US Companies Lag on Climate Change

Article excerpt

Byline: Kit Bingham

US companies trail their European counterparts in assessing and disclosing the financial risks they face from climate change.An analysis of 20 groups in the most carbon dioxide-emitting sectors, including oil, utility and car groups, finds that US companies, including ExxonMobil and General Electric, are the worst performers in addressing climate change. Top performers are the UK and Anglo-Dutch oil giants, BP and Shell.

The study was commissioned by Ceres, a coalition of investor and environmental groups, and was carried out by the Investor Responsibility Research Centre (IRRC), which advises institutional investors with $5 trillion ([euro]4.4 trillion) in assets on corporate governance and corporate responsibility issues.

Mindy Lubber, executive director of Ceres, says: "Recent corporate scandals point to the high price paid by everyone - investors, employees and pension beneficiaries - for inadequate corporate governance practices. This report uncovers that climate change is a new off-balance-sheet risk that could affect shareholder value."

She warns that companies that ignore climate change face regulatory intervention, consumer protests and reputational damage. "Large issues can be ignored for a time at serious cost to shareholders, evidenced by the costly asbestos and tobacco litigation. Climate change is happening. It has begun to affect our economy. It will affect our companies and the value of those companies," says Lubber.

Claudia Kruse, an analyst in the governance and socially responsible investment team at Isis Asset Management, praises the report's approach. "It is very important to link the issues of climate change and corporate governance. Climate change needs to be addressed at a strategic level by the board. When the board has that formal responsibility, it creates a structure for reporting and accountability," she says.

The study looks at how 20 companies have progressed on 14 action points on climate change. Among the target points, Ceres and IRRC say companies should carry out a board level review of the risks posed by climate change; set targets for reducing greenhouse gasses; make executive pay in part dependent on hitting those targets; publish a statement on the material risks and opportunities posed by climate change; and begin to develop renewable energy sources. …