Uniquely global dataset helps even in passive investments.
KLP is Norway’s largest life insurance company. It manages the pension assets of over 550,000 Norwegians and has over $70 billion of assets under management. KLP is committed to responsible ownership and to promoting long-term and sustainable value creation. KLP has been a CDP partner since it first launched in the Nordics.
Jeanett Bergan, Head of Responsible Investment at KLP, explains that a significant chunk of KLP’s investments follow an indextracking model, which means that anything that improves general market performance is good for their long-term value. “If we as active owners improve the performance of CO2 intensive companies, that will help us secure better returns in the future” , explains Bergan.
Bergan continues that the company-specific data in CDP’s quarterly sector reports are especially helpful in identifying which companies might warrant active stakeholder engagement. In 2015, KLP used CDP’s sector reports on the global automobile and electrical utilities sectors as the basis for engagement with other Nordic investors to encourage the companies covered to improve their performance on climate metrics.
CDP helps smaller investors make their voices heard
According to Bergan, by facilitating collaborative engagements with other investors on climate reporting, CDP helps investors to speak, “with a louder voice than if we were engaging on our own.” She continues: “KLP is a relatively small fund in an international context and it can be more powerful to work with other investors to amplify our impact”.
A unique source
Bergan says that the nature of the CDP database is “uniquely global” in its provision of emissions data. That means that investors can judge corporate environmental performance along its whole supply chain in a way that national government-based datasets cannot emulate and which she believes gives CDP an important future role as emissions reporting continues to evolve.
“There are other sources for country-specific data, but CDP is the only one that covers global business”, she explains. As global businesses in turn account for for a major part of global emissions, Bergan adds that this unique global data set and reporting framework should be more closely linked to the work of the United Nations in some way, due to its efforts to reduce global emission and securing the world’s climate.
Comparable data is key
For KLP, CDP’s sector-specific reports are also helpful in identifying companies that might provide a better investment in the longer term. “What we need is comparable information. For that reason, the sector reports are tremendously useful”, says Bergan. She adds that the benchmarks in those reports help investors to see, for example, which companies have climate risk management built into their governance and strategy, going beyond carbon intensity alone.
KLP finds that companies can be resistant to filling out CDP questionnaires as it can often be very time-consuming. To help address this, KLP hosts workshops together with investee companies to walk them through the process and understand the value of completing the questionnaire. Since becoming a CDP partner, KLP has hosted a workshop every year to help launch the CDP questionnaire response process and provide support to companies.
“When the sector report comes back and companies find themselves at the bottom of the ranking because they didn’t fill out the questionnaire, then they realize that investors use this data and we see the results”, Bergan explains.
Looking forward, she says that she would also like to see more companies provide a clearer breakdown of energy use in their operations to highlight how much comes from renewables and how much from fossil fuels. Again, this is an area where CDP could have a big influence.