The Boston Globe (Editorial),April 18, 2004
Under its current leadership in Congress and the White House, the US government is too paralyzed to address growing environmental threats like climate change. Happily, some investors are stepping forward, seeking to force the big coal-burning utilities, oil and gas producers, and the big three US automakers to plan for the consequences of these risks.
This is the approach taken by CERES, the Coalition for Environmentally Responsible Economies, which brings together environmentalists, investors, and advocacy groups in pushing for forward-looking corporate policies on climate change. Last week at a CERES meeting in Boston, the leaders of 13 major public pension funds managing assets of nearly $800 billion called on the Securities and Exchange Commission to require companies to disclose explicitly the financial risks to themselves of global warming in their securities filings.
These risks can take many forms. For a utility heavily dependent on coal -- the single biggest source of the greenhouse gas carbon dioxide -- the risk could be federal imposition of a "carbon cap," which would limit the use of coal and force the utility to pay a premium for such alternative sources of power as natural gas or wind.
For an automaker, a risk is that it will surrender much of the market to hybrid leaders Toyota and Honda if it lags in developing hybrid gas-electric propulsion systems and new emission rules make gasoline engines less marketable. Oil and gas producers should report the risk that stormier weather caused by climate change would pose to offshore facilities and fuel transportation.
CERES, the Natural Resources Defense Council, and a utility, the Public Service Enterprise Group, also released last week a report on emissions in 2002 by the nation's 100 largest electric power producers. The report showed that while the Clean Air Act has succeeded in reducing the nitrogen oxide and sulfur dioxide pollutants it is aimed at, release of carbon dioxide by utilities remains uncontrolled and is rising steeply. In 2002, power plant carbon dioxide emissions were 25 percent higher than they were in 1990.
The report includes a breakdown of emissions by individual utilities, but the utilities themselves should be sending that information to all their investors so they can decide whether each company is making responsible decisions for the future. Richard George, the CEO of Suncor, a Canadian energy company, explained to the CERES meeting the great benefit of the kind of risk reporting CERES favors: "If you don't measure it, you don't improve it."
The pension fund leaders are taking the long view for retirees dependent on the investments they make. But it isn't just retirees who deserve that kind of farsighted representation -- it is all of us.