May 12, 2014

Cor­po­rate cli­ents deepe­ning their approach to sus­tain­abi­lity: Ceres report de­mon­strates the grow­ing expec­tat­ions on all com­pa­nies for im­proved sus­tain­ability performance

An evaluation of 613 of the largest public US companies has found that many companies are taking more action on environmental and social challenges but this is not keeping pace with the required level of change to address climate change and other sustainability threats.

Some companies have substantially accelerated and broadened their sustainability efforts as an essential strategy for building long-term shareholder value, the report says. However, many companies are just beginning to address sustainability issues that could impact their profitability.

The report states that “the scientific and economic realities facing corporations today have shifted substantially from even just a decade ago. From the risks posed to operations and the supply chain due to a changing climate, to an increasingly resource-constrained world with a growing population, to mounting human rights abuses — finding solutions to these business challenges will require collaboration, innovation and transformation”.

Expanding the adoption of sustainable business practices and solutions

The report was written by the non-profit Ceres and the company Sustainalytics which provides environmental, social and governance research and analysis for the investment community. Ceres works with investors, companies and other groups to expand the adoption of sustainable business practices and solutions to build a healthy global economy. Deutsche Bank is a member of Ceres’ Investor Network on Climate Risk, but was not involved in the drafting of this report.

Companies were evaluated using 20 key metrics in the areas of governance, stakeholder engagement, disclosure and performance related to companies’ operations, supply chain, transport/logistics, products and services and employees. Some of the key findings include:

  • A growing number of companies are incorporating sustainability performance into executive compensation packages. 24% of companies link executive compensation to sustainability performance – up from 15% in 2012
  • While many companies are taking action to reduce GHG emissions, few have set time-bound targets. More than two-thirds of the companies evaluated have activities aimed at reducing GHG emissions, but only 35% have established time-bound targets for reducing carbon emissions
  • More companies are setting clear sustainability standards for suppliers. Fifty-eight percent of companies have supplier codes of conduct that address human rights in supply chains, compared to 43% in 2012. However, only a third of companies have some activities in place to engage suppliers on sustainability performance issues, up from 27% in 2012.

Providing information to shareholders about how the companies are performing in key areas

In addition to informing the sustainability efforts of companies, the report provides important information to shareholders about how the companies in their portfolios are performing in key areas, such as disclosing material issues and engaging with stakeholders. Aggregate data and scorecards for companies and information on sector performance was also published online. Spreading the use of such information to make investment decisions is one of the objectives of Deutsche Asset and Wealth Management and its recently formed ESG Head Office.

“This report is critical for investors because it reveals how well prepared or, in many cases, how poorly prepared individual companies are to thrive in an economy being profoundly shaped by sustainability risks and opportunities,” said Anne Stausboll, Chief Executive Officer of the California Public Employees’ Retirement System (CalPERS) – the largest public pension fund in the US.

Financial Services companies are starting to capitalize on sustainability as a business opportunity

While Deutsche Bank was not specifically examined is this report, the report includes an examination of 31 US financial services companies. The report finds that financial firms have begun to demonstrate their commitment to sustainability by expanding investments in clean technology, adopting policies to address environmental and social risks, and engaging in more proactive and robust stakeholder engagement and disclosure. However, a small group of leading companies is providing most of the progress. The report finds that financial companies have made progress in addressing operational environmental impacts, especially by “greening” their owned and leased buildings. Deutsche Bank has made significant progress in this area as part of our ongoing carbon neutral commitment. More Financial Services companies are starting to capitalize on sustainability as a business opportunity by expanding their lending and investments to projects and industries that offer sustainability solutions. However, the proportion of these offerings remains small compared to overall lending and investment portfolios.

Deutsche Bank’s sustainability performance is annually evaluated

The recently published Deutsche Bank Corporate Responsibility report describes and provides data on our progress to create sustainable value for clients, employees, shareholders and for society. Based on this report and other available information, Deutsche Bank is annually evaluated by external third parties on our sustainability performance. These ratings are increasingly used by investors to help them integrate important extra-financial information into their decision-making. Our performance continues to earn good scores and a place on the most important sustainability indices.

Group Sustainability Officer Sabine Miltner said “The Ceres report demonstrates the rising public expectations and investor requests for all types of companies to improve their performance on key environmental, social, and governance factors. Deutsche Bank and other financial services companies are increasingly focusing on how we can assist companies with their sustainability goals such as by financing renewable energy or structuring green bonds. Deutsche Bank recognizes the need to deepen our own sustainability efforts, as part of the Bank’s aim to restore the bond of trust with society and to create deep cultural change based on our values and beliefs.

“This re­port is cri­ti­cal for in­ves­tors be­cause it re­veals how well pre­pared or, in many cases, how poorly pre­pared in­di­vi­dual com­panies are to thrive in an eco­nomy being pro­foundly shaped by sus­tai­nabi­lity risks and oppor­tun­ities.”

Anne Stausboll Chief Executive Officer of the California Public Employees’ Retirment System (CalPERS) – the largest public pension fund in the US

Sustainability performance as key indicator

24% of ana­lyzed com­panies

link executive compensation to sustainability performance – up from 15% in 2012

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