Firms warm up to climate change issues

Investment News dot Com
Dan Jamieson
June 16, 2006

Concerns about global warming are changing the way financial services firms do business.

But critics say the industry, in addressing greenhouse gas emissions, is caving in to pressure groups.

Even some in the environmental movement say corporate actions sometimes are just lip service.

Nevertheless, across the financial services industry, concern over climate change has moved beyond being just an environmental issue: Global warming now is seen as a key risk factor for companies.

The latest example came last Wednesday, when 27 institutional investors - managing more than $1 trillion in assets - wrote in a letter to Securities and Exchange Commission Chairman Christopher Cox that climactic change poses material financial risks to many companies in their portfolios.

While some U.S. firms reported their climate risk to shareholders, the letter states - citing commission rules governing the acknowledgement of material dangers to shareholder wealth - the majority of businesses have refused to disclose such risks.

Also this month, Lloyd's of London said insurers - which were some of the first firms to see a financial effect from global warming - still must do more to anticipate weather-related risks from climate change.

Several brokerage firms and banks have adopted investment policies that address carbon dioxide emissions, both from their own activities and from the companies and projects they cover, advise on and finance.

"The thing we have broken through [with Wall Street] on are that [environmental impacts] are financial issues as real as currency risk, interest rate risk and inflation," said Mindy Lubber, president of Ceres Inc., a Boston-based network of investment funds and public interest groups.

"Wall Street is waking up, because [environmental costs] are not being put on the taxpayer's back anymore," said Thomas Van Dyck, San Francisco-based senior consultant in the SRI Wealth Management Group of Piper Jaffray & Co. of Minneapolis.

"Those costs are ending up on balance sheets of insurance companies."