Ole Wilken: Four reasons you should disclose on climate

CFO, it’s CDP Reporting Season!

Now it is time to submit your Climate response to investors and customers via the CDP’s Online Response System (ORS). The window closes on 27 July 2022. Ole Wilken highlights four important reasons why CFOs and sustainability executives should bother. 

”There are four important reasons why you should carry out climate disclosure via CDP, and they are all related to regulatory compliance, climate change risk and related business opportunities.”

First, CDP is best-practice

CDP is widely used and regarded as best-practice for corporate climate change disclosure today. Not only did nearly 60% of the global market cap disclose information on climate impact using CDP reporting, investors also evaluated CDP as a leading ESG rating in terms of quality and usefulness

So when confronted with a long list of environmental, social and governance disclosure standards and frameworks, CDP is highly relevant when covering climate change within the environmental dimension.

Second, CDP sways investors

CDP will potentially influence the decision making of investors. CDP and other ratings are used by third party ratings and indices such as MSCI ESG, and Bloomberg ESG, among others, to gauge the climate impact of companies. In turn, this data is used in combination with other key data in assessments that influence the decisions of investors. Further, in line with Rockefeller Capital Management’s investment thesis, we believe that companies entering an ESG improvement journey (‘Improvers’) will outperform competitors with declining ESG performance (‘Decliners’). From this perspective, investors like Rockefeller Capital Management see an investment opportunity in undervalued ESG Improvers. 

Choosing to improve your company’s ESG performance on material ESG issues, like climate change, therefore makes good sense from an environmental, social and financial perspective.

Third, CDP reflects how committed you are

A low CDP score does not always mean low performance. A company’s CDP report may not be an accurate representation of the impact of a company, and related managerial and strategic practices and priorities, simply due to an incomplete or non-exhaustive response. CDP reporting is resource intensive and complex, and requires both quantitative financial and non-financial data, as well as qualitative descriptions of policies, procedures and strategic priorities. Addressing this complexity can be challenging and many companies could improve their CDP score if they can ensure that their report fully represents performance as well as relevant strategies and practices.   

In short, companies have an opportunity to improve CDP scores through fine-tuning of their collective internal climate disclosure efforts. 

Fourth, proof is in the pudding

Corporations benefit from CDP Climate disclosure. CDP is one of the most prominent climate disclosure frameworks that determines best-practice in many industries. It is important to ensure that your CDP rating reflects, as accurately as possible, the climate impact of your company. Further, it is also important to consider the CDP Climate questionnaire as a guideline for best-practice climate change management, and appreciate the benefits of being on the ESG improvement learning curve and journey. 

CDP reporting is relevant to a range of companies, and we recognize the practical challenges of project management and coordination that companies face when completing  their CDP report.

So, remember this

In conclusion: CDP is widely used and regarded as best-practice for corporate climate change disclosure today. Be aware that a low CDP score doesn’t always mean low performance and you can improve your CDP score through fine-tuning of your collective climate disclosure efforts. Identifying and realizing your company’s CDP improvement potential can be a key step forward in your company’s ESG improvement journey.

Now it is time to submit your Climate response to investors and customers via the CDP’s Online Response System (ORS). The window opens in the second week of April and closes on 27 July 2022.


Need help with CDP disclosure?

Ole Løhr Wilken