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This blog combines articles from ADEC ESG Solutions, as well as FirstCarbon Solutions (FCS), an ADEC Innovation.
Emphasizing Low-Carbon Strategies to Attract Climate-Savvy Investors
Posted by Michele Carchman on Oct 2, 2013 8:45:00 AM
For years, businesses have been trying to learn how best to deal with the effects of climate change in their annual reports. On the side of capital markets, they learned that annual financial performance may not be enough for them to discern whether they are making good investments or not. As they primarily reviewed financial performance, some investors felt the impact of climate change when the companies they invested in experienced losses due to extreme weather conditions.
It was due to such events that investors were able to see the importance of recognizing how well companies perform when it comes to their preparedness for the effects of climate change. In order to attract new investment, businesses must emphasize their efforts to mitigate the effects of climate change: low-carbon growth.
Underscore Clean Energy Initiatives
The 2012 Investor Summit on Climate Risk and Energy Solutions lists clean energy technology as one of the most viable investments capital markets can make in today’s climate-challenged times. Businesses today would do well to report their production of onsite clean energy through installation of mechanisms such as photovoltaic (PV) panels or wind turbines, for example. Inclusion of clean energy initiatives in annual reports prompts investors into realizing that the company they want to invest in is energy-secure; companies’ energy self-sufficiency means that their operations will not be hampered by power outages caused by any shortage of non-renewable energy. In line with that, companies who produce clean energy are also protected from the risks posed by rising prices of non-renewable energy.
Another important step in inviting climate-conscious investors is for businesses to tell them about their energy efficiency strategies. More importantly, companies must highlight the cost-effectiveness of their efforts to reduced energy consumption and their utilization of energy-efficient structures, machines, or retrofits. In their annual reports, businesses should report how much cost savings are realized through reduction of energy consumption. In addition, companies should report on the ability of their energy efficiency projects to “pay for themselves”. Switching to low carbon, energy-efficient operations requires immense investment—companies will inevitably spend money in replacing old equipment, machines, and fixtures with their new and energy-efficient counterparts. Companies should detail the exact amount of cost savings that these energy efficiency strategies will generate yearly in their annual reports. Additionally, companies must also report the increment of further cost savings that they expect to reap after their energy efficiency solutions have finally paid for themselves.
Initiatives such as those above enable the proliferation of sustainable investors—members of capital markets who maximize their profits while keeping environmental sustainability in mind. As businesses face increasingly climate-conscious capital markets, it is critical that climate change initiatives are reflected in one of their trusted references—annual reports. Companies can focus on highlighting and integrating their clean energy and energy efficiency initiatives in their annual reports in order to prove to investors that they are climate-aware businesses and are prepared to face the challenges posed by climate change.
As an exclusive scoring partner for Carbon Disclosure Project’s (CDP) Investor Program, FirstCarbon Solutions (FCS) has extensive experience in helping companies effectively communicate climate change information to investors globally through efficient collection and in-depth analysis of their climate change data. Click on the button below to obtain world-class consultancy and access to robust software to help you prepare reports for climate-savvy investors.