Despite growing financial losses in various business sectors from climate change, over half of the nation’s 500 largest publicly traded companies are doing a poor job of disclosing climate change risks to their investors, according to a first-ever report analyzing climate disclosure practices among S&P 500 companies last year.

The Ceres/Calvert report concludes that America’s largest companies still aren’t taking climate change seriously enough. Less than half (47 percent) of the S&P 500 companies responded to a global survey last year by the Carbon Disclosure Project requesting information about their climate risks and strategies, and those that did respond failed to provide much of the information investors are seeking. Nearly a third (30 percent) of the responders, in fact, declined to publicly release their responses, calling them “confidential.”

“Many US companies are still downplaying climate change and its far-reaching business impacts,” said Mindy S. Lubber, president of Ceres, a leading coalition of investors, environmental groups and other public interest organizations. “More-extreme weather events, regulatory changes and growing global demand for climate-friendly technologies are just a few of the ways that climate change will ripple across all sectors of the economy. Yet, many US companies are not addressing these trends and are leaving investors in the dark about their strategies for mitigating those risks.”

Poor survey responses among lower-emitting companies – in particular, retailers, banks and insurers – was especially conspicuous. Many companies in these sectors provide insufficient climate disclosure to investors, even after suffering large financial losses from climate-related events, such as the 2005 hurricanes. Lubber said that all companies should disclose their risks using the three most common disclosure mechanisms: SEC filings, CDP, and sustainability reports using Global Reporting Initiative guidelines.

“All companies have a duty to provide shareholders with more analysis and disclosure on climate risks and their strategies for managing or mitigating those risks,” said Dr. Julie Fox Gorte, vice president and chief social investment strategist at Calvert. “Lower-CO2-emitting sectors and companies also face potential risks from new regulations, physical changes, and other climate-related impacts. Power and oil companies are improving their climate disclosure and it is now time for retailers, banks and telecommunication companies to start doing the same.”

The Ceres/Calvert analysis was based on S&P 500 company responses to a questionnaire distributed last year by the Carbon Disclosure Project (CDP), to obtain more information relating to corporate management of climate change. CDP is a coordinated effort by 225 global investors with total assets of $31 trillion. The report authors used the Global Framework for Climate Risk Disclosure to analyze the quality of responses.

Other key findings from the Ceres/Calvert report include:

• Poor Greenhouse Gas Emissions Management: 80 percent of the 228 companies that responded to the survey (182 companies) addressed the need to reduce greenhouse gas emissions, but only a quarter (59 companies) disclosed measurable emissions reductions targets and specific time frames for reductions.

• Physical Impacts Not on Radar Screen: Nearly 75 percent of the responding companies (171 companies) acknowledged bottom-line risks associated with extreme weather events such as hurricanes, fires and floods. However, very few of the companies surveyed link more-extreme weather to climate change and fewer still—only four percent – disclosed strategies for mitigating and adapting to the growing physical impacts from climate change.

An international mix of businesses and non-governmental organizations (NGO’s) are joining forces to promote global action on climate change. This activism is of more critical importance in light of the recent report by the leading international network of climate scientists that has concluded for the first time that global warming is “unequivocal” and that human activity is the main driver, “very likely” causing most of the rise in temperatures since 1950.

The report by the Intergovernmental Panel on Climate Change is their fourth assessment since 1990 on the causes and consequences of climate change, but it is the first in which the group asserts with near certainty (i.e., more than 90 percent confidence) that carbon dioxide and other greenhouse gases from human activities have been the main causes of warming in the past half century. Striking a hopeful note, the report said warming and its harmful consequences could be substantially blunted by prompt action. Two groups consisting of major global businesses – U.S Climate Action Partnership (USCAP) and Combat Climate Change Initiative (3C Initiative) – are already trying to mobilize businesses to take the lead on climate change.

