November 25, 2024
Editorial

CLIMATE CHANGE COSTS

Most scientists have long concurred that it is happening. The Pentagon has begun planning for its consequences and insurance companies are already paying for it. Yet, most companies do not acknowledge climate change as a cost of doing business.

Several state treasurers, including Maine’s Dale McCormick, and a group of pension fund managers are trying to change that. They have asked the Securities and Exchange Commission to change disclosure rules to require companies to tell investors how the business will be affected by climate change.

By many accounts, the consequences could be large and investors, including individuals, states, pension funds and the like, are entitled to know about them.

Swiss Re, the world’s second-largest reinsurer, announced earlier this month that it expects environmental disasters – from storms, drought, flooding, hurricanes, etc. – to leap to $150 billion a year in the next 10 years, with insurance companies paying out $30 billion to $40 billion annually. The cause of the increasing number of these events is climate change, the company wrote.

In a recently declassified paper, the Pentagon warned that abrupt climate change could lead to massive food and water shortages forcing millions of people to flee their homelands for more hospitable climes leading to border blockades, nuclear proliferation and constant war.

Despite such forward thinking, most companies don’t let on that they are concerned with the consequences of climate change. Corporate officers, especially those in the energy, manufacturing and transportation sectors, must generally consider their company’s impact on the environment and vice versa.

For example, do more frequent severe storms disrupt shipping of parts, delaying production and driving up costs? Do consumers stop buying their product because the company is perceived to harm the environment?

Do new regulations require expensive infrastructure improvements? The consequences aren’t always negative.

A company could make a lot of money developing a new technology to limit emissions or otherwise reduce the human impact on climate change.

Since these issues are already being considered in boardrooms, there is an opportunity to share them with investors.

Hundreds of companies around the world are already doing so through participation in the Global Reporting Initiative, an independent program founded by United Nations Environment Programme and Coalition for Environmentally Responsible Economies (CERES). These companies annually report their activities in the areas of sustainability, community involvement and other areas. Baxter International Inc., a pharmaceutical and medical supply company, said with regard to climate change in its more recent report that “solid reporting and tracking of [greenhouse gas] emissions indicates the company is slightly behind on its energy efficiency and related GHG emissions goal.”

Ford Motor Co. includes in its report detailed charts on its performance in several areas. The company cut its carbon dioxide emissions from its facilities worldwide from 9.9 million metric tons in 2000 to 8.7 million metric tons in 2002. Energy consumption at is facilities was cut 6.2 percent from 2001 to 2002.

If these companies, and many others like them around the world, can handle this type of disclosure, others can too.


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