Some investors eye companies’ ‘carbon footprints’ as risk factors

By Marilyn Geewax
Seattle Post-Intelligencer

WASHINGTON — Stock investors already are worried about interest rates, oil prices and credit crunches.

Now environmentalists, state officials and others say shareholders should pay close attention to another risk: a company’s “carbon footprint.”

They want corporations to release more information related to greenhouse gas emissions so that investors can better judge whether they may be exposing themselves to lawsuits and other costs related to climate change.

In recent days, the environmentalists have scored some successes, getting Wal-Mart Stores Inc. to take action, as well as stepping up pressure on regulators to require more disclosure from publicly traded companies.

“Smart companies know that profits and jobs come from solving problems, not ignoring them,” Fred Krupp, president of Environmental Defense, said in a news release announcing his group’s effort to demand greater disclosure. “Investors have a right to know who is paying attention.”

But some analysts say companies cannot be expected to anticipate every conceivable risk, especially from events that may be years away.

“Companies know legislation is coming down the road” to force reductions in emissions, said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University. But forecasting exactly how such changes might affect the bottom line or reshape the economy is impossible, given that Congress has not passed significant greenhouse gas legislation.

“Government can’t require information on everything” that could possibly impact the future, Dhawan said.

But Environmental Defense, an advocacy group, argues that all companies, even low-polluting ones such as banks and phone service providers, should estimate the financial impact of having their operations disrupted by global warming-related changes such as rising sea levels, floods and droughts.

Just as companies already inform investors about hazardous waste risks, they should warn them about climate-change risks, the argument goes.

Earlier this month, Environmental Defense joined with nearly two dozen state officials, plus pension fund managers and other environmentalists, to petition the Securities and Exchange Commission to use existing law to require disclosures about legal proceedings related to carbon emissions, and financial losses related to climate changes.

SEC spokesman John Nester said the SEC does not have to respond to petitions.

He noted the agency already requires companies to disclose “material environmental issues” that could have an effect “upon the capital expenditures, earnings and competitive position of a company.”

But last week, Wal-Mart decided not to wait for legislation or regulatory requirements. Instead, it announced it would begin asking suppliers to measure, and then reduce, their carbon footprints. It will start by focusing on seven categories: DVDs, toothpaste, soap, milk, beer, vacuum cleaners and soda.

“Some of them are things we rarely think about — like our vacuum cleaners — and some of them are things we’d rather think about, like beer and movies,” John Fleming, Wal-Mart’s chief merchandising officer, said at a New York news conference. “But each of these products has an impact on our planet.”

Fleming said even huge suppliers such as the Coca-Cola Co. have agreed to participate in its carbon-disclosure program and to reduce emissions.

The company said it is working with the Carbon Disclosure Project, a non-profit group of 315 institutional investors controlling about $41 trillion in assets.

On Monday, the project released its fifth annual global survey of 2,400 large companies’ self-reported carbon emissions and energy costs.

Four of five U.S. companies consider climate change to be more of a risk than a commercial opportunity, the study said.

But only about 29 percent of firms said they have specific targets and timelines for reducing emissions.

Wal-Mart is not alone in trying to reduce its carbon footprint.

For example, Dell Inc. promised last week that in 2008, it will become the first major computer manufacturer to neutralize the carbon effect of its worldwide operations.

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