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  • Half of Europe’s largest firms now link executive pay to climate change

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Half of Europe’s largest firms now link executive pay to climate change

Source(s):  CDP (CDP)

  • Annual CDP report covering companies worth three quarters of European market cap finds 47% reward their senior management for managing climate topics, with 1 in 4 tying incentives to climate targets.
  • 80% of companies see business risks in adapting to climate change, yet over half still have no total emissions reduction target.
  • As environmental awards are announced, French businesses lead Europe’s sustainability trend - with a third of CDP A List awards and 7 of the 10 most climate-friendly investment funds in Europe.
  • 76 European companies, half of the global total, are recognized as pioneers for environmental action, including: L'Oréal, Unilever, Bayer, Firmenich, Telefonica, EDF, ING Group and Carrefour.
  • Investment funds from BNP Paribas AM, Candriam and Banque Postale AM among 10 awarded for climate performance, as analysis shows half (46%) of the funds’ top company holdings are rated A by CDP this year.

The companies and investment funds leading on environmental sustainability are recognized today as CDP, the non-profit environmental disclosure platform, hands out its annual awards at the launch of its European Report: Higher Ambition, Higher Expectations.

Analysing environmental disclosures by 859 companies, the report finds 75% now believe so-called ‘transition’ risks, such as new climate legislation, will meaningfully affect their businesses.

To manage these risks, as many as 47% of companies now offer monetary incentives to their C-suite or boards, while 1 in 4 incentivize meeting climate targets financially.

The study also finds that, by 2020, 72% will use different climate scenarios to inform their business strategies. Such scenario analysis helps companies consider their performance in different ‘alternative worlds’, such as if global warming is limited to 2°C or lower as a result of vastly reducing emissions.

Almost 9 in 10 European companies responding to CDP see business opportunities resulting from climate change, including almost half who expect more demand for lower carbon goods.

The report follows recent warnings from the Intergovernmental Panel on Climate Change (IPCC) that the global economy needs a radical transformation to prevent climate change’s worst effects, and from the World Economic Forum, whose annual Global Risk Report ranked environmental risks top.

Reductions in greenhouse gas emissions equal to Austria’s annual emissions were reported in 2018 by European companies, responding to an investor request for environmental information. In parallel, companies with approved science-based targets to lower their emissions in line with the Paris Agreement grew by 65% last year.

However, over half (53%) still do not have a target for their total (absolute) emissions, and among the companies that do have targets, only a third stretch past 2025.

The 76 companies receiving an A in CDP’s annual rankings are presented today at the CDP Awards in Brussels.

Steven Tebbe, CDP Europe Managing Director, commented:

“The next decade is vital if our shift to a sustainable economy is to be successful, and companies lie at the heart of this transition. Companies on the A List show that environmental and economic leadership go hand in hand, with the A List-based STOXX Global Climate Change Leaders Index having outperformed the STOXX Global 1800 by 5.5% per annum from 2011 to 2019.”

Tom Delay CBE, Chief Executive at the Carbon Trust, said:

“Europe is home to some of the world’s most ambitious corporates, showing transformative leadership on sustainability issues and finding new ways to prove that profitability doesn’t have to come at the expense of the planet. But even in a part of the world where there is an almost unique combination of committed businesses, comparatively strong environmental policy frameworks, and citizen support for action, progress is still not happening quickly enough. While some leaders are showing the way forward, many others are only just starting to take their first steps on the journey, or moving too slowly along the pathway to sustainability. Others must follow rapidly in the footsteps of those leaders if we are to tackle one of the most urgent global challenges we face today.”

Also awarded today at the CDP Europe Awards are the asset managers of the 10 European investment funds with the best climate performance, based on data from the climate rating for funds, Climetrics. The CDP-data powered tool measures the climate performance of a fund’s stocks, its asset manager’s governance of climate issues, and its investment policy, to help investors find investments better aligned with a low carbon economy.

Analysis of top 10 company holdings for each winning fund shows that almost half of top holdings (46%) were scored A by CDP, with almost three quarters (73%) receiving either an A or B score.

Asset managers BNP Paribas AM, Candriam and Mirova all have two funds among the 10 receiving a Climetrics Fund Award, while French asset managers received 70% of all awards, underlining the leading role of French investors in the transition to a low carbon economy.

France also leads Europe in regulatory policies for the financial sector such as Article 173-VI, which obliges investors to report on their climate risks and integration.

Nico Fettes, Head of Climetrics at CDP, said:

“Greater transparency in the fund industry is important for helping to move capital towards sustainable investments and to achieve the Paris Agreement. Climetrics’ goal is to give investors confidence in their investments, and these awards recognize that certain funds represent lower long-term risks from climate change”

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  • Publication date 19 Feb 2019

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