Companies Make Bets on Climate Change

Stocks of companies that take climate change seriously beat the wider market by almost 10 percent over the last five years, according to a report released this week by a U.K. nonprofit. The group, CDP, encourages companies to disclose their climate change work publicly, on behalf of hundreds of institutional investors.

CDP’s Carbon Performance Leadership Index (CPLI) is composed of companies that lead their peers in managing and reporting the carbon pollution from their own operations and supply chains. That’s not necessarily the same as the least-polluting companies; it’s the companies most aggressively wrangling carbon.

CDP grades companies based on how aggressively they are setting and meeting carbon goals, and on how forthcoming they are about this work. CDP started with a pool of about 2,000 companies that shared information about their climate-related work earlier this year. The 187 companies that received an “A” from group this year made the index. They include some of the world’s leading brands — Apple, Bank of America Merrill Lynch, BMW, CVS Health, Google, Northrop Grumman, Samsung, Unilever.

At least part of the strong performance of the CDP carbon index can be attributed to its heavy concentration of tech and financial stocks, sectors that grew faster than average in the last five years. Businesses in those industries have embraced pollution cuts much faster than their counterparts in industries where burning fossil fuels is more central to the core business.

The results challenge the still-pervasive assumption that climate-friendly business is automatically bad business. “The A List” study complements a library of research into the benefits to businesses and investors of considering environmental and other sustainability criteria when setting strategy.