From engagement to education – three ways CDP helps us.
Boston Common Asset Management is a global investment manager with more than US$2 billion in assets under management. The firm has a long-term investment horizon, and is widely acclaimed within the responsible investment community for their integration of environmental, social and governance (ESG) factors into their investment process. Boston Common has been a CDP signatory since 2004 and a CDP investor member since 2012. Geeta Aiyer, the firm’s Founder, also sits on the Governing Board of the UN-supported Principles for Responsible Investment (PRI).
A key part of the engagement strategy
There are three key ways that Boston Common uses CDP data.
The first is during company engagement. Boston Common believes that reporting to CDP is an essential first step for all companies to assess and manage their carbon and water risks – and therefore advises firms that do not respond to CDP to do so. Boston Common has engaged companies from all sectors across the globe regarding CDP from Europe and the US to Asia including India, Japan, Singapore and South Korea.
Steven Heim, Managing Director and Director of ESG Research at Boston Common explains, “For us, CDP provides a critical platform for qualitative and quantitative assessment of a company’s carbon footprints and water risk management. The CDP questionnaires include details on governance at board level and long-term strategy, and really provide great insight into how a company is managing risks.”
One example of how Boston Common uses CDP disclosure for engagement is with VF Corporation – a global apparel company and the parent company of Timberland and North Face. Constantina Bichta, Manager of ESG Research explains, “VF Corporation is one of the biggest cotton buyers in the world. However, cotton is a very water intensive product and this is becoming an increasingly critical issue for the apparel sector. Yet they weren’t responding to the CDP water questionnaire. We were concerned that without robust water management strategies VF was exposed to a number of business risks. In 2015 VF Corporation responded for the first time to the CDP water questionnaire, and we have now been able to better understand its strategies and benchmark its water management against industry leaders.”
An internal yard stick
Alongside using CDP data to measure, monitor and manage the performance of companies in its portfolio, Boston Common uses CDP data to assess the carbon footprint of its portfolio strategies and monitor their own environmental performance.
Heim explains, “We have used CDP data as a key part of measuring the carbon footprint of our portfolio. This is useful as not only has it shown our carbon footprint is significantly smaller than that of major indices, but more importantly it has shown us which companies in our portfolios are the highest GHG emitters.”
Heim goes on, “This led to extensive discussions with French companies Veolia and Air Liquide about their carbon footprints and how they work to help other companies reduce emissions. This is part of our ‘ecoefficiency’ initiative that we are rolling out with companies to reduce their energy and water use, and eliminate waste, as a next step for companies and investors seeking to address climate change.”
As an investor seeking to understand their net climate benefits or impacts, CDP data on a company’s impact on its supply chain is proving increasingly valuable.
Educating others
The third way that Boston Common uses CDP data and services is as part of their work to educate companies on the material importance of sustainability issues.
For example, Boston Common have presented on a CDP webinar with Latin American companies to explain why water is an important issue for investors and how the CDP Water questionnaire can be a practical part of managing it.
In November 2016 Lauren Compere, Managing Director and Director of Shareowner Engagement presented to a group of over 20 companies in Japan. She shared how global investors use CDP data and how it can be used as an internal management tool to better manage energy and water in both direct operations and in their supply chain. She encouraged companies to improve their disclosure on these key risks by integrating their CDP responses into their other sustainability and integrated reports.
“When companies hear that investors are concerned, that drives action, and helps us to see improved behavior and ultimately more sustainable returns”, concludes Heim.