Posted on 11-7-2003
U.S.
Giants Care Less About Global Warming
BOSTON, Massachusetts, July 9, 2003 (ENS) - Most of the
US's largest carbon dioxide emitting companies are failing to
assess, disclose and address the financial risks posed by climate
change, according to a new study of 20 of the world's largest
companies. Unlike many of their foreign rivals, American industry
giants such as ChevronTexaco, ExxonMobil, General Electric,
Southern Company and Xcel Energy, continue to pursue business
strategies that discount the global warming threat, the report
details. "Such strategies leave them and their shareholders
especially vulnerable to the increased financial risks and missed
market opportunities posed by climate change," said Doug
Cogan, author of the study and deputy director of social issues
for the Investor Responsibility Research Center (IRRC). "Companies
cannot expect to mitigate climate change risks and seize new
market opportunities until they build a foundation of well functioning
environmental management systems and properly focused governance
practices for a carbon-constrained world," Cogan explained.
The report, "Corporate Governance and Climate Change: Making
the Connection," was commissioned by CERES, a coalition
of investor, environmental and public interest groups, and compiled
by the IRRC, an independent firm that advises institutional
investors managing more than $5 trillion in assets. The report
profiles 20 companies - including include the top five carbon
emitters in electric power, auto and petroleum industries as
well as five other industry leaders - and uses a 14 point "Climate
Change Governance Checklist" to analyzes their response
actions in the areas of board oversight, management accountability,
executive compensation, emissions reporting and material risk
disclosure. "Recent corporate scandals point to the high
price paid by everyone - investors, employees, and pension beneficiaries
- for inadequate corporate governance practices," said
Mindy Lubber, executive director of CERES. "This report
uncovers that climate change is a new "off-balance sheet"
risk that could affect shareholder value."
Companies face "very real financial and legal risks from
global warming and their responses to it," added Peter
Lehner, chief of the Environmental Protection Bureau with the
New York State Attorney General's Office. U.S. corporations
have a large impact on the environment within and beyond the
nation's borders and that impact is connected to the companies
long term viability, shareholder value and competitiveness,
Lehner explained. Lehner noted that the changing rainfall and
weather patterns associated with global warming could cause
market disruptions for some industries, as could regulations
aimed at global warming. Some reinsurance companies are now
asking companies applying for directors and officers liability
insurance if they have developed a global warming strategy.
"The fact that the federal government has relaxed its environmental
enforcement efforts and completely ignores global warning should
not suggest that any company can safely ignore the need to comply
or address the emissions of greenhouse gases," Lehner said.
"Many other nations and states have already acted."
The 20 companies, which are all core holdings in institutional
investment portfolios, included in the study are: Alcoa, American
Electric Power, BP, ChevronTexaco, Cinergy, ConocoPhillips,
DaimlerChrysler, DuPont, ExxonMobil, Ford Motor Company, General
Electric, General Motors, Honda, IBM, International Paper, Royal
Dutch/Shell, Southern, Toyota, TXU and Xcel Energy. "All
companies profiled in this report are taking some governance
actions to respond to climate change," Cogan told reporters.
"But few have adopted comprehensive programs to treat this
issue as an imminent financial and environmental threat."
The report found that all the companies are beginning to measure
their greenhouse gas emissions and most have discussed climate
change at the board level, yet only 12 have reported on the
issue in their securities filings and only nine are projecting
greenhouse gas emissions trends. Of the 12 companies that do
mention climate change in their securities filings, according
to the report, the disclosure tends to be minuscule and vague.
The electric power industry as a whole scored lowest on the
checklist, despite being the largest source of U.S. emissions
and vulnerable to changing clean air regulations. The auto industry
failed to measure and disclose the emissions of its products
- the source of more than 95 percent of that industry's emissions.
At the same time, Japanese competitors are taking the lead in
introducing hybrid gas-electric vehicles that substantially
reduce tailpipe emissions.
The report finds the widest disparity in corporate governance
responses to climate change within the oil industry. BP and
Royal Dutch/Shell have pursued all 14 items listed on the Climate
Change Governance Checklist, while American-based rivals ChevronTexaco,
ConocoPhillips (COP) and ExxonMobil have pursued only four or
five actions. Unlike their foreign counterparts, the U.S. based
oil companies continue to devote nearly all development efforts
to fossil fuels and to largely ignore renewable energy technologies.
DaimlerChrysler, General Electric and TXU are other companies
with low scores, having taken only four or five actions. Alcoa
and DuPont stood out among the U.S. companies profiled, having
pursued 12 of the 14 actions.
The time is ripe for including global warming in the push to
reform corporate governance, Lubber said in today's teleconference,
and investors and executives must make a choice. Corporations
have proven they can rise to large and difficult issues such
as the challenge of Y2K, Lubber said, but have also ignored
such issues, noting industry handling of the tobacco and asbestos
issues. "Climate change is happening, it has begun to affect
our economy and it will affect our companies and the value of
our companies, it will affect our investments," she said.
"It is endangering the future of wealth on Earth. "Checklists
will not get us there," Lubber said. "Every company
in America must adopt an environmental ethic that will be built
into the corporation's core strategy."
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