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[ Tackling Climate Change: A Smart Financial Investment ]

Tackling Climate Change: A Smart Investment


SalFalko / Flickr

In the financial community, the conventional wisdom holds
that businesses will continue investing in fossil fuels, despite the damage
they do to the climate, because they’re profitable. Last month, financial-services
company The Motley Fool held a symposium challenging the idea that
fossil fuels are a wise investment, even when you exclude environmental harms


Staff from EarthShare member organizations including The
Union of Concerned Scientists and Green America joined other guests to show how
companies are thriving by addressing climate risk in their portfolios and
operations. If you’re an investor or business owner, you’ll want to take their
lessons to heart.

Rachel Cleetus,
an economist at the Union of Concerned Scientists, introduced the audience to
the concept of the Carbon
. The idea is
simple: because we can’t burn most of the fuels that energy companies have in
their reserves without causing catastrophic warming, those reserves are
currently overvalued by the market. In other words, companies are placing
“unburnable carbon” in their portfolios.

“We’re in a new
normal now,” Cleetus said. “And we’ve got to start taking climate change as a
base issue for everything we do, including the way we invest.”


Rachel Cleetus

The insurance
industry is preparing more than most, particularly those companies that insure
other insurance companies (“reinsurers” like Munich Re and Swiss Re). That’s
because they have to pay out when towns get swept away by floods or crops
wither from sustained droughts. Private insurers are so cognizant of climate
risk that they no longer provide flood insurance in the U.S., leaving the
federal government to provide that service.

“That means
every time one of these events happen, every single taxpayer is on the hook,
whether we’re talking about disaster relief or paying insurance claims. So this
is not just about the people getting flooded,” Cleetus said.

Stu Dalheim, Vice President of
Shareholder Advocacy at Calvert Investments has also witnessed the direct
impacts of climate change on businesses:

“We’ve seen
companies like VF Corporation [an apparel company] have earnings impacts due to
floods in Pakistan which caused cotton prices to go up. [They’re already]
dealing with very thin margins in their supply chain.”

How can you find out if a company you
invest in is truly addressing climate change?
Find out if their sustainably goals are integrated
into everything they do, said Joe Cosola of the Center for Climate and Energy
Solutions. And look at their 10-K
with the Security
and Exchange Commission (SEC).

“You can often
tell quite quickly how seriously they take their [climate] risks,” Cosola said.

climate change in one’s business plan helps companies avoid risk on one hand,
and also opens up opportunities on the other. Organizations like Opower and
National Geographic are making and saving money by making sustainability a core
part of their businesses.

Geographic saves $500,000 per year on utilities through energy saving measures
in its buildings. Opower is in the business of helping companies and homeowners
reduce their energy costs – nearly $300 million since they launched in 2007.

One of Opower’s
clients, an energy utility called National Grid, is banking on efficiency.

“National Grid
can… make as much money investing in energy efficiency as they would investing
in other types of transmission, distribution, and power generation – sometimes they
make even more,” said Opower’s Senior Director of Market Development Jim
Kapsis. “You’re aligning the incentives
of the private sector with what is in the social interest and what’s also,
frankly, in the economic interest of the country because we’re wasting a lot of
resources that would be better used to stimulate other parts of the economy.”


Todd Larsen

America, an EarthShare organization that certifies small businesses on
sustainability measures, has found that consumers, too, are more apt to support
businesses that are good to the environment. This is backed up by the results
of a recently released Cone Communications/Echo
Global CSR study
, which indicated that consumer
affinity surges when companies support social or environmental issues: 96% of global citizens reported
having a more positive image of a company; 94% will be more likely to trust
that company; and 93% will be more loyal to the company (i.e., continue buying
products or services).

 “If you provide a product that’s genuinely
green, and not greenwashed, then people can see that your company is actually
walking the talk and are more likely to buy the product,” said Todd Larsen,
Green America’s Corporate Responsibility Director.

Slowly, the
business community is finding that their continued existence is dependent on addressing
climate change. Investors can play a role in encouraging this shift by
supporting companies that have an eye on the future and using shareholder
activism or removing support from those that aren’t.

may be difficult, according to Cleetus, but “’Let’s not do anything’ is not



To learn more about climate change
impacts on investing, visit:

Investor Initiatives, Carbon Disclosure Project

Social Investing, Green America*

Investor Network, Ceres

Clean Technology: A Smart Investment for the United
, Union of
Concerned Scientists*

Carbon Bubble Interactive

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