Many U.S. Industry Giants Ignoring Global Warming

BOSTON, Massachusetts, July 9, 2003 (ENS) - Most of the nation's largest carbon dioxide emitting companies are failing to assess, disclose and address the financial risks posed by climate change, according to a new study of 20 of the world's largest companies. Unlike many of their foreign rivals, American industry giants such as ChevronTexaco, ExxonMobil, General Electric, Southern Company and Xcel Energy, continue to pursue business strategies that discount the global warming threat, the report details.

"Such strategies leave them and their shareholders especially vulnerable to the increased financial risks and missed market opportunities posed by climate change," said Doug Cogan, author of the study and deputy director of social issues for the Investor Responsibility Research Center (IRRC).

"Companies cannot expect to mitigate climate change risks and seize new market opportunities until they build a foundation of well functioning environmental management systems and properly focused governance practices for a carbon-constrained world," Cogan explained.

The report, "Corporate Governance and Climate Change: Making the Connection," was commissioned by CERES, a coalition of investor, environmental and public interest groups, and compiled by the IRRC, an independent firm that advises institutional investors managing more than $5 trillion in assets.

The report profiles 20 companies - including include the top five carbon emitters in electric power, auto and petroleum industries as well as five other industry leaders - and uses a 14 point "Climate Change Governance Checklist" to analyzes their response actions in the areas of board oversight, management accountability, executive compensation, emissions reporting and material risk disclosure. sunset

The United States is responsible for more than a quarter of the world's greenhouse gas emissions. (Photo courtesy
"Recent corporate scandals point to the high price paid by everyone - investors, employees, and pension beneficiaries - for inadequate corporate governance practices," said Mindy Lubber, executive director of CERES. "This report uncovers that climate change is a new "off-balance sheet" risk that could affect shareholder value."

Companies face "very real financial and legal risks from global warming and their responses to it," added Peter Lehner, chief of the Environmental Protection Bureau with the New York State Attorney General's Office.

U.S. corporations have a large impact on the environment within and beyond the nation's borders and that impact is connected to the companies long term viability, shareholder value and competitiveness, Lehner explained.

Lehner noted that the changing rainfall and weather patterns associated with global warming could cause market disruptions for some industries, as could regulations aimed at global warming. Some reinsurance companies are now asking companies applying for directors and officers liability insurance if they have developed a global warming strategy.

"The fact that the federal government has relaxed its environmental enforcement efforts and completely ignores global warning should not suggest that any company can safely ignore the need to comply or address the emissions of greenhouse gases," Lehner said. "Many other nations and states have already acted."

The 20 companies, which are all core holdings in institutional investment portfolios, included in the study are: Alcoa, American Electric Power, BP, ChevronTexaco, Cinergy, ConocoPhillips, DaimlerChrysler, DuPont, ExxonMobil, Ford Motor Company, General Electric, General Motors, Honda, IBM, International Paper, Royal Dutch/Shell, Southern, Toyota, TXU and Xcel Energy.

"All companies profiled in this report are taking some governance actions to respond to climate change," Cogan told reporters. "But few have adopted comprehensive programs to treat this issue as an imminent financial and environmental threat."

The report found that all the companies are beginning to measure their greenhouse gas emissions and most have discussed climate change at the board level, yet only 12 have reported on the issue in their securities filings and only nine are projecting greenhouse gas emissions trends.

Of the 12 companies that do mention climate change in their securities filings, according to the report, the disclosure tends to be minuscule and vague.

The electric power industry as a whole scored lowest on the checklist, despite being the largest source of U.S. emissions and vulnerable to changing clean air regulations.

The auto industry failed to measure and disclose the emissions of its products - the source of more than 95 percent of that industry's emissions. At the same time, Japanese competitors are taking the lead in introducing hybrid gas-electric vehicles that substantially reduce tailpipe emissions. haitiflood

The report recommends that corporations consider future financial risks from changing weather patterns, such as increased torrential rains. (Photo by C. Errath courtesy FAO)
The report finds the widest disparity in corporate governance responses to climate change within the oil industry. BP and Royal Dutch/Shell have pursued all 14 items listed on the Climate Change Governance Checklist, while American-based rivals ChevronTexaco, ConocoPhillips (COP) and ExxonMobil have pursued only four or five actions.

Unlike their foreign counterparts, the U.S. based oil companies continue to devote nearly all development efforts to fossil fuels and to largely ignore renewable energy technologies.

DaimlerChrysler, General Electric and TXU are other companies with low scores, having taken only four or five actions. Alcoa and DuPont stood out among the U.S. companies profiled, having pursued 12 of the 14 actions.

The time is ripe for including global warming in the push to reform corporate governance, Lubber said in today's teleconference, and investors and executives must make a choice. Corporations have proven they can rise to large and difficult issues such as the challenge of Y2K, Lubber said, but have also ignored such issues, noting industry handling of the tobacco and asbestos issues.

"Climate change is happening, it has begun to affect our economy and it will affect our companies and the value of our companies, it will affect our investments," she said. "It is endangering the future of wealth on Earth."

"Checklists will not get us there," Lubber said. "Every company in America must adopt an environmental ethic that will be built into the corporation's core strategy."