MasterCard – GHG Emissions (2016)
Outcome: Successfully withdrawn following a commitment from the company to set GHG reduction targets by the end of the year.
Resolved: Shareholders request that MasterCard, Inc. adopt, company-wide, specific, quantitative and time-bound goals, taking into consideration the Intergovernmental Panel on Climate Change’s (“IPCC”) recommendations, to reduce operational greenhouse gas (GHG) emissions, and to report by November 2016, at reasonable cost and omitting proprietary information, its plans to achieve those goals, and any relevant performance metrics.
The rationale for companies to reduce emissions is compelling. First, the ability to generate reliable financial returns for shareholders while meaningfully reducing carbon emissions is well-proven. A report published by WWF, CDP, and McKinsey & Company, found that companies with GHG targets achieved an average of 9% better return on investment than companies without targets. As a result, setting GHG emission targets is widespread among U.S. companies. According to Power Forward 2.0, a report by WWF, Ceres, Calvert Investments and David Gardiner and Associates, 60 percent of Fortune 100 companies have GHG reduction commitments and renewable energy commitments, as of 2013. Further, Power Forward 2.0 finds that the 53 Fortune 100 companies that report climate and energy targets to the CDP are saving $1.1 billion annually by reducing emissions and procuring renewable energy.
Second, consumers increasingly expect companies to reduce their carbon footprint. Therefore, mitigating this potential reputational risk has become a key driver of corporate action. This is especially crucial in the wake of the recent COP 21 agreement that not only magnifies public attention, but also increases the likelihood of further regulatory action.
Lastly, in its Fifth Assessment Report (AR5), the IPCC stated that GHG emissions in 2050 must be 40% to 70% lower than 2010 levels in order to stabilize global temperatures. Given the range and extent of the risks associated with failing to do so, all companies, including MasterCard, must play a role in reducing emissions.
Investors are increasingly monitoring how corporations are reducing their climate impacts and risks. 1,380 institutional investors managing more than $59 trillion have joined The Principles for Responsible Investment (UNPRI), including 7 out of MasterCard’s 10 largest shareholders acknowledging that ESG issues can affect the performance of investment portfolios.
In its 2015 CDP response, MasterCard indicates that its facilities and core data centers account for a majority of its GHG emissions impact. Although MasterCard has achieved LEED certification for several facilities, it has yet to set targets to reduce energy use or emissions, which may cost the company reputationally and financially. This is especially troubling because in its fiscal year ended 2014, the Company’s emissions increased 19.3% from fiscal 2013, outpacing revenue growth of 13.5% over the same period.
To ensure it is meeting investor and consumer expectations, MasterCard should demonstrate it has a strategy and executive-level commitment to address its carbon footprint and adopt GHG reduction goals. Further, we recommend that MasterCard consider renewable energy procurement as a strategy to achieve its emission reduction goals.