Matthew Kish in the Portland Business Journal tracks the evolution of interest in CO2 and global warming from environmental concerns to business concerns, A new item for watchdogs: the corporate carbon load:
Roughly half of the country’s automobile, manufacturing, oil and gas, insurance, petrochemical, and utility companies now disclose climate change risks in their SEC filings, according to a report released in October by the Washington, D.C.-based not-for-profit Friends of the Earth. That’s nearly double the percentage from five years earlier.
But perhaps surprisingly, the people pushing for the disclosures aren’t a bunch of Berkeley peaceniks. They’re major Wall Street players.
“Right now, the effects [of climate change] are maybe a business can get its facility smashed up by extreme weather events,” said Paul Dickinson, a coordinator for the London- and New York-based Carbon Disclosure Project [whose members’ assets represent “one-third of all the money in the world.”]. “But tomorrow there’s probably going to be some state-level taxation of [carbon dioxide] and that’s going to impact profitability of companies depending on how much they emit.”
In other words, shareholders want to know how much of the bottom line public companies will have to fork over if caps on certain pollutants become law.
It’s not the first time someone’s sounded the call. In addition to CDP, the Investor Network on Climate Risk (INCR) has been bringing institutional investors and financial institutions, since 2003, to promotes better understanding of the financial risks and investment opportunities posed by climate change.
The UN Environmental Program Finance Initiative has been deep into the matter as well, working with more than 160 banks, insurers and fund managers “to understand the impacts of environmental and social considerations on financial performance.” Publications include their Global Framework for Climate Risk Disclosure. (138kb PDF)
I’ve been among the voices writing and speaking about environmental risk and its potential impacts on fiduciary duty of boards and executives for a while as well, including old chestnuts like Risk, Fiduciary Responsiblity and the Laws of Nature, Risk, CFOs, and the Sustainability Business Case, An Economic Approach to Slowing Global Climate Change, and, from 1996, one of my personal favorites, Weather or not: Risk and the physics of climate change”
The sportscasters say “let’s look at the videotape.” I say “Let’s look at the physics…. Simply put, if we shift the amount or the nature of energy society adds to the atmospheric engine, the engine–our climate and weather–will change its behavior. It can’t do anything but that. There may be dispute over how it will change, in what patterns, how quickly, and who will benefit or suffer. There can be no dispute over whether it will change. The laws of physics take care of that one.
If that is so, where lies the prudent strategy? To not unnecessarily perturb critical systems we don’t understand. In practical terms, that means that competitive advantage shifts to those who can learn to prosper economically without depending on jiggering the global climate…for whom tinkering with the climate is no longer an economic necessity.
It may have taken a few years for this thinking to come in from the periphery, but I’d say that “a third of the money in the world” is fairly mainstream. Wouldn’t you?