[Vision2020] Investments & Global Warming
starbliss at gmail.com
Mon Apr 17 13:18:27 PDT 2006
Green Alert: Watch These Investments
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*Global Warming Could Melt Your Portfolio*
by Marc Gunther, FORTUNE senior writer
*A coalition of environmentalists and institutional investors lays out which
companies will be better prepared for climate change.*
NEW YORK (FORTUNE) - Long-term investors, take heed: Global warming will
have a significant impact on the financial performance of companies in your
Some companies -- General Electric, DuPont, Cinergy, American Electric
Power, BP, Toyota and Honda -- are seriously grappling with the risks and
opportunities posed by climate change. They will be better prepared as
governments and shareholders focus on the issue.
Many others -- ExxonMobil, Dominion Power, Sempra Energy, Nissan, BMW and
Volkswagen -- have been slow to address climate change, and they could put
their owners at financial risk.
Those, at least, are the findings of a report released March 21, 2006 that
takes a close look at how 100 of the world's largest companies are
positioning themselves to compete in what's called a "carbon-constrained
world" -- that is, a world in which emissions of greenhouse gases are
regulated, as they are today in Europe and Japan and probably will be before
long in the United States.
The report, which ranks the companies on a 100-point scoring system, comes
from a group called Ceres, a coalition of environmentalists and
institutional investors, including government pension funds, socially
responsible mutual funds and religious investors, with $3 trillion in
assets. It's worth checking out at www.ceres.org.
"Climate change is no longer a fringe issue, no longer an issue that can be
ignored," said Mindy Lubber, the president of Ceres, at a news conference.
"These trends present enormous risks and opportunities."
Political support for regulation of greenhouse gas emissions is growing both
in Congress and in state governments. U.S. Sen. John McCain and New York
Gov. George Pataki are among the Republican elected officials who support
some form of carbon regulation. So do a growing number of CEOs, including
GE's Jeffrey Immelt and Jim Rogers of Cinergy.
The risks posed by global warming aren't only regulatory. There's compelling
evidence that world temperatures are rising, glaciers are melting and storms
are becoming more fierce. Food, fishing and forestry businesses could all be
affected, the report says.
The cost of natural disasters exceeded $225 billion in 2005, up from the
previous record of $118 billion in 2004, according to reinsurance giant
Swiss Re. A Swiss Re executive is quoted in the report as saying, "Global
warming has accelerated from a problem that might affect our grandchildren,
to one that could significantly disturb the social and economic conditions
of our lifetime."
Much of the report delivers encouraging news. In 2003, Ceres surveyed 20 big
firms and found that most were doing little about climate change. Since
then, more corporate boards have addressed the issue and corporate thought
leaders like GE's Immelt responded with new business strategies. GE's
"EcoMagination" initiative includes a pledge to invest $1.5 billion annually
in clean technologies by 2010, up from $700 million in 2004.
it can make money by selling wind turbines, more efficient
locomotives and jet engines, among other products.
Other favorable developments cited by Ceres include Ford
that it will boost production of hybrid vehicles tenfold
(albeit from a small base) by 2010,
to invest in alternative energy and curb its emissions, and American
Electric Power's decision to build the nation's first so-called "clean coal"
plant. Coal companies are especially threatened by proposals to regulate or
tax carbon emissions.
the leading scorer among U.S. companies, has already reduced its greenhouse
gas emissions by 72 percent since 1990. It is developing and marketing an
array of "green" products such as Tyvek insulation, energy-efficient
refrigerants and corn-based raw materials that can replace plastic produced
William K. Reilly, head of the U.S. Environmental Protection Agency during
the first Bush Administration and a DuPont director, said at a Ceres news
conference: "We've already saved a significant amount of money by moving in
Ceres' Lubber noted that European firms
the top-scoring company overall, and Royal Dutch Shell scored highest in the
crucial oil and gas sector. Japan-based
Honda led the way among automakers because of their commitment to
hybrids. U.S. firms will face a competitive disadvantage if they don't
improve their practices, she said.
singled out for criticism by Meredith Miller, the assistant state
treasurer of Connecticut, because she said the company won't meet with
investors to discuss climate change. Last year, nearly 30 percent of
ExxonMobil's shareholders supported a shareholder resolution asking the
company to disclose its plans for complying with greenhouse gas reductions
targets in countries that have adopted the Kyoto Protocol, which regulates
ExxonMobil, which opposed the shareholder resolution as unnecessary, says it
is currently seeking "economically competitive and affordable future options
to reduce long-term global greenhouse gas emissions while meeting the
world's growing demand for energy."
The issue clearly isn't going away. A flurry of new books focus on climate
change. In May, Paramount Classics will release a documentary called "The
Inconvenient Truth," about Al Gore's crusade to curb global warming. Silicon
Valley technologists are taking the problem seriously, as this recent
Ceres has worked on the issue for years. The question is, how long will it
take for mainstream investors and the laggards of corporate America to
respond? Plugged in is a daily column by writers of FORTUNE magazine.
Today's columnist, Marc Gunther, can be reached at mgunther at fortunemail.com.
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