A diverse group of U.S.-based businesses and leading environmental organizations called on the federal government to quickly enact strong national legislation to achieve significant reductions of greenhouse gas emissions. The group said any delay in action to control emissions increases the risk of unavoidable consequences that could necessitate even steeper reductions in the future.

This alliance, called the U.S. Climate Action Partnership (USCAP), consists of major corporations with a combined market capitalization of more than $750 billion, including Alcoa, BP America, Caterpillar, Duke Energy, DuPont, FPL Group, General Electric, Lehman Brothers, PG&E, and PNM Resources; along with four leading NGO’s with more than one million members – Environmental Defense, Natural Resources Defense Council, Pew Center on Global Climate Change, and World Resources Institute.

USCAP has issued a landmark set of principles and recommendations to underscore the urgent need for a policy framework on climate change. The solutions-based report, titled A Call for Action, lays out a blueprint for a mandatory economy-wide, market-driven approach to climate protection. “The time has come for constructive action that draws strength equally from business, government, and non-governmental stakeholders,” said Jeff Immelt, Chairman and CEO of General Electric. “These recommendations should catalyze legislative action that encourages innovation and fosters economic growth while enhancing energy security and balance of trade, ensuring U.S. leadership on an issue of significance to our country and the world.”

USCAP’s recommendations [visit www.us-cap.org/ClimateReport.pdf ] are based on the following six principles:

• Account for the global dimensions of climate change;
• Recognize the importance of technology;
• Be environmentally effective;
• Create economic opportunity and advantage;
• Be fair to sectors disproportionately impacted; and
• Recognize and encourage early action.

The principles and the recommendations outlined in A Call for Action are the result of a year-long collaboration motivated by the shared goal of slowing, stopping and reversing the growth of greenhouse gas (GHG) emissions over the shortest period of time reasonably achievable.

USCAP urges policy makers to enact a policy framework for mandatory reductions of GHG emissions from major emitting sectors, including large stationary sources and transportation, and energy use in commercial and residential buildings. The cornerstone of this approach would be a cap-and-trade program. The environmental goal is to reduce global atmospheric GHG concentrations to a level that minimizes large-scale adverse impacts to humans and the natural environment. The group recommends Congress provide leadership and establish short- and mid-term emission reduction targets; a national program to accelerate technology research, development and deployment; and approaches to encourage action by other countries, including those in the developing world, as ultimately the solution must be global.

3C - Combat Climate Change - A Business Leaders’ Initiative

The 3C Initiative aims at forming a global opinion group consisting of companies showing leadership by demanding an integration of climate issues into the world of markets and trade facilitated by means of a global framework coming into force in 2013. Many of the companies signing the 3C Initiative also take part in other activities on climate change such as the World Economic Forum’s G8 Climate Change Roundtable and various Trade Associations’ initiatives. Duke Energy and General Electric are part of USCAP as well as 3C signatories. Other signatories include Bayer, PG& E Corporation, and Siemens.

The goal of the 3C Initiative is to underline the need for urgent action by the global community and to influence the post-Kyoto process by demanding a global framework supporting a market based solution to the climate change issue. In essence, 3C’s principles for combating climate change are: 

• A long-term switch-over to lower emissions of greenhouse gases is a necessity.
• A worldwide policy framework is needed to replace the Kyoto Protocol from 2013 and onwards.
• The priority should be to focus on a common, global goal of limiting global warming via a cap on the carbon dioxide equivalent concentration.
• In order to minimize the cost of staying below the cap it is necessary to establish a global price for the emission of greenhouse gases.
• To limit negative effects on global wealth, a global system facilitating emissions trading should be established.
• The global burden should be shared but the richer countries shall pull a larger weight.

For more information visit www.combatclimatechange.org/

A special report in the July/August issue of MIT’s Technology Review concludes that we can avoid the catastrophic effects of global warming if we act now. The report says that we need more effective deployment of existing energy technologies while we begin building a sustainable energy infrastructure for the future. The main culprits in the global warming crisis are the greenhouse gases, primarily carbon dioxide, that are emitted from burning fossil fuels. About 80% of worldwide power comes from fossil fuels and demand is growing. Moving to renewable, carbon-free energy sources is the ultimate goal.

Respected NASA climate scientist, Jim Hansen, has been sending the warning signals since the 1980’s. Hansen believes that we have not yet seen the full effects of the greenhouse buildup. He says that global warming lags behind the greenhouse buildup for 2 primary reasons: 1) The excess energy first heats the oceans with the atmosphere to follow later, and 2) The pollution in the air dims the sunlight and thereby offsets as much as half of the warming effect. The irony is that reducing air pollution will likely increase global warming.

Hansen’s computer models show that temperatures will rise 2 to 3 degrees if we stay on our current path. That would make earth as warm as it was about 3 million years ago, a time when the seas were 15 to 35 meters higher than they are today. At those levels as many as half a billion people would be living under water.

Hansen and his team of researchers believe the solution is in making existing energy technologies more efficient to buy time (a couple of decades) while we develop new technologies to reduce global carbon dioxide emissions by as much as 80%. Technology Review’s report goes on to highlight some of the efficiencies that can be achieved with today’s energy technologies; such as, cleaner coal technology, recyclable nuclear energy, better methods of producing ethanol, and new approaches to oil exploration. It also points out the future prospects for wind and solar energy, both of which are renewable and carbon-free.

As Jim Hansen says, “No court of justice or court of international opinion will forgive us for what we’re doing now, because now we know the problem and we’re just pretending we don’t understand it. We are going to be responsible, but it will be our children and grandchildren that have to pay.”

Greenbiz.com reports that in a recent MIT survey “Americans now rank climate change as the country’s most pressing environmental problem – a dramatic shift from three years ago, when they ranked climate change sixth out of 10 environmental concerns.” The survey shows that people are beginning to grasp that climate change is a real issue. They want government action and are even willing to spend their own money to help.

Apparently concerned citizens also want business to be held accountable for its role in the climate change problem. BusinessWeek, October 30, 2006, reports that global warming is the next wave of litigation after tobacco, guns, and junk food. At least 16 cases are pending in federal and state courts. The targets are oil, electric power, auto, and other companies whose emissions are linked to global warming.

It may prove difficult for the plaintiffs to win these cases, but the mere threat of litigation can certainly motivate businesses to act, especially if the general population sees the problem and wants resolution. The heat is on.

An international report entitled Ecosystem Challenges and Business Implications, issued in November 2006, says that business and ecosystem services are inextricably linked. Companies not only affect ecosystems but also rely on them. The report identifies risks and opportunities for business based on the findings of the Millenium Ecosystem Assessment, a 4-year scientific study that concluded that the past 50 years of human activity has altered ecosystems faster and more extensively than ever before. The inter-relationship between business and ecosystems poses significant risks to companies including:

• Operational — increased scarcity and cost of raw materials, such as freshwater, disruptions to business operations caused by natural hazards, and higher insurance costs for disasters such as flooding.
• Regulatory — emergence of new government policies such as taxes and moratoria on extractive activities.
• Reputational — damage to corporate reputation from media and non-governmental organization campaigns, shareholder resolutions and changing customer preferences.
• Access to capital — restrictions as the financial community adopts more rigorous investment and lending policies.

At the same time, new business opportunities can arise through development of new technologies, products and services that restore and preserve ecosystems. However, most companies fail to recognize the link between healthy ecosystems and their business interests.

The report is a collaborative effort by four international organizations — Earthwatch Institute, IUCN - The World Conservation Union, The World Business Council for Sustainable Development, and World Resources Institute. Their aim is to make businesses aware of the degradation of ecosystems and to promote ways that business can help reverse the trend. 

Click here for more information and to download a copy of the report.