CARBON DISCLOSURE PROJECT (CDP)

Akshat Dhaval Mohan Sudhanshu

What is CDP?

A project to facilitate a dialogue between investors and corporations, supported by high quality information

from which a rational response to climate change will emerge

Overview

It is often said that a business can only manage what it measures

The disclosure brings out the challenges companies are facing and on how they have integrated the long-term value and cost of climate change impacts into their assessment of financial health and the future prospects of their business.

Largest investor coalition in the world

More than 385 signatory investors, with a combined asset base of $57 trillion

Principal Areas

Risk and opportunities presented by climate change

Greenhouse gas emissions accounting

Strategies to reduce emissions

Corporate governance w.r.t. climate change

Securing a Green Future

Missions of Indian NAPCC

Solar Energy Energy η

Sustainable Habitat

Water Himalayan Ecosystem

Green India

Energy η

•Energy Benchmarks•Facilitate Least Cost Method•9 sectors•$2 bn Potential yet to be tapped

Carbon Ch

arge

•Adding Carbon Charge•Promote Efficient Technologies•Restructuring Subsidy Portfolios• Low Carbon Economy

Renew

able

Energy

•Opportunities through Expanded Markets•Large Scale Production•Technology Transfer•Key Role of Private Sector

Clean

Technologi

es

•Differential Taxation Method•Allowance for Accelerated Depreciation & Reduced VAT•“Window of Opportunity”

Green Buildings

•Significant Energy Demand of Buildings•Lower Operating Costs• 30% decrease in Energy Use•1 bn sqft of Green Building Space

Othe

r C

hallenges

•Rise in Consumer Pressure to go Greener•Impact of International Developments •Access to Technology & Financial Support

Responding to the Change

Exposure to rapidly evolving & complex Regulations

Importance & Inexorability of Low Carbon Economy

Pace of Adaptation to Climate Change

Need for a Structured, Concerted approach

Response Overview

Expansion of CDP in 2007

Information requested from top 200 companies (95 from Energy Intense Sectors)

The opportunities and risks perceived from climate change and the strategies being contemplated to manage these opportunities and risks

Direct and Indirect GHG emissions with Emission Intensity, Energy Consumption and cost thereof

Emission Reduction Strategy and Emission Trading

Performance Monitoring and Forecasting Plan

Corporate-level Climate Change Management and

Governance

Willingness of India Inc.

51

10

139

Sales

Answered QuestionnaireDeclined to ParticipateNo Response

Cont…

The Risks Identified

Regulatory Risk: Current or Expected National

Policies International, national, regional

or state regulation of emissions

Carbon taxation Mandatory energy efficiency

standardsPhysical Risk:• Change in Temperature and

Precipitation• Drought, floods and Increased

storm & hurricane activity• Rising sea levels• Higher incidence of diseases.

General Risk:• Commercial and competitive risk due

to loss and delay in production &

sale scarcity of resources

• Reputation loss associated with company’s action

• Disruption in the transportation of raw materials and finished products

Opportunities IdentifiedRegulatory Opportunities:• The introduction of emissions trading

programmes• Technology incentives and imposition

of process and product standards

Physical Opportunities:• Increased sales of particular products

and services• Opportunities arising from measures

to adapt to the physical consequences of climate change

• Better market reputation and improved export potential

General Opportunities:• Change in the consumer behaviour in

terms of demand for more energy efficient products

• Introducing new products that withstand natural calamities

• Carbon trading and finance, financing renewable energy projects, financing infrastructure projects and promoting alternate energy systems

Opportunities Identified

Regulatory

Opportunities: The introduction of emissions

trading programmes Technology incentives and

imposition of process and product standards

Physical

Opportunities:• Increased sales of particular

products and services• Opportunities arising from

measures to adapt to the physical consequences of climate change

• Better market reputation and improved export potential

General Opportunities:• Change in the consumer behaviour

in terms of demand for more energy efficient products

• Introducing new products that withstand natural calamities

• Carbon trading and finance, financing renewable energy projects, financing infrastructure projects and promoting alternate energy systems

Methodologies Adopted

Sector Analysis

Analysis of climate change impacts shows variance in vulnerability of

sectors. Insight of responses at sectoral level

and breaks down the responses to industry level to compare and contrast how each sector performs with respect

to their climate vulnerabilities

Sector Analysis Methodology The 200 companies contacted for the CDP6

India Report have been broadly classified into energy intensive industries non-energy intensive industries

Based on the designated consumer criteria defined by the Environmental Conservation Act, 2001

CDP6 had identified 9 energy intensive sectors and grouped the remaining 8 sectors under the non-energy intensive sectors.

Sector Analysis Methodology

involves a comparison of energy intensive versus non-energy intensive industries;

individual sectors as well as the respondent companies that constitute these sectors

Energy Intensive-Auto Mobile sector

In 2008, out of 8 companies contacted, 2 responded – Mahindra & Mahindra and Tata Motors.

They acknowledge the possibility of regulatory risks in the future

Emission regulations are expected to change manufacturing processes as well as GHG targets.

