Amazon and other large companies are coming under fire from some of the world’s most powerful investors for failing to fully disclose data on their environmental impact.
CDP, a non-governmental organisation formerly known as the Carbon Disclosure Project, has teamed up with a group of 88 investors with a combined $10tn under management, including HSBC Global Asset Management and Investec, to expose companies which do not reveal their approach to sustainability.
CDP’s target list features big names such as Amazon, ExxonMobil and Chevron alongside about 700 other companies chosen for their high environmental impact and low transparency. Some investors have warned that they may sell their holdings of companies which do not comply.
“Companies must disclose their role in addressing the climate crisis we face. We know that climate change, water security and deforestation present material risks to investments, but these risks cannot be managed without proper information,” said Emily Kreps, global director of investor initiatives at CDP.
The initiative highlights a growing concern in the asset management industry over a lack of standardised metrics for environmental, social and corporate governance (ESG) investing. Investors cannot make apples-to-apples comparisons on sustainability information if companies do not report their data within a common framework, Ms Kreps said. The lack of disclosure standards also makes it easier for companies to “greenwash” their results.
“Because there’s no standardised framework from regulators, CDP tries to serve in that role,” Ms Kreps said. The group, which launched in 2000, was among the first to bridge the gap between activism and finance in the responsible investing market. CDP receives sustainability data from around 7,000 companies, including 70 per cent of the S&P 500.
Amazon has long been a target of CDP. The group has unsuccessfully requested information from the e-commerce giant since 2004. In recent months others have taken up the fight as well.
Earlier this year, nearly 8,000 Amazon employees signed an open letter to chief executive Jeff Bezos demanding the company publicly report how it is preparing for climate-related disruptions. The issue came to a vote in May as a shareholder resolution, but was defeated even after winning support from the industry’s two most influential proxy advisers, ISS and Glass Lewis.
Amazon’s board argued in its proxy statement that the resolution was unnecessary, saying it already reports enough on climate issues. “We are on a path to becoming the most sustainable retailer and cloud provider in the world, and will release our carbon footprint later this year,” the company said.
Other companies on the target list have also rejected the CDP criticism. Chevron previously submitted data to CDP before discontinuing the practice this year in favour of publishing a report on its own website.
“Rather than do the survey-style CDP process, we decided to do our own [Taskforce on Climate-Related Financial Disclosures]-aligned reporting, including articulating our approach to issues and increasing the information available directly to stakeholders based on their feedback. We think that increases transparency and allows for meaningful discussions with stakeholders,” says Sean Comey, a senior adviser in the oil company’s corporate affairs office.
However, CDP insists ad hoc reporting is not enough. “Investors and the wider market need transparency in the form of consistent, comparable and relevant metrics that are easy to access, compare and measure,” said Ms Kreps.
Investors are following a range of strategies to ratchet up pressure on companies that do not provide the data they want. One option is lodging a protest vote against a company’s board of directors, says Max Messervy, a senior associate at investment consultancy Mercer.
However, if that does not work, more drastic measures may need to be taken, he says. “If you don’t get a satisfactory response . . . you may look at reweighting your holdings if you think they are not disclosing material risks.”