Investors demand more corporate action on energy efficiency

A group of nearly 100 leading pension funds, asset managers, banks and other institutional investors have today written to the chief executives of the world's largest 415 public companies urging them to accelerate efforts to deploy cost-effective emission reduction measures.

The letters form part of the Carbon Disclosure Project's (CDP) Carbon Action initiative, which builds on the NGOs strategy of requesting emissions data from public firms.

Each of the letters is tailored to the individual recipient's circumstances, setting out a series of measures investors would like to see the company take to reduce its carbon emissions. Typically they call on chief executives to commit to delivering year-on-year emissions reductions, set targets for cutting greenhouse gas emissions, and step up investment in green measures that deliver a positive return on investment, primarily in the field of energy efficiency.

The letters were signed by 92 companies after a further 61 companies joined the initiative in the past year. New signatories include Spain's Banco Santander, Banesto and BBVA, fund manager Henderson and asset manager APG.

Claudia Kruse, head of sustainability and corporate governance at APG, said the demands contained in the letter would help businesses deliver better returns for their investors.

"Companies stand to benefit from improving operational energy efficiency, as well as from capturing the market opportunity for energy efficiency-related products and services," she said. "The potential upside to their short-term performance and long-term competitiveness can be material. Hence, investors need greater visibility of how management drives improvements and seizes strategic opportunities."

Her comments were echoed by Paul Simpson, chief executive of the CDP, who argued that companies that enhance their energy efficiency will also reduce their exposure to long-term financial risks, particularly in markets where carbon pricing regulations are in place.

"Minimising exposure to emissions regulation in Australia, the EU and other markets will protect their investments for the long-term," said Simpson. "Companies that capitalise on financial savings as a result of carbon reductions are well placed to improve their competitive position in the marketplace."

CDP said it would publish information gained from responses to the letters, alongside its annual update on firms' carbon footprints.

The intervention comes hot on the heels of a new consultation paper from the European Commission, which warns that the bloc is in danger of missing its target of improving energy efficiency by 20 per cent by 2020.

The paper states that while energy efficiency is improving across the bloc, it is not on track to realise its goal. "Although the latest 'business-as-usual' scenario shows a break in the trend towards ever-increasing energy demand, the reduction in energy consumption is estimated to be only about nine per cent in 2020," it states.

It also stresses that there is a strong case for governments to step up support for energy-efficiency measures, arguing that a recent study by Germany's Kreditanstalt für Wiederaufbau (KfW) has shown that each euro spent by the state on energy-efficient construction and renovation, generated revenue of about €2 to €5 in the form of additional tax revenue and social security contributions and a reduction in unemployment costs,

In addition, it calculates that reducing energy use will also make it easier for the EU to transition to cleaner energy sources. "If EU energy consumption is decreased only by one per cent, this would avoid the otherwise necessary construction of about 50 coal power plant units or 25,000 wind turbines and the accompanying infrastructure," the consultation argues.