Survey: How Equity Analysts Link Climate Change And Company Valuation

Published: 27 May 2008

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£ 200.00 inc VAT

50 interviews, 20 figures, 30 pages

Introduction

Over the last 2 years corporate leaders have recognized climate change as an important business issue with strategic implications. But have equity analysts also taken note? This survey reveals, in detail, the climate change perspectives held by 50 equity analysts, representing 22 different investment banks and 13 industry sectors.

The central conclusion of the study is that analysts divide into believers, sceptics and cynics. Thirty per cent of analysts believe that climate change already has a material impact on profitability and think firms can achieve business benefits with their climate change strategies. A second group admit that climate change is a strategic issue for firms today but does not impact profitability. They anticipate more significant financial implications within 2 to 5 years. A final segment of equity analysts don’t envisage a material financial impact within the next 5 years and some analysts in this group don’t consider there will ever be a material impact on profitability.

How You Benefit

Based on 50 in-depth telephone interviews this survey-based report provides unique, ground-breaking data and analysis on the financial analysis of climate change. Benefits include:

Improving your understanding of what questions are being asked by equity analysts on climate change and what they are actively researching.
Understanding the cutting-edge thinking on how climate change impacts company profitability and valuation across all sectors.
Getting the inside track on how equity analysts view your sector and your firm so you can revise your financial communications.
Prioritizing different climate change initiatives and investor communications based on analysts’ financial analysis.
Planning when you need to invest time and effort in financial analysis of climate change to maintain your credibility.

This report helps executives, investor relations directors and financial communications professionals to understand how equity analysts link climate change and company valuation. It also provides insights for equity analysts to benchmark their own perspective and for advisers in professional services firms to understand current thinking in financial circles.

LINKING CLIMATE CHANGE AND COMPANY VALUATION

Introduction
Equity Analysts Divide Into Believers, Sceptics And Cynics
No Consensus Within Sectors — Apart From The Utilities Sector
Analysts Suffer From An Information Gap And A Knowledge Gap
Regulations And Input Costs Dominate Climate Change Thinking
Energy Costs Significantly Outweigh Climate Change Impacts
Analysts View Climate Change As A Corporate Branding Issue

SURVEY DATA AND ANALYSIS

Demographics Of Survey Participants
Equity Analysts Buy Into The Business Impact Of Climate Change
Uncertainty Clouds Climate Change Information Needs
Understanding Regulatory Impacts Dominates Analyst Research Efforts
Extreme Weather Events Affect Profit Forecasts
Climate Change Strategies Get A Mixed Reaction
Climate Change Begins To Influence Company Valuation
Compliance Costs Outrank Weather Cost Impacts
Regulations, Energy And Leadership Drive Climate Change Strategy
Reputation Benefits More Likely Than Financial Benefits
Climate Change Strategy Can Deliver Competitive Advantage
Equity Analysts Split Into Believers, Sceptics And Cynics

WHAT IT MEANS FOR FINANCIAL COMMUNICATIONS

Draft A Company Position On Climate Change
Benchmark Climate Change Reporting Capabilities
Launch A Climate Change Financial Analysis Project
Forecast When Climate Change Will Have A Material Impact On Profits
Communicate On Issues Likely To Receive A Positive Response

TABLE OF FIGURES

Figure 1. Survey respondents represent 22 investment banks
Figure 2. Survey respondents cover 13 different industry sectors
Figure 3. Equity analysts buy into the business impact of climate change
Figure 4. Uncertainty clouds analysts’ climate change information needs
Figure 5. Analysts rely on company-provided climate change information
Figure 6. Understanding regulatory impacts dominates research efforts
Figure 7. Extreme weather events affect profit forecasts
Figure 8. Climate change strategies get a mixed reaction
Figure 9. Climate change begins to impact company valuation
Figure 10. Compliance costs outrank emissions and weather costs
Figure 11. Equity analyst perspectives on climate change strategy drivers
Figure 12. Climate change strategy drivers: analyst and company views
Figure 13. Reputation benefits are more likely than financial benefits
Figure 14. Climate change brand benefits: analyst and company views
Figure 15. Climate change profitability: analyst and company views
Figure 16. Climate change strategy can deliver competitive advantage
Figure 17. Competitive advantage potential: analyst and company views
Figure 18. Cost advantage potential: analyst and company views
Figure 19. Equity analysts split into believers, sceptics and cynics
Figure 20. Receptivity of analysts to climate change communications