JP Morgan, one of the world’s leading investment banks with 8,000 clients in more than 100 countries, has adopted new environmental policies based in significant part on WRI advice. JP Morgan will account for greenhouse gas emissions associated with their lending portfolio. The bank will work with clients to develop financing solutions to fund development of lower carbon-emitting technology solutions and investments in greenhouse gas reductions. The bank will lead efforts with other financial institutions advocating for the U.S. government’s adoption of a market-based national policy on greenhouse gas emission reductions.
The financial implications of environmental opportunities and risk need to be understood by financial institutions and investors, and reflected in the world’s capital markets. Our collaboration with Merrill Lynch, one of the world’s leading financial management and advisory companies, has resulted in their report, “Energy Security and Climate Change: Investing in the Clean Car Revolution.” Merrill Lynch uses this report to advise clients about investments in the auto industry. WRI’s work with Merrill Lynch advances our efforts to involve the financial sector in addressing climate change.
Few countries are unaffected by China’s overseas investments. The country’s outward foreign direct investments (OFDI) have grownfrom $29 billion in 2002 to more than $424 billion in 2011. While these investments can bring economic opportunities to recipient countries, they also have the potential to create negative economic, social, and environmental impacts and spur tension with local communities.
To address these risks, China’s Ministry of Commerce (MOFCOM) and Ministry of Environment (MEP)—with support from several think tanks—recently issued Guidelines on Environmental Protection and Cooperation. These Guidelines are the first-ever to establish criteria for Chinese companies’ behaviors when doing business overseas—including their environmental impact. But what exactly do the Guidelines cover, and how effective will they be? Here, we’ll answer these questions and more.
This post was co-authored with Carita Chan, an intern with WRI's forests initiative.
As the crisis of tropical deforestation reaches a new level of urgency due to forest fires raging in Indonesia, an important question is how can the world satisfy the growing demand for forest products while still preserving forest ecosystems? This week, some of the world’s largest companies will join U.S. and Indonesian government officials in Jakarta at the Tropical Forest Alliance 2020 (TFA 2020) meeting to discuss this issue.
The meeting comes three years after the Consumer Goods Forum (CGF), a group of the world’s 400 largest consumer goods companies from 70 countries, announced their commitment to source only deforestation-free commodities in their supply chains and help achieve net-zero deforestation by 2020. The TFA 2020, a public-private partnership established in 2012 at the Rio+20 Summit, aims to provide concrete guidance on how to implement the forum’s pledge.
Investors need to understand a wide variety of business and market risks facing the companies in which they invest. In the 21st century, that includes water risks.
An increasing number of companies are experiencing detrimental water-related business impacts, including operational or supply chain disruptions and property damage from flooding, to name a few. These impacts can be costly--in 2011 they cost some companies up to $200 million--and have caught the attention of investors around the world.
As a result, the movement toward increased Corporate Water Disclosure is gaining speed. The deadline for companies to respond to the CDP 2013 Water Disclosure Questionnaire is six weeks away. To make the reporting process easier, WRI has aligned our Aqueduct Water Risk Atlas with CDP’s water questionnaire. Together, we are providing step-by-step guidance on how to measure and report exposure to water-related risks.
This post originally appeared on The Guardian's Sustainable Business blog.
The way companies report on their financial status has changed little since corporate accounting standards were first created 80 years ago. Yet the world they operate in, and the risks and opportunities they face, have changed almost beyond recognition.
Global population has soared from two to seven billion, with human and manufactured capital now in abundance. Natural capital, on the other hand, has become scarcer and more precious. Once-plentiful forests, food, water, wetlands, minerals and metals are in short supply, creating supply chain and operational risks.
Today, a global coalition of regulators, investors, companies, and accounting organizations launched a new integrated reporting framework in six major cities, which aims to address this gap. The draft framework from the International Integrated Reporting Council (IIRC), based on input from 85 pilot companies and more than 50 investors, represents a much-needed milestone in the evolution of corporate reporting.
This is the last of a five-part blog series, Aligning Profit and Environmental Sustainability. Each installment has explored key ingredients to help businesses overcome barriers that prevent them from integrating environmental sustainability into their everyday operations. Read the entire series.
This post also appears on Greenbiz.com.
Over the past month, we’ve discussed some of the key barriers that prevent companies from truly integrating sustainability considerations into their long-term strategies. Countless companies across the world struggle with these obstacles, such as: capital budgeting processes that fail to account for sustainability initiatives’ benefits; financial teams whose goals don’t align with those of the sustainability teams; and uncertainty about how to implement metrics that properly account for external environmental costs.
