July 18 2016- Forbes article<\/p>\n
Almost all U.S. publicly traded companies face risk either from climate change itself or from the changes needed\u00a0to fend it off, experts agreed\u00a0Monday at the S&P Global offices in New York\u2014but few companies have warned their investors.<\/p>\n
Some executives\u00a0seem to\u00a0be in denial, while other executives may not have any idea\u00a0how to assess climate\u00a0risk, according to panelists convened by the international Task Force on Climate-related Financial Disclosures.<\/p>\n
\u201cIf you look at the boards maybe they don\u2019t have the expertise to assess climate risk and opportunities,\u201d\u00a0said Diane Larsen, Americas assurance markets\u00a0leader\u00a0for Ernst & Young.\u00a0\u201dSo then this is about good governance. How do we get that expertise, how do we bring it on board?\u201d<\/p>\n
The Sustainability Accounting Standards Board (SASB) chaired\u00a0by Michael Bloomberg\u00a0reported<\/a>\u00a0in December that 93 percent of American public companies face some degree of climate risk, and only 12 percent have disclosed it.<\/p>\n The\u00a0SASB report was\u00a0overlooked by news organizations at the time, perhaps with so much news breaking from\u00a0the\u00a0Paris Climate Conference<\/a>.\u00a0Bloomberg himself was in Paris, announcing\u00a0the formation of the\u00a0<\/a>Task Force on Climate-related Financial Disclosures<\/a>, which he also chairs.<\/p>\n \u201cMake no mistake, climate change means business,\u201d wrote SASB CEO Jean Rogers. \u201cIt affects 93 percent of the U.S. equity market, representing $33.8 trillion market capitalization. As we\u2019ve said before, because climate risk is systemic and embedded across a portfolio, investors can\u2019t diversify away from it.\u201d<\/p>\n Those 93 percent of\u00a0companies could face \u201ctransition\u00a0risks\u201d\u00a0as the world shifts to a low-carbon economy, including declining revenues, stranded assets, asset write-downs,impairment charges<\/a>, and changes in cash flow.<\/p>\n To prepare for those risks, investors need information on\u00a0companies\u2019 future emissions profiles, capital-expenditure plans and\u00a0risk-management plans, the panelists said. Investors\u00a0need to know who is responsible for assessing risk\u00a0at each company, how they\u2019re doing it, and how far they\u2019ve gotten.<\/p>\n Mike Wilkens of S&P called on companies to prepare carbon stress tests, calculating revenues and cash flows under different emissions limits and carbon prices.<\/p>\n Among the companies that seem to be in denial, Wilkens singled out American oil majors. Unlike their European counterparts<\/a>, some American oil companies continue to predict, at least publicly, that oil demand\u00a0will continue to grow, he said.<\/p>\n \u201cI\u2019m not entirely\u00a0sure what planet they\u2019re living on because clearly there is a second- or possibly third-generation renewables revolution happening at the moment,\u201d said Wilkins, the global head of environmental and\u00a0climate risk research\u00a0for\u00a0S&P Global.<\/p>\n If the world is to limit global warming to 2\u00baC, then fossil fuel demand has to fall, added\u00a0Mark Lewis, the head of\u00a0European utilities equity research\u00a0for\u00a0Barclays.<\/p>\n \u201cOver the next 25 years the global fossil fuel industry in our view would stand to lose $33 trillion of revenue compared with a business-as-usual scenario,\u201d Lewis said, citing aBarclay\u2019s analysis<\/a>\u00a0that also came out last December. Most of those lost revenues, he added, are oil revenues.<\/p>\n The use of fossil fuels for energy, transportation and industry accounts for about 70 percent of anthropogenic greenhouse gas emissions, Lewis said, so those\u00a0sectors seem most vulnerable.<\/p>\n But climate\u00a0risk is spread across the market, can come from unforseen directions, including storm damage and coastal flooding, and companies outside of the\u00a0energy sector may be less prepared\u00a0to assess it.<\/p>\n \u201cI think the first step, in terms of baby steps, is to acknowledge the possibility that there is a risk or an opportunity out there\u2014there could be opportunities,\u201d said Diane Larsen, \u201cand then bake that into a process, you know, do an assessment, figure out what it means.<\/p>\n \u201cThere could be real significant financial impact to the organization, and the governance structure of that company needs to really understand that impact and when will that impact come home to roost.\u201d<\/p>\n If the companies don\u2019t do it, the panel suggested, it will get done another way.<\/p>\n \u201cIf you don\u2019t use a reasonable assumption for your climate policies and your climate risk, then the market will do it for you,\u201d Lewis said.\u00a0\u201dAnd then ultimately you\u2019re going to be at the mercy of the market, which most companies don\u2019t want to be.\u201d<\/p>\n The Dutch pension firm\u00a0PGGM is shifting $20 billion in assets based on four \u201cmegatrends\u201d that it believes will\u00a0affect the value of companies going forward: climate\u00a0change, water security, food security, and access to health care.<\/p>\n \u201cWe have started divesting from those companies with the highest carbon footprint,\u201d said Eloy Lindeijer, PGGM\u2019s chief of investment management, \u201cand then reinvesting those funds on a country- and sector-neutral basis with those companies that have a better performance in that field.\u201d<\/p>\n By Jeff McMahon, based in Chicago. Follow Jeff McMahon on <\/i>Facebook<\/i><\/a>, <\/i>Google Plus<\/i><\/a>,<\/i>Twitter<\/i><\/a>, or email him <\/i>here<\/i><\/a>.<\/i><\/p>","protected":false},"excerpt":{"rendered":" July 18 2016- Forbes article Almost all U.S. publicly traded companies face risk either from climate change itself or from the changes needed\u00a0to fend it off, experts agreed\u00a0Monday at the S&P Global offices in New York\u2014but few companies have warned their investors. Some executives\u00a0seem to\u00a0be in denial, while other executives may not have any idea\u00a0how […]<\/p>\n","protected":false},"author":1,"featured_media":575,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.genesisarg.com\/en\/wp-json\/wp\/v2\/posts\/941"}],"collection":[{"href":"https:\/\/www.genesisarg.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.genesisarg.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.genesisarg.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.genesisarg.com\/en\/wp-json\/wp\/v2\/comments?post=941"}],"version-history":[{"count":0,"href":"https:\/\/www.genesisarg.com\/en\/wp-json\/wp\/v2\/posts\/941\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.genesisarg.com\/en\/wp-json\/wp\/v2\/media\/575"}],"wp:attachment":[{"href":"https:\/\/www.genesisarg.com\/en\/wp-json\/wp\/v2\/media?parent=941"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.genesisarg.com\/en\/wp-json\/wp\/v2\/categories?post=941"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.genesisarg.com\/en\/wp-json\/wp\/v2\/tags?post=941"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}