The increase in fuel prices will have a significant bearing on the market demand for automobiles

CC as Opportunity

Regulatory policy as an opportunity to invest in clean technologies and to tap into the carbon markets and markets for alternative-fuel engines and vehicles

Rising trend of manufacturing of alternative-fuel based vehicles

Tata Motors has successfully introduced CNG buses, Light Commercial Vehicles, LPG versions of Indica and a CNG version of ACE

Mahindra & Mahindra, on the other hand, has also launched the CRDe biodiesel Scorpio and 5% bio-diesel B5 tractor

Capital Goods

Consists : Cement, Construction & Engineering, diversified industrials, Industrial Conglomerate, Industrial Machinery, Industrial products & services

E.g. ABB, Areva T&D, Cummins India,GMR Infrastructure ltd,Hindustan Machine Tools (HMT) and Thermax

Responses

Regulatory Risk : Majority of companies do not perceive that any regulatory risks to their businesses.

Physical Risk: As this sector is heavily reliant on its industrial operations so climate change related natural calamities may jeopardize construction sites

Likelihood of stringent future emission laws presents a lucrative opportunity for engineering companies with a portfolio of products and services designed to mitigate GHG emissions and save energy

Energy

Consists: Oil & Gas exploration, production and refining & distribution.

Respondents are Cairn and Castrol , BPCL, GAIL, HPCL &nd ONGC

Risks & Opportunities

Public sector companies consider that their operations are not exposed to regulatory risks

Sector heavily reliant on logistical networks, oil & gas companies can suffer considerable losses in the event of disruption of their supply chain

As part of their risk management process, HPCL has accounted for physical risks in the design, development and operation of its facilities, and GAIL has drafted disaster management plans

BPCL have already begun setting up green fuel (LPG/CNG) terminals and are conducting R&D for alternate fuels, specifically bio-fuels and hydrogen cells

Materials

Aluminium, Cement, Chemicals and Diversified Chemicals, Metals and Mining and Steel

E.g. Ambuja Cement, Asian Paints, Godrej Industries, Hindustan Copper, Hindustan Zinc, JSW Steel, Sesa Goa, Sterlite Industries, Tata Steel and Ultra-Tech Cement.

Various Risks

Only Tata Steel perceived regulatory risks as being of concern given the energy intensive nature of this sector

The materials sector is more concerned about the physical risks with Ambuja Cements and JSW Steel listing availability of water thers on SCs

The dependence of steel industries on coal has been listed as a financial challenge as coal price

Risk management plan, JSW Steel has identified long-term agreement with international coal suppliers to ensure energy security.

The integration of new technologies to improve energy efficiency and resource conservation

New Leads

CDM Opportunities EMS, LCA, Energy Efficiency Resource Recovery Recycling Technological Innovation

Non Energy Intensive Industries Banks

Financial Services sector has been segregated into two subsectors: Banks and Diversified Financials

Indian financial institutions perceive no immediate regulatory risks, banks expressed concern about the indirect effect of new climate policy regulations on organisations operating in carbon intensive sectors

Need for informational transparency with regard to GHG emission disclosures

Banks also state that climate change related damage to bank-owned properties and assets is a physical risk in terms of financial valuation and insurance claims

Risk management in the financial services sector is largely concerned with spreading climate change awareness and its role as a responsible lender. Like SBI’s Green Banking Policy and Yes Bank’s Environment & Social Policy

CDM has created opportunities for banks to partake in the carbon market see regulatory opportunities in financing clean technologies, CDM projects and servicing loans to the renewable energy sector

Commercial Services and Supplies

Diversified Consumer Services, Financial Services, IT Consulting & Services and Software.

Infosys Technologies, Tata consultancy Services and Wipro – to the information request.

Whereas other three companies -

Firstsource Solutions, HCL Infosystems, and HCL Technologies - declined to participate.

Risks Due to CC

Regulatory Risk:GHG emissions within this sector are largely a by-product of employees’ travel and electricity consumption at service outlets, corporate offices and ,As per WIPRO it may loose some Businesses. carbon duties/tax that may be levied on the import of carbon heavy .

Market risks associated with climate change events, like in insurances payoffs

Opportunities identified as its ability to provide business solutions that can drive sustainable development. Tata Consultancy Services is actively pursuing business opportunities to help clients assess their carbon footprints, carry out energy audits and pursue sustainable initiatives

Wipro now plans to invest in renewable energy solutions to help companies switch from fossil fuel dependency towards biogas, solar, wind, biomass cogeneration and geothermal power

Infosys Technologies and Wipro have expressed an interest in becoming carbon neutral in the near future

Conclusion

Indian companies encouragingly are responding to measure and

disclose their carbon emissions and integrate the long-term value

and cost of climate change into their assessment of the financial health

and prospects of their business, but there is still lot of spade work to

be undertaken to beef-up their capacities.

Positive Signs

Proactive approach to share information voluntarily with stakeholders

Improvement in the quality of disclosure

Need for more awareness

Thank you