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CDP 2007 FindingsCDP 2007 FindingsHow investors are using the dataHow investors are using the data

Paul Simpson – Chief Operating OfficerTBLI, Paris 15th November 2007

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Significant risks and opportunities from:

Taxation and regulation Changes in weather patterns Technological innovations Shifts in consumer attitude and demand

There will be winners and losers in the transition to a low carbon economy

Investors need information to determine how companies will be affected.

Climate Change – An Investment IssueClimate Change – An Investment Issue

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Climate change is expected to reduce GDP by at least 5% each year; if more dramatic predictions come to pass, the cost could be more than 20% of GDP

To stabilise at manageable levels, emissions would need to stabilise in the next 20 years and fall between 1% and 3% after that. This would cost 1% of GDP

The benefits of strong, early action considerably outweigh the costs

Each tonne of CO2 we emit causes damages worth at least $85, but emissions can be cut at a cost of less than $25 a tonne

Shifting the world onto a low-carbon path could eventually benefit the economy by $2.5 trillion a year

By 2050, markets for low-carbon technologies could be worth at least $500bn

Context: UK Government Stern Report

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Costs of Climate ChangeCosts of Climate Change

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Investment Opportunities

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CDP Mission: To facilitate a dialogue between investors and corporations supported by quality information from which a rational response to climate change will emerge

CDP provides a coordinating secretariat for institutional investor collaboration

Create a lasting relationship between shareholders and corporations regarding the implications for shareholder value and commercial operations presented by climate change

CDP is a not for profit organisation, independent with US charitable status 501(c)3, application to be UK charity

CDP supported financially by donations, sponsorship and the governments of USA, France, UK, Australia and Sweden

Carbon Disclosure Project (CDP) Background

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315 investors with assets of $41 trillion (30% of global total invested assets)

Information requested from 2,400 companies

1,300 companies answered the questions in 2006

www.cdproject.net - largest registry of corporate GHGs in the world

2007 expansions in US, Japan, UK, France, Germany, Canada, Brazil, India, Australia, Asia, South Africa, Scandinavia

Global launches with high profile speakers

CDP is now an established annual process

CDP is where the corporate world reports GHG emissions

The Carbon Disclosure Project (CDP)

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CDP1 2003 35 signatory investors $4.5 trillion

CDP2 2004 95 signatory investors $10.3 trillion

CDP3 2005 155 signatory investors $21 trillion

CDP4 2006 255 signatory investors $31 trillion

CDP5 2007 315 signatory investors $41 trillion

Rising Awareness in the Financial Services Sector

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Regional Variations in Responses

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FT500 Report by Innovest Strategic Value Advisors

Highest response rate ever – 77% answered questionnaire

North America leads growth in emissions disclosure

Improved carbon accounting; more robust responses - 79% disclosed GHG data

80% see risks from climate change

82% see opportunities

76% implemented emissions reductions programs

46% strategies for emissions trading

Wide variations in risk exposure – between and within sectors

CDP Key Findings 2007 (FT500 Companies)

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Variations Between Sectors

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Variations Within Sectors

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Innovest “Carbon Beta™” Varies Widely – Both Between and Within Sectors

CO2 Regulatory Cost of Compliance as Percentage of EBITDA

25.24%

21.45%

10.49%

15.94%

9.72%

7.76%

9.09%

1.23%

0.10%

1.42%

3.11%

1.14%

2.92%

0.04%0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Electric PowerCompanies - N.

America

Multi-Utilities &Unregulated Power

DiversifiedChemicals

Specialty Chemicals Metals & Mining Surface Transport Pharmaceuticals

Co

st

of

Co

mp

lian

ce a

s E

BIT

DA

%

Max case Min case

Mylan Laboratories

Johnson & Johnson

CSX Corp.

Union PacificAlcoa

Newmont Mining

Praxair

International & FlavoursFragrances

Du Pont

EastmanChemicals

PG & E

Xcel

Exelon

American Electric Power

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Climate Disclosure Leadership Index

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Qualitative check – Are companies addressing the

issue?

