Friday, June 01, 2007

Full Disclosure

Although it might seem like it after the recent series of posts about carbon emissions and corporate sustainability reports, I am not tilting at wind mills. The need for public companies to “come clean” is not an original idea and I am not alone in looking for disclosure…any disclosure…of environmental liability in terms of hard facts and figures.

Carbon Disclosure Project (CDP) is a self-styled institutional investor collaboration on the “business implications of climate change.” The group has its beginnings in the United Kingdom but has been joined by some high-profile U.S. institutions like Blackrock, CalPERS and CalSTRS.

Supported by philanthropic groups, the CDP has set out to establish an on-line registry of corporate greenhouse gas emissions. So far over 1,000 corporations have responded to the CDP survey. All the responses are available for no charge. I mentioned Chevron in a recent post, “Emissions Estimates,” describing how Chevron developed a system for estimating carbon emissions. So it is not surprising that
Chevron responded to the CDP’s questionnaire.

What is attractive about the CDP’s survey approach is that it gives investors another vantage point for comparability. It also cuts corporations off at the pass, so to speak, by not allowing them to duck one topic or another if it makes them look bad.

Here is another helping hand from the CDP - a list of “best in class” responses to the CDP questionnaire. The
CDP Climate Leadership List is put together to give investors names of companies that have the most comprehensive climate-change disclosure practices in place. The current list is composed of the top fifty survey respondents to the CDP survey.

RWE AG (RWEOY: OTC/BB), the German utility company scores the highest in that industry. If you prefer to invest close to home, take a look at Entergy Corp. (ETR: NYSE) the electric utility serving Louisiana.

In the chemicals group, another German company,
Bayer AG (BAY: NYSE) also scored high in the CDP disclosure index as did Praxair, Inc. (PX: NYSE), the industrial gas supplier based in the U.S.

Ford Motor Company (F: NYSE) is the only U.S. automotive manufacturer to make the CDP list. This is somewhat surprising given the noise General Motors (GM: NYSE) has been making lately about wanting to be part of the solution rather than part of the problem. General Motors responded to the CDP questionnaire, but apparently did not score as high on the "forthright" meter than other respondents.

The Ford vs. GM comparison highlights one of the issues to which I believe investors should be sensitive, i.e. companies that may only be paying lip service to environmental responsibility. I think the Carbon Disclosure Project provides one avenue to keep corporations honest and make available the information investors really need to calculate corporate sustainability and long-term profits.

Of course, it does not help us in the small-cap world, but I think it is just a matter of time before carbon disclosure trickles down below the Mason-Dixon Line of market capitalization - $1.5 billion.

Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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