What Is a Carbon Disclosure Rating?

A carbon disclosure rating is a measure of the environmental sustainability of a company based on voluntary disclosures by the company itself. The practice is intended to help investors who wish to incorporate environmental, social, and governmental (ESG) factors into their investment decision-making processꦑ.

The most widely used carbon disclosure ratings are administered by CDP, a United Kingdom-based 澳洲幸运5开奖号码历史查询:non-profit organization form▨erly known as the Carbon Disclosure Project.

The carbon disclosure ratings collected by CDP are comparable to the carbon disclosures collected by the Amsterdam-based 澳洲幸运5开奖号码历史查询:Global Reporting Initiative (GRI). GRI works with businesses and organizations alike, while CDP works specifically with individual companies.

How Carbon Disclosure Ratings Work

The basic framework involved in generating carbon disclosure ratings is the use of questionnaires administered by CDP. Companies participating in this program, which number nearly 15,000 as of year-end 2022, submit responses on an annual basis to a series of questions tailored depending on the company’s industry. The responses are then analyzed, graded, and made available to 澳洲幸运5开奖号码历史查询:institutional investors and other interested parties.

CDP's metrics separate companies based on their understanding and application of climate-related changes.

A and A- | Leadership level

B and B- | Management level

C and C- | Awareness level

D and D- | Disclosure level

F | Failure to provide sufficient information to be evaluated

Special Considerations

One criticism of the carbon disclosure rating process is that its scores do not necessarily reflect the actions a company takes to mitigate its impact on climate change or to 澳洲幸运5开奖号码历史查询:offset its carbon footprint. Rather, a score may simply reflect that ꦯthe company failed to promptly or fully discl🌌ose information with CDP.

However, an "F" does not mean the company has failed to reign in its carbon footprint. Rather, it means that the company has failed to provide enough information to CDP to receive an evaluation. As a result of this, another criticism of the process is that the ratings are inconclusive, as many companies do not provide information to the CDP on what actions they've taken to limit how they impact climate change.

Real-World Example of a Carbon Disclo꧑sure Rating

CDP publishes an annual “A-List” of the companies that ranked most favorably in their carbon disclosure ratings. In 2022, 431 companies were featured on this list, many of whom are large 澳洲幸运5开奖号码历史查询:multinational corporations that are dominant in their respective industries.

These include many prominent American companies, such as Ford Motor Company (F), Johnson & Johnson (JNJ), and Microsoft (MSFT).