Engagement

Shareholder resolutions

Sell side research

New Investment products

Weighted indexes

Focus on certain technologies or asset classes

How Investors are Using CDP Data

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Increasing number of sell side broker reports:

UBS – Beyond Weather

Citigroup – Climatic Consequences

Lehman Brothers – The Business of Climate Change

Merrill Lynch – Combating Climate Change

New investment products:

Schroders - Global Climate Change Fund

KLD / Fixed Income Securities LP

CalPERS / CalSTRS – Green Wave Initiative

Investors addressing Climate Change

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Climate change is likely to prove one of those tectonic forces that gradually but powerfully changes the economic landscape in which our clients operate and one that causes periodic sharp movements in asset prices.

Sectors particularly affected include: Utilities, Oil and Gas, Metals and Mining, Insurance, Pharmaceuticals, Building and construction and real estate.

Given the size of the investment management industry, investment companies are in a strong position to influence business managers to focus on these issues.

Lehman Brothers – The Business of Climate Change

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New fund offering investors exposure to companies involved in mitigation of, or adaptation to the effects of climate change on a globally diversified basis.

Portfolio of 50 to 80 stocks aiming to provide long term out performance of the MSCI world index.

Schroders – Global Climate Change Fund

Carbon Capture & Sequestration

Renewable Technology

Shift from High-Carbon to Low-Carbon fuels

Energy Efficiency

SolutionMitigation

Carbon Capture & Sequestration

Renewable Technology

Shift from High-Carbon to Low-Carbon fuels

Energy Efficiency

SolutionMitigation

Ecosystems

Coastal

Water Resources

Forestry

Agriculture

EffectsAdaptation

Ecosystems

Coastal

Water Resources

Forestry

Agriculture

EffectsAdaptation

Oil & Gas, Industrial Engineering, Forestry

Wind, Solar, Hydro, Tidal, Geothermal, Fuel Cells, Biofuels

Natural Gas, Nuclear, Materials

Autos, Electronic & Electrical Equipment, Industrial Engineering, Materials

Industries Impacted

Oil & Gas, Industrial Engineering, Forestry

Wind, Solar, Hydro, Tidal, Geothermal, Fuel Cells, Biofuels

Natural Gas, Nuclear, Materials

Autos, Electronic & Electrical Equipment, Industrial Engineering, Materials

Industries Impacted

Oil & Gas Equipment and Services, Travel & Leisure, Utilities

Construction & Materials, Travel & Leisure

Food Producers, Biotechnology, Beverages. Real Estate, Construction

Forestry & Paper

Biotechnology, Beverages, Food Producers

Industries Affected

Oil & Gas Equipment and Services, Travel & Leisure, Utilities

Construction & Materials, Travel & Leisure

Food Producers, Biotechnology, Beverages. Real Estate, Construction

Forestry & Paper

Biotechnology, Beverages, Food Producers

Industries Affected

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Carbon still largely an externality

Future regulation uncertain

Data quality remains varied

Short term focus of investors, particularly in

equity markets

Pension funds failing to incorporate into RFP’s

Barriers to Integration of Carbon Data in Investment Analysis

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There will be winners and losers from the transition to a low carbon economy.

Investors have a key role to play and need better information to incorporate climate change into investment decisions.

Increased integration of carbon data but barriers still remain

CDP is the Global standardised mechanism by which companies report their greenhouse gas emissions to their investors

CDP hosts the largest registry of corporate GHGs in the world at www.cdproject.net

Conclusion

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There will be a large creation and re-distribution of shareholder value in the transition to a low carbon economy – there will be winners and losers at sector level and within sectors at company level.

The winners are more likely to be those businesses that take the time to understand and address this complex area.”

Tom Delay, Chief Executive, The Carbon TrustClimate Change and Shareholder Value

March, 2006

Conclusion

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Thank you

Carbon Disclosure Project

www.cdproject.net

Paul Simpson

Chief Operating Officer

simpson@cdproject.net

+44 7799 345 269