Corporate Risks | Green Energy News

July 6, 2003 – Vol.8 No.15

CORPORATE RISKS.

Public corporations are owned by shareholders that can be anyone from other large institutions to your grandmother. As they are owned by people or entities which have little control over day-to-day operations, managers of those corporations have an obligation - either legal or just as part of good business practices - to report to their investors, their owners, on the current condition of the corporation, their plans for its future, and the risks they foresee down the road.

One of the areas of risk some think corporations should report is climate change. One investor group, the Coalition of Environmentally Responsible Economies (CERES), thinks that climate change could have such a wide-ranging effect over the coming decades that public corporations will be affected financially in some manner, and that corporations should disclose those possible risks to shareholders. The group has announced completion of a report - Corporate Governance and Climate Change - that examines the climate change risk reporting of 20 well known corporations. Those 20 are also large contributors to greenhouse gas emissions either through the products they sell or in the course of their own operations.

Of the 20 only two, BP and Royal Dutch Shell, have pursued all 14 points on the CERES checklist used a basis for the report. Only 12 have included any mention of climate change at all in securities filings. Less than half have reported greenhouse gas trends within the corporation.

The checklist includes items such as internal discussion among management of emissions, reporting and inventorying of emissions, investment in technologies such as renewable energy to reduce emissions, new lower-emission product development and the possibility of legal action over climate change. Climate change may end up in court someday.

Yet there is a defense of those companies that did a poor job of reporting under the CERES criteria. Climate change is an inexact science. We know that something will happen, but not exactly when and where. Thus if the science of climate change is inexact, the science or profession of determining how climate change will affect an individual company is even more inexact.

Eventually, reports like this from CERES might give corporations a better idea of what to look for in determining the financial risks of climate change. But for now climate change should at least be on the radar screens of all publicly traded organizations. Visit CERES at http://www.ceres.org/ .