Climate change poses risks for business. Quite apart from the risks of the direct effects of climate change - sea-level rise, extreme weather events, changes in rainfall for climate dependent industries - there are also the financial risks of having to deal with it. Some companies may find themselves unprofitable if forced to pay the full cost of their climate-damaging activities. Others may face competitive risks from consumers abandoning polluting products in favour of cleaner technology. And there are reputational risks - the danger of being labelled a climate polluter in a market which is sensitive to environmental issues.
All of these risks ultimately affect profitability - and so for the past four years, a group of major institutional investors has been asking major companies about the risks they face and what they are doing about them. Not because they're necessarily concerned about the environment (though they might be) - but because they want to know whether they are making good investments, or whether the companies they are investing in will suddenly turn into lemons if forced to pay the full cost of their activities. This is the Carbon Disclosure Project.
This year's CDP is the biggest ever, with institutional investors managing US$31.5 trillion (around 30% of the world's total) asking more than 2,000 companies worldwide what they're doing to manage the risks of climate change. And for the first time, New Zealand companies were included in the survey. Unfortunately, they didn't want to talk about it. Of the thirty-three New Zealand companies surveyed, only six responded, and only one - Fletcher Building, which owns major emitter Pacific Steel - agreed to allow its response to be made public. The rest either did not respond, or explicitly refused to participate. This compares very unfavourably with the FT500 response rate of 72% and the FTSE350 response rate of 83%, and the natural conclusion will be that New Zealand companies are not considering these issues and have their heads firmly stuck in the sand. Unfortunately for them, the issue is not going to go away; quite apart from the fact that climate change will happen whether they plan for it or not, these major institutional investors are going to keep asking their questions until they get some answers. And they may draw unfavourable conclusions from non-compliance...
Bloody good post Savant - as more scientific evidence comes suggesting that we are at the Environmental tipping points that we have been warned about, to see the absolute refusal of NZ companies to come clean about the pollution they are creating is disgusting
ReplyDeleteBomber: it's not even about the pollution they're creating - though reporting on emissions is a part of it. They're being asked questions like what effects climate change and climate change policy will have on their business, and what steps they are taking to manage those risks. The resolute silence of new Zealand companies speaks volumes about the poor quality of management in this countyr, and their seeming belief that if they whine loud enough (and donate enough to the National Party) the whole thing will just go away...
ReplyDeleteI suspect the real reason is for obfuscation purposes - the larger companies are trapped between a rock and a hard place. If they admit even to risk assessment based on the possibility of global warming, then they are at peril of people (rightly) pillorying them for acting in self-interest when their own information is telling them to restructure to mitigate risk.
ReplyDeleteHowever, the whole stone-walling thing is an egregiously bad look as well... It will take the leadership of a few of the big fish even realistically acknowledging the importance of climate change policy before it will filter down through the mainstream business community.
At the moment it is the preserve of niche businesses marketing themselves on their environmental accountability, but hopefully the groundswell of public opinion will force a few of the big players over the top.
Fingers crossed aye!
DenMT
DenMT: This isn't just niche businesses; the FT500 section included firms such as Boeing, Wal-Mart, Ford, American Express, and HSBC. And they're being driven to do this by major investment and insurance companies such as Merrill Lynch, Morgan Stanley and Munich Re. These large investors have figured out that climate change is going to cost them money, and so are demanding information so they can avoid investing in risky and stupid companies. Which doesn't exactly make the NZ companies look good...
ReplyDeleteThose sensitive caring fund mamagers dumped 15bUs oil future contracts overnight(30 day)and 75b 365 day contracts (rememberibg the futures market is 250 the real market}
ReplyDeleteoil to be cheaper at the pump by xmas at around 50 per barrel$ oops
Christ that is astounding - surely when the insurance industry is freaking out, that must be an indicator that they are taking it more seriously than the media seem to. I was amazed that story about the massive decrease in Arctic Ice was on the back page a couple of days ago -am I missing something here? Was there a bigger story that day?
ReplyDelete