Are small companies telling investors about climate risks and
opportunities that affect their businesses? A new study examined
364 companies to find out.
Pax World Investments and Clean Air-Cool Planet collaborated on
Risk and Opportunity in a Low-Carbon Business Climate,
which they are publicly releasing on January 5. Pax World, based in
Portsmouth, N.H., offers mutual funds and exchange-traded funds
focused on sustainable investing. Clean Air-Cool Planet is a
nonprofit organization dedicated to finding and promoting solutions
to global warming.
Large companies have been steadily increasing their disclosure
of the potential impacts of climate change on their businesses, in
part because of pressure from shareholders and environmental
groups. But small companies have tended to escape attention, the
report notes. However, "inattention to climate change and the risks
and opportunities that come with it is likely to become a more
serious liability for small companies," says the study.
Although climate change legislation has stalled in Congress, the
U.S. Environmental Protection Agency has moved ahead with
aimed at limiting emissions of carbon dioxide and other
heat-trapping greenhouse gases. On December 7, 2009, EPA
Administrator Lisa Jackson signed a final action under the Clean
Air Act, finding that six greenhouse gases constitute a threat to
public health and welfare, and that the combined emissions from
motor vehicles cause and contribute to the climate change problem.
The EPA is requiring many companies to start reporting greenhouse
gas emissions this year.
"Small companies will have to pay attention to this, too," said
Julie Gorte, senior vice president for sustainable investing at Pax
World Management, in a recent interview. She added investors are
becoming more aware of climate change and want information on what
efforts companies are making to lessen their risk or increase their
opportunities from it.
The study notes that reporting on any of several types of
climate-related risk is generally inadequate among smaller
companies. What reporting is done, it adds, is generally limited to
only regulatory risk and ignores other potential ones, such as
physical, business interruption or supply chain risks.
The companies in the study, written and researched by Helen Mou,
represented the top 50% of the market capitalization of the Russell
2000 as of June 5, 2009. The 364 companies were in 10 economic
sectors: utilities, materials, energy, industrials,
telecommunications, consumer staples, consumer discretionary,
information technology, financials and health care.
The four sectors that generally have the greatest impact on the
environment and climate change--utilities, materials, energy, and
industrials--ranked highest overall on their climate change
disclosure, based on eight indicators. The financials, information
technology, and health care sectors rank in the bottom three, with
health care consistently at the bottom.
The report did not provide a ranking of individual companies,
but it did name many companies that stood out. Among them:
• ITC Holdings Corp.
, a utility, disclosed that an electric transmission infrastructure
project it's building will transport wind energy from other
companies through the Midwest and Great Plains.
• Tetra Tech Inc.
, an industrial company, provides environmental design and
consulting services in areas such as LEED certification,
alternative energy, carbon management and greenhouse gas inventory
• JetBlue Airways Corp.
, created carbon offset programs to make it easier for passengers
to reduce their individual climate impact. Jet Blue was one of the
very few companies to attain all eight climate risk indicators that
were studied, the report notes.
• MasTec Inc.
, which builds and upgrades infrastructure supporting the
telecommunications, utilities, and energy industries, stand out for
providing useful components of technologies and services that can
contribute to carbon reduction.
• In the consumer staples sector,
Green Mountain Coffee Roasters Inc.
was the only company to report carbon emissions and offer a
climate-friendly product, (sustainable and fair trade coffee in
• Timberland Co.
, an outdoor clothing company that has been at the cutting edge of
corporate social responsibility and climate risk reporting among
smaller companies, stood out for its LEED-certified office
buildings, carbon neutrality commitment (for 2010), strong
management structure, and willingness to work with regional
• Out of 25 REITs researched, only four owned LEED-certified
properties. They include
American Campus Communities Inc.
Highwoods Properties Inc.
Corporate Office Properties Trust
Bio-Med Realty Trust Inc.
The report makes these recommendations: 1. Industry trade groups
should undertake an effort to develop reporting guidelines for
smaller companies. 2. Asset managers and investment counselors
should make a practice of noting the absence of climate-risk
reporting, thus creating an enhanced incentive for smaller
companies to report--and pointing out the potential investment
advantages of acting on climate change risks and reporting that
action. 3. Investment organizations and businesses and groups
working on sustainability or climate issues should offer guidance
to smaller companies in order to promote reporting standards,
efficiency and effectiveness.
Financial Advisor magazine reaches 90,000 financial planners and
investment advisors through its print publication and its
. It also publishes
, for advisors interested in socially responsible investing, and
, for advisors targeting the ultra high-net-worth market.
Copyright © 2010 Charter Financial Publishing Network Inc. All Rights Reserved.