- BOSTON (ENS) -- Most of the
nation'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.
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- "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).
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- "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.
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- 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.
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- 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.
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- The United States is responsible for more than a quarter
of the world's greenhouse gas emissions.
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- "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."
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- 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.
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- 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.
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- 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.
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- "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."
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- 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.
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- "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."
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- 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.
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- 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.
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- 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.
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- 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.
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- The report recommends that corporations consider future
financial risks from changing weather patterns, such as increased torrential
rains.
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- 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.
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- 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.
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- 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.
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- 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.
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- "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."
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- "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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- Copyright Environment News Service (ENS) 2003. All Rights
Reserved.
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- http://ens-news.com/ens/jul2003/2003-07-09-11.asp
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