The Corporate Climate Juggernaut

The relentless march of climate studies, research reports, and major initiatives that has come forth during this fledgling year has been breathtaking, to say the least. There's a new one this week. But first, consider that the following have been unleashed during 2007's first 50 days:

A group of large companies formed a group aimed at developing an effective global climate protection policy for the period following the expiration of the Kyoto Protocol in 2013. Combat Climate Change, a.k.a. the 3C Initiative, began its life with 18 major corporate members, many from the energy sector, including both power companies (Duke Energy, Endesa, Eskom, PG&E, Suez, Vattenfall) and manufacturers of power-generating equipment (ABB, Alstom, GE, Siemens). The group has issued an "urgent request to the global community and all its representatives" to join in.

Ten major corporations formed a partnership with four major environmental groups to seek a U.S. cap on greenhouse gas emissions along with a reduction of up to 15 percent within 15 years. The broad coalition, known as U.S. Climate Action Partnership (USCAP), laid out the most aggressive proposal for legislation endorsed by any group of major corporations to date.

UBS Wealth Management released a report report, Climate Change: Beyond Whether, that breaks down sector-by-sector into detailed key investment opportunities and risks for the individual investors. Among other things, the report noted that companies with low greenhouse gas exposure within a particular polluting industry are in a relatively strong strategic position, and that "The risk of future climate change events on companies and industries includes heightened regulation, increased impairment of physical property, loss of revenues and erosion of reputation, individually or in combination."

Lehman Brothers issued a report, The Business of Climate Change, warning that companies that do not respond quickly and effectively to changes in the physical and economic environments will face extinction. "The pace of a firm's adaptation to climate change is likely to prove to be another of the forces that will influence whether, over the next several years, any given firm survives and prospers; or withers and, quite possibly, dies," the report says. It called climate change a "tectonic force" similar to globalization and aging populations, that leads to gradual economic change and "causes periodic sharp movements in asset prices."

Marsh, part of the Marsh & McLennan empire of financial services companies, issued a report, Climate Change: Business Risks and Solutions, in which it said, in part:

Climate change is a significant emerging global risk. Businesses- if they haven't already-must begin to account for it in their strategic and operational planning. Risks, which will vary by industry and geography, include the potential for physical damage due to changing weather patterns, fines and business constraints due to regulatory requirements, legal costs from possible litigation, investment risk from shareholder demands, changes in the competitive landscape as companies adapt to climate change, and possible brand damage if a company develops a reputation as a "climate change villain."

Citigroup released a report titled Climatic Consequences that discusses "the investment implications of a changing climate." It offers up dozens of companies that are well positioned to do business in a climate-constrained world. "We believe that, as a direct result of pressure from consumers, litigants, and investors, there will, in the next few years, be a "tipping point" in corporate behavior with regard to climate change issues," it concluded.

A study by McKinsey on the relative economics of different approaches to reducing greenhouse gas emissions concluded that "almost a quarter of possible emission reductions would result from measures (such as better insulation in buildings) that carry no net life cycle cost -- in effect, they come free of charge."

Oh, yes. There were also those 600-odd scientists who concluded for the first time that evidence of the earth's rising temperatures was "unequivocal."

And now the latest. This week brings a new "global framework" from the Global Roundtable on Climate Change, signed by a host of big companies, calling on governments to set scientifically informed targets for greenhouse gases and carbon dioxide emissions and "to place a price on carbon emissions and to set forth policies aimed at addressing energy efficiency and de-carbonization in all sectors."

According to the statement -- endorsed by Allianz, Bayer, Citigroup, DuPont, General Electric, Volvo, and a range of others -- "Failing to act now would lead to far higher economic and environmental costs and greater risk of irreversible impacts."

Is there anybody outside the Bush Administration -- and maybe Exxon -- who doesn't understand that climate change represents one of the biggest risks ever to face the private sector? And that there are great financial benefits to reap from addressing it head-on with new, clean technologies?

If this is the case, why isn't every business-friendly politician working overtime to ensure that their constituents (and contributors) will survive and thrive?

And where is the anger against those business and political leaders who aren't at the front of this parade?

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Comments

[Preston]

Exactly...in the latest print edition of BusinessWeek, even Jack Welch--Mr. Profits-Are-Paramount or King of Cost Cutting--worked his way into telling businesses to adapt their models to survive in a climate change world. Pretty much everyone is coming around, except as you say Exxon and maybe Bush (but Bush does have a green home). Oh yeah, and TXU too.

http://www.hugg.com/story/Neutron-Jack-Mr-ProfitsareParamount-Eases-Into-Global-Warming-Advocacy-1/

[Melissa Brandao]

Thank you Joel for the comprehensive list of corporate America getting a clue--it sure seems like 2007 may be a banner year for awareness. Hope it's more than rhetoric and there is indeed some action in there...

[Ron]

It's true, the Bush Administration and Exxon are still doing their best to ambush any effective action against global warming, but their motivation is profit driven. Let's not forget the honorable Republican Senator from Oklahoma, James M. Inhofe, who seems committed for altruistic reasons. Credit given where credit's due.

[robert veach]

This is exactly what we need, corporate america finally believing in global warming from an econmomic point of view! What ever it takes is fine with me to start the ball rolling towards reducing greenhouse emmisions. I feel compelled to mention this:
www.jointhesolution.com/yorkville

[Jim Leemann]

Here is the Lehman Bros. Report - The Business of Climate Change online:

http://www.cs.bc.edu/~muller/teaching/cs021/lib/ClimateChange.pdf

[David Biddle]

This is a great summary of the business cases that are being made right now and the break down of the economic argument for climate solutions. Thanks Joel, you continue to amaze with your talent for being tuned in.

For an interesting twist, NPR's Talk of the Nation did a show that sort of pitted science against economics, which I found odd until I realized that one of the guests was Jonah Goldberg whose twisted thinking about practically anything is legendary and often highly misinformed. Anyway, check out Talk of the Nation, Feb. 22.

http://www.npr.org/templates/story/story.php?storyId=7551080

[Scot Quaranda]

Thank you so much for this excellent summary. It has almost been difficult to stay on top of all of the major initiatives in the last six months without your help. I am wondering if anyone is paying close attention to the McKinsey report which seems like a wise place to start - conservation and efficiency! Also, I would imagine that most of these initiatives come with the price of compromise. When huge energy producers are lining up, you know they are hoping to shape future legislation in order to ensure the least amount of burden to their bottomline in the future.