Environmental risks?!?! Grrmph!

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Guess what! Companies are now refusing to reveal environmental risks!

Now that the climate change discussions have moved from controversial to conventional, and economists expect the world to lose a mammoth 2.6% in terms of GDP this year due to extreme weather events (in fact, the loss in regional GDP will be a killingly massive 6% for the developing and South Asian nations by 2100 – see B&E issue dated February 22, 2007), the question that surfaces is how deep, financially, will the cut be in the global corporate world?

Digest this! The most famous and recent survey conducted on S&P 500 companies by US based Ceres, the leading coalition of environmentalists and institutional investors, found out that only a quarter of the respondents posses measurable emissions reduction targets and have decided specific time frames to accomplish the same. On the other hand, “Most companies in sectors with lower emissions, such as healthcare, retailers, and banks, have been largely unresponsive to the financial risks they face from climate change,” Ceres spokespersons bemoaned to B&E. In a benchmark fashion, by picking up the impact of hurricanes in 2005 as an example, while nearly half of S&P 100 companies reported definitely measurable impacts from these hurricanes, the losses related to ‘Katrina’ and ‘Rita’ in the third quarter of 2005 were estimated to be nearly $4.5 billion. Compellingly, top of the line companies like Bell South recorded a loss of $102 million for asset impairment and $136 million in other expenses.

But now comes the most worrisome of all the findings of the Ceres survey. Analysts forecast that the impact on investors is going to be disastrous, especially for the long term ones, as most of the companies still do not provide any kind of climate risk disclosure to their investors, clearly ignoring the investors’ right to know the environmental risks attached with the company they are investing in. Astoundingly, nearly one third of the respondents of the Ceres survey did not even allow their responses to be made public. Unless global regulators make the inclusion of such details as mandatory, and unless such clear double-speak (of hiding details of environmental risks) invites legal action, Enron could well be the most ethical firm this side of the 21st century!

Edit Bureau: Deepak Ranjan Patra

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Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative