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Sustainability Research

What is CDP and Why Should it Matter to Me?

CDP, formerly the Carbon Disclosure Project, is a not-for-profit whose mission is to focus institutions on measuring and understanding their impact on climate and the environment. In 2019, CDP’s global disclosure program was used by over 7,000 companies, 600 cities, and 120 states and regions to measure and report environmental impacts. This voluntary reporting included carbon emissions and climate change, water, forests, and supply chains. Covering 20% of global emissions and over half the global market cap, CDP manages the most detailed set of self-reported environmental data in the world.

CDP is an independent organization with a presence in 50 countries. CDP’s funding comes from a variety of sources, including philanthropic grants, service-based memberships, and government grants.

How does Prentiss Smith & Company use CDP Data?

At Prentiss Smith & Company, we check every investment against CDP’s database. While small or mid-size companies may not always disclose, we feel that disclosure is an important data point for larger companies in particular, or for those whose products and services indicate a responsibility to counterbalance adverse environmental impacts. When available, we also read the full report provided by CDP on the disclosing company, and weigh CDP’s scoring and other analysis when making investment decisions.

According to CDP, entities that respond to their survey experience a 67% higher return on equity compared to those who don’t respond. This is perhaps not surprising, given that respondents have identified $53B in savings based on their experience collecting and submitting data to CDP. It also fits with our core thesis: that companies with a more progressive, long-term outlook ultimately experience stronger financial performance.

In order to collectively reduce our carbon footprint, we must be able to measure and understand it. In this effort, CDP is playing a critical role: providing a clearinghouse for corporate emissions data, while simultaneously promoting a level of transparency that we believe strong companies must engage in to be successful long-term.