement Sustainability Initiative. PTT's response was less detailed but indicates a solid grasp of the issues and progress on more systematic programs including CDM projects. Sector Focus Two Leaders, Two Laggards Asian Bankers Waiting for Guidance With several exceptions, the 2007 CDP process makes it obvious that Asia's banks are making only slow progress in addressing the long-term economic impacts of climate change. It is tempting to see the limited capacity of Asian banks in assessing climate change issues as a by-product of the bureaucratic restrictions faced by Asian bank regulators who often have a narrow policy remit. While global groups such as UNEP FI are broadening their contact base in Asia, many Asian banks lack even the environmental management capacity to address basic operational issues. Asian banks: focused on facilities, worried about economic impacts All of the financial sector respondents displayed at least a basic perception that climate change is a global issue, and two-thirds acknowledged potential business impacts. Only one-third, however, recognized that there might be large-scale economic repercussions. For example, ICICI offered a clear view that the potential long-term impacts on the agricultural economy could be harsh and would have fundamental effects on its business model. Despite the still limited understanding of climate change impacts, two useful strands of reporting were evident from the responses concerning the role of energy efficiency and opportunities for new products. Energy Efficiency The Asian banks reporting in 2007 are gradually identifying energy efficiency as the best means to reduce carbon emissions in their industry. Four of the bank respondents refer to or have implemented energy efficiency programs of varying depth and quality. Most seek to increase efficiency by decreasing air conditioning usage, replacing and minimizing lighting elements, and adjusting office behavior patterns, such as dress codes. Only two of the financial sector respondents had clear energy reduction targets. Two Hong Kong banks, Hang Seng Bank and ICBC, were alone in reporting quantitative data on emissions. Hang Seng Bank, a subsidiary of HSBC, broke down its numbers into specific categories, detailing the degree of attention Hang Seng is giving to reducing its carbon footprint. 10 Association for Sustainable & Responsible Investment in Asia