Carbon Caps Through the Backdoor

WSJ discusses the role of NAIC (National Association of Insurance Commissioners) - insurance regulators from 50 states - in development and enforcement of climate change-related disclosure norms. It is somewhat ideological in its take. The states have legitimate interest in climate change impacts and its cost (often paid through insurance companies). It is not very different from actions by any number of interest groups - many of them much more odious than this.

Carbon Caps Through the Backdoor

Since the beginning of the climate debate, environmental lobbies such as Ceres (a coalition of activists and investors that pressures companies to go green) have expressed particular interest in insurers. Rather than nitpick every company to adopt climate-change policies, these organizations realized it would be more efficient to target a gatekeeper. Everybody needs insurance. If insurers could be bludgeoned into requiring policyholders adopt carbon-mitigation practices as a requirement for insurance, the activists would have imposed their will widely and quickly.

CDP Backing Continues to Grow

Climate Risk Disclosure is starting to look inevitable with this level of SEC and institutional backing.

Record number of investors support CDP’s 2010 request for climate change information

The Carbon Disclosure Project (CDP) today announced its eighth annual request for information on greenhouse gas emissions and climate change strategies to over 4,500 companies globally. Companies this year will report to CDP through an upgraded system, developed with Accenture, Microsoft and SAP, that will for the first time utilize the full power of online analysis tools to drive improved carbon management.

A global, independent, not-for-profit organization, CDP is the world’s largest institutional investor collaboration working to inform the global market place on investment risk and commercial opportunity. The number of institutional investors that signed CDP’s annual request for climate change information this year has risen from 475 in 2009, to a record 534 with a combined US$64 trillion of assets under management. New signatory investors include Wells Fargo, BNY Mellon, Generali and the Industrial Bank of Korea.

CDP continues to act on investor interest in emerging markets with requests for information going to companies in the S&P/IFCI Carbon Efficient Index. This year CDP is, for the first time, writing to companies in Turkey, Peru, Morocco, Egypt and Israel as well as continuing to expand its coverage in areas such as Asia, Poland, Chile and Mexico.

CDP gives companies the tools they need to identify and report material risk and opportunity to their business from climate change. This is an increasingly important skill for US corporations to master, following the recent publication of climate change risk disclosure guidance by the Securities and Exchange Commission (SEC).

Washpost: SEC to require disclosure of climate change risks

Yet another technical hurdle has been crossed with this SEC resolution. It will make climate change consideration a norm, a concern for the shareholders, and reduction a responsibility of the management.

Washpost: SEC to require disclosure of climate change risks

The commission, in a 3 to 2 vote, decided to require that companies disclose in their public filings the impact of climate change on their businesses -- from new regulations or legislation they may face domestically or abroad to potential changes in economic trends or physical risks to a company.

Schapiro said companies already must disclose anything that can have a significant effect on their bottom lines. But she said the SEC's action on Wednesday was intended to provide more guidance on what might be taken into account. "The commission is not making any kind of statement regarding the facts as they relate to the topic of climate change or global warming," Schapiro said.

A number of large institutional investors had been urging the SEC to put more pressure on companies to disclose more details about the effects of climate change on their businesses.

Water Disclosure Project

Some days back I talked about the Carbon Disclosure Project. There is a new project from the same folks.

Water Disclosure Project
Carbon reporting group launches Water Disclosure Project

Having encouraged over 2,500 companies to measure and report on their carbon footprint, the Carbon Disclosure Project (CDP) will today launch a new initiative designed to repeat the trick with firms' water footprints.

The group, which is backed by 475 institutional investors, will announce that from next year it is to send questionnaires on water use to approximately 300 of the world’s largest corporations in water intensive sectors such as chemicals, consumer goods, food and beverage, mining, forestry, pharmaceuticals, power generation and semiconductor manufacturing.

Emulating the model pioneered the Carbon Disclosure Project, firms will be asked to detail their water use, water management and improvement plans, and the risk and opportunities presented by water use across their supply chains. The results will then be made available to institutional investors and summarised in an annual report to be published in late 2010.

Paul Dickinson, chief executive of the CDP said there was a strong commercial case for businesses to pay greater attention to water risks. “If climate change is the shark, then water is its teeth and it is an issue on which businesses need far greater levels of awareness and understanding," he said. "CDP Water Disclosure will raise this awareness and drive companies to take action to mitigate risks and seize opportunities."

Investors also need to be aware if businesses are exposed to risks of water shortages or disruption, according to Norges Bank Investment Management (NBIM), which is lead sponsor of CDP Water Disclosure project.

"As water becomes an increasingly constrained resource, it also becomes an investment issue," the company said in a statement. "It is vital that institutional investors have access to high quality information on how water-related risks threaten corporations, both directly and within their supply chains, in order to make better informed decisions and direct the flow of capital away from risks and towards solutions."

This is fascinating at multiple levels. Carbon was immediately followed by water. The carbon project is about reducing future problems but the water project is about today's problems. Water will be the basis for many national and sub-national conflicts. I myself was involved once in the past in campaigning against Coke bottling plant in India for its abuse of underground water. However I felt at that time and now that the effort was anti-something but not enough pro-something else. Also that the water not priced right resulting in misuse. This database will enable coordination of pricing, conservation efforts across countries, and development of new business models, services, and projects across national boundaries. At a recent meeting Arnold Schwarznegger mentioned that 20% of the California energy is spent moving water around. A reduction in water consumption will reduce the energy need as well.

Is low carbon world also a water efficient world?

Climate change disclosure & SEC

Catching up stuff...Was a little busy yesterday.

This news is somewhat dated but interesting nevertheless. This could be potentially real because big investment firms have asked for this information.

SEC says climate change disclosure a priority

The SEC plans to focus on climate change disclosure requirements once it completes working on corporate compensation disclosure proposals, said spokesman John Nester in a statement today.

“This is an area of great interest and we intend to focus on it,” he said in his statement.

His comment came in response to a letter sent last week by 41 institutional investors, urging the SEC to require corporations to disclose climate change and other environmental and social risks.

The request is from INCR - Investor Network on Climate Risk

INCR is a $7 trillion network of investors that promotes better understanding of the financial risks and opportunities posed by climate change.