Wall Street adds climate change to bottom line
The environmentally tinged takeover of TXU Corp. illustrates global warming's increased financial relevance.
from the February 27, 2007 edition
Page 2 of 3
Analysts eye carbon 'footprint'
By calculating the footprint – the amount of greenhouse gases a company pumps into the atmosphere – analysts can begin to forecast the potential risks of climate-change lawsuits and future costs of any greenhouse-gas regulations.
"It's been a slow start, but we have been pleased to see financial institutions begin to grapple with those systems," says Jennifer Layke, deputy director of climate and energy for WRI. "But this is the first time we have seen a set of investors reach out to the environmental community around the terms of a new investment deal."
Last year, the New York Stock Exchange began to educate CEOs about the issue. It sponsored a lunch with former Vice President Al Gore, who gave a slide-show version of his Oscar-winning documentary, "An Inconvenient Truth."
Investors call for carbon accounting
This year there will be a record number of shareholder resolutions asking companies about their carbon footprint.
Normally, shareholder propositions don't receive much traction in the corporate world.
But, the proposals have been receiving a significant amount of institutional support from such large shareholders as Calpers, the California public-employee pension fund. And there is increasing concern that corporate boards may have a liability if they don't start to plan for future limits on carbon emissions.
Pressure was already building on TXU to scale back its proposal to build 11 coal-fired power plants. Over the weekend, Ceres issued a report that looked at the potential carbon taxes the utility would face, assuming that Congress or the states begin to enact such charges.
"Our report made some reasonable assumptions, including that none of the costs would be grandfathered in," says Mr. Bakal. "That means 100 percent of the carbon dioxide must face a carbon tax, which we estimate could be as much as $780 million per year, perhaps for 15 years."
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