This is part 14 of a series of educational posts from the IFoA’s Climate Change Disclosures Working Party about climate reporting topics. Here we give an introduction to CDP and a brief overview of its submission process and outcomes.
CDP (formerly known as Carbon Disclosure Project) was created in 2000.
It is an international “not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts”1.
There is an admin fee for companies to support disclosure via the CDP platform.
Each year, CDP provides a score to companies or cities who decide to participate and submit relevant information via questionnaires. Companies and cities who participate are scored A to D- (for those who submitted questionnaires and relevant data to CDP), with A being the highest score and D- being the lowest. (See below for more details.)
Since 2018, CDP questionnaires have been adjusted to be in line with Task Force on Climate-related Financial Disclosures (TCFD) recommendations (for more details, see CDP Technical Note on TCFD).
Currently, there are over 18,700 companies disclosing through CDP across the globe. The majority of organisations reporting to the cities, states, and regions questionnaires are based in the US, Japan, and Brazil. For recent corporate disclosures, the top 5 countries are (in decreasing order): the US, China, the UK, and Brazil2.
A company or city may receive an F rating if they fail to disclosure via CDP.
Companies and cities may receive 3 separate scores from CDP based on the disclosure areas of climate change, forests, and water security.
The scores show “where they are on the road towards operating in line with a 1.5-degree, deforestation-free and water-secure” future. Each grade from D- to A represents where a company or city may be in their environmental journey from purely reporting (D-), ‘awareness’ (C), ‘management’ (B), and ‘leadership’ (A) – with the aim of moving away from simple report to more encouraging companies and cities who are being proactive in environmental action.
For more details of the scoring system please, see CDP scoring methodology guidance.
There is no real direct impact for actuaries though there are potential secondary impacts. For example based on management’s aim of participation within CDP to improve scores by changing investment and business strategy, as well as any additional scenario analysis required.
CDP has a 5-year strategy from 2021 to 2025, which includes:
Below is a list of websites we hope you find useful:
What are your thoughts on the points raised in this article?
We would love to hear your views in the comments on the IFoA's Sustainability Finance Community LinkedIn page.
To find out more, visit: Sustainability: research working parties
[1] www.cdp.net/en/
The views expressed in this post are those of the individual authors, and not necessarily those of the Institute and Faculty of Actuaries or those of their employers. Information within this post is correct as at the date of writing (i.e. end of July 2023). Hence, there may be subsequent updates which are not reflected. Any reader should still reference the underlying legislation and standard, and should there be any conflict, the underlying information in the relevant standard or legislation supersedes any information presented in this post.