A handful of companies, however, are starting to identify effective ways to break these barriers down. Johnson & Johnson now allocates $40 million a year to a special fund that directs capital to greenhouse gas reduction projects, helping to lighten its environmental footprint while proving these projects generate good returns. AkzoNobel and Alcoa have elevated the role of the Chief Sustainability Officer in capital budgeting decisions to ensure the company is spending money to achieve financial and environmental results. And Natura is accounting for the environmental impacts of its suppliers and including those costs in its supplier selection process.
This post also appears on Greenbiz.com.
This is Part Four of a five-part blog series, Aligning Profit and Environmental Sustainability. Each installment explores solutions to help businesses overcome barriers that prevent them from integrating environmental sustainability into their everyday operations. Look for these posts every Thursday.
David Roberts at Grist, the online environmental news organization, commented on Twitter last week that “people talk about ‘externalities’ like they are just bad vibes or something. But that money is real money. Those costs are real costs.” How real is that money? Dr. Pavan Sukhdev, author of The Economics of Ecosystems and Biodiversity and Corporation 2020, claims that these “externalities”—or costs to society from carbon emissions, water use, pollutants, and other byproducts of business activities—are more than $2 trillion.
Putting a financial value on these environmental costs can help businesses make better informed decisions about how they manage their environmental risk. Not all companies recognize this—and even fewer actually know how to value these externalities correctly. But a few corporations are starting to show us the way.
This is Part Three of a five-part blog series, Aligning Profit and Environmental Sustainability. Each installment explores solutions to help businesses overcome barriers that prevent them from integrating environmental sustainability into their everyday operations. Look for these posts every Thursday.
This post also appears on Greenbiz.com.
A large, multi-national company likely spends hundreds of millions of dollars every year on new projects. How these projects are designed, constructed, and operated clearly impacts costs in the short-term, but also poses huge implications for a company’s “sustainability footprint” in the long-term.
A major challenge is that most corporate sustainability experts within a business are not involved in capital budget requests at the outset. A company’s financial leaders make investment decisions with upfront costs and projected revenues in the front of their minds. They are far less likely to take into account a project’s potential environmental risks and benefits. Not coordinating financial and sustainability decisions can lead to projects that are cost-efficient to build today, but may not hold up to sustainability pressures over their lifetime. For example, a company might invest in a factory that is inexpensive to build, but then realize that it’s in a location that locks them into buying only fossil fuel-based energy sources.
The lack of integration between financial and sustainability-related decision-making is a main barrier to scaling truly impactful corporate environmental sustainability. But as WRI found in its new working paper, Aligning Profit and Environmental Sustainability: Stories from Industry, there are companies who are starting to show us ways of overcoming this challenge.
This post also appears on Greenbiz.com
This is Part Two of a five-part blog series, Aligning Profit and Environmental Sustainability. Each installment explores solutions to help businesses overcome barriers that prevent them from integrating environmental sustainability into their everyday operations. Look for these posts every Thursday for the next four weeks.
As companies tackle environmental sustainability initiatives—such as developing a climate change strategy—early steps involve getting the CEO on board and committing to public goals. But the process doesn’t stop there. In fact, that’s only the beginning. Companies also need to find the money to implement projects and make good on the promised goals—all while delivering financial results.
Finding the Money: A Case Study from Johnson & Johnson
Finding the funds for environmental sustainability initiatives can be a tall order, especially since many companies’ sustainability decisions are made separately from its financial ones. Johnson & Johnson experienced this conundrum firsthand. Back in 2004, the company had a public greenhouse gas reduction target, but was not on track to reach it. Although the emission-reduction projects it identified could save energy and operating costs, managers were having difficulty getting approval for the capital they needed. Core business priorities like new product development were competing with the money the company had earmarked for its sustainability efforts.
Managers, therefore, decided to re-think the way the company allocates internal capital. Johnson & Johnson started putting aside $40 million each year for “win-win” projects—greenhouse gas (GHG)-reduction initiatives that also reduce operating expenses, such as solar photovoltaics. Projects like these sometimes require more upfront capital, but benefit from more predictable returns and lower operating costs than conventional energy systems. The strategy reduces the company’s risk exposure over time and lowers its operating budget.
Fast forward to today and this approach has enabled Johnson & Johnson to reduce its GHG emissions by more than 138,000 metric tons through projects that have an average return of 19 percent. This emissions-reduction is equivalent to the electricity use of approximately 21,000 homes. The company met its initial GHG-reduction target in 2010 and renewed its commitment with a new 20 percent absolute reduction target by 2015.