Risky Business Ups The Ante On Climate Change
When Tom Steyer and Robert Rubin joined me on the stage in January for Ceres’ 6th Investor Summit on Climate Risk at the United Nations to discuss the economic impacts of climate change, it was immediately clear that I was in the company of two businessmen who truly understood the essential role that financial leaders must play in the global transition to a low-carbon economy.
Today’s report from Risky Business – the project chaired by Steyer, former U.S. Treasury Secretary Hank Paulson, and former NYC Mayor Michael Bloomberg – puts actual numbers on the financial risk the United States faces from unmitigated climate change. Among those: an extra $2 to $3.5 billion in coastal damages every year along the East Coast and Gulf of Mexico due to higher sea levels, storm surges and hurricanes; and projected drops in agriculture yields of more than 10 percent in the Midwest and Southeast in the next five to 25 years due to increased drought and flooding.
The fact that this group has come together to release such an important report is yet another indication that the financial community is taking climate change seriously. But the Risky Business project and today’s report makes it more clear than ever that there are two big elephants in the room: policymakers in the U.S. and around the world who are lagging in enacting tougher policies to reduce greenhouse gases; and investors who remain fixated with short-term profits at the expense of sustainable, long-term business strategies that will protect the global environment and economy.
The reality is that policymakers have had more than a decade to get it right, and have failed to do so. Politicians have consistently argued that we must choose between a stable environment or a stable economy. We know this argument is fundamentally flawed, and that continuing forward under this assumption will destroy our planet and will result in economic devastation worse than anything we’ve ever seen before.
Global policymakers do, however, still have a chance to put us on the right path. They can do so by reaching a climate deal and putting a price on carbon emissions during negotiations at the UNFCCC Conference in 2015. And policymakers can help catalyze the global transition to a low-carbon economy by adopting climate and energy policies that send clear market signals and free up capital that can be invested in clean energy. Key among these policies is supporting EPA’s proposed carbon limits on U.S. power plants.
The term ‘climate risk’ first entered the financial lexicon in 2003, and business support for addressing these risks has grown rapidly since. A decade ago, Ceres’ Investor Network on Climate Risk (INCR) was formed with just 10 institutional investors dedicated to addressing the financial risks and investment opportunities from climate change. Just this month, INCR welcomed its 110th member. INCR’s current members collectively manage $13 trillion in assets.
This year, investors have filed more than 140 climate-related shareholder resolutions with U.S. companies and launched a coordinated effort to spur 45 of the world’s largest fossil fuel companies to address the financial risks posed by climate change.
These actions are encouraging, but it’s clear investors should be doing more. One critical step is ending ‘the tyranny of short-termism,’ a practice that drives far too many CEOs, investors and analysts to focus on quarterly returns at the expense of longer-term business practices that have lower carbon footprints. Investors should be rewarding companies that are building long-term value with products and services that reduce – not worsen – climate impacts. Ceres and its INCR members look forward to working with Risky Business to get more financial leaders to shift this paradigm.
Companies are also pushing harder on climate change, and are reaping the economic rewards in doing so. In fact, through their energy efficiency, renewable energy and greenhouse gas reduction efforts, the 53 Fortune 100 companies reporting on climate and energy targets have collectively saved $1.1 billion annually and decreased their annual CO2 emissions by approximately 58.3 million metric tons – the equivalent of retiring 15 coal-fired power plants.
When we encounter policymakers who argue that it’s too expensive to act on climate change, we need to push back – because five million people already die each year from air pollution, hunger and disease as a result of climate change and excessive greenhouse gas emissions. And hundreds of millions of people will be displaced by the end of this century due to the impacts of climate change, increasing the risk of violent conflict and wiping trillions of dollars off the global economy.
The reality is that the cost of inaction far outweighs any short-term investment. Maybe that’s why more than 700 companies are calling on policymakers to act. If America's largest companies and investors are up to the challenge, our elected officials should also be stepping up to the plate not standing in the way.