Climate Change
Climate Change Business Drivers
- Their development and current status
A report by Don
Reed CFA and Rick Humphries - Ecos Corporation 2004.
Keeping up to speed with global
climate change trends and their business implications
can be challenging. The issue typically only makes
the headlines of major newspapers when there are
either new scientific or public policy developments.
That's nowhere near enough information for those
of us focused on understanding how the issue is
changing the operating environment and business
strategy of companies.
At the other end of the spectrum are those dedicated
full-time to understanding the ins and outs of the
issue down to the specific provisions of the Kyoto
Protocol and who's arguing for which interpretation
of each provision. The level of detail can be mind
numbing.
Ecos has written this briefing paper for those
who want an update on the key ways that climate
change and the related regulatory and market actions
are shaping the business environment. It is made
up of briefings on key climate change topics, each
no more than a page and a half. The individual elements
can stand alone, or it can be used as an overall
update.
Table of Contents:
Part 1 - Introduction
1.2
The Development of Market Forces
Part 2 - The "Next Ozone Hole" 1985
2.1
Climate Science
2.2
Non-Government Organization (NGO) Action
Part 3 - Emerging Corporate Leadership - 1995
3.1
Kyoto Protocol Implementation Local Policies
3.2
Corporate Leadership and Action
3.3
Carbon Markets
Part 4 - Market Pressure Mounts - 2000
4.1
Equity Markets
4.2
Proxy Results
Part 5 - The Carbon Constrained Economy Emerges
- 2010?
5.1
Insurance Premiums
5.2
Legal Liabilities
Link to our Climate Drivers Slide Show:
http://www.ecoscorporation.com.au/think/slideshow.htm
Look Ma, No Protocol
Don Reed CFA and
Rick Humphries share their take on the recent Kyoto
negotiations in Milan.
You could almost hear the sign
of relief from those opposed to the Kyoto Protocol
following Russia’s failure to ratify the international
treaty to address climate change. No doubt those
in the business community who are sceptical or in
denial about global warming will assume that the
Milan meeting is a turning point in the debate and
that the pendulum has swung in their direction.
Without Kyoto there is no framework for action,
no critical mass for change right? Wrong.
The Kyoto Protocol has been the singular focal point
in the global warming debate. It has been the arena
where the recalcitrant US and Australian administrations
have slugged it out with EU and others over the
need for an international legal regime to tackle
greenhouse gas emissions. Civil society has focused
a huge amount of energy around the international
negotiations. For the media it’s a one-stop shop
that allows it to cover the issue without understanding
the debate.
Don’t get me wrong. Getting the right international
policy on global warming is key, but it would be
a gross error of judgment for the corporate sector
to now assume that no agreement means no pressure
on climate change. An array of powerful drivers
are spurring corporation action on climate change
and it is these forces which businesses should pay
immediate attention or fail to do so at their peril.
The science just keeps rolling in, showing record
temperatures around the world and increasing certainty
that the change is caused by the hand of man. There
are scientists who say, “we can’t be certain,” but
they’re sounding increasingly like the tobacco industry
scientists who clung to the claim that there was
no proof that cigarettes led to lung cancer, well
beyond the turning of the tide.
Not long ago, global warming looked like other international
environmental issues. The driving force was a group
of committed scientists analyzing the issues from
new vantage points and a cadre of civil society
groups of various perspectives campaigning to get
governments and the international establishment
to act. This first wave of pressure on climate change
led to the Kyoto Protocol and continues to push
for national and international action to sign the
treaty and implement it with effective national
and regional policies.
A second wave of forces has already swept the climate
change landscape, changing the operating environment
for many companies even without the global adoption
of Kyoto. This wave added the forces of the early
adopters at both the national and corporate level.
On the government side, the EU and its members have
led the way with policies including carbon taxes,
capping carbon emissions and creating tradeable
permits as well as the markets to trade them. Even
before these governments acted, a number of companies
exercised leadership and reduced their greenhouse
gas emissions whereby creating carbon credits to
sell to others who couldn’t reduce their emissions
as cheaply. The forces have taken on a strong market
form with voluntary reductions and trading credits
setting the tone.
In the third wave, market aspects are broadened
and deepened. Others in the financial service realm
have begun to take note and acted accordingly while
the civil society groups have incorporated market
aspects into their campaigns. Investors have filed
proxy resolutions requiring companies to discuss
their strategy for dealing with the competitive
landscape changed by global warming. Lo and behold,
these resolutions start getting support from one
quarter of US institutional investors, far beyond
the numbers of religious and other socially responsible
investors. Real hard-nosed investors are concluding
companies have real value at stake on climate change
and that means the investors have a fiduciary responsibility
to understand what their holdings are doing to mitigate
those risks and capture the opportunities. Some
of this reflects existing policy changes and the
anticipation of more of the same, but some of it
is the market saying “don’t ignore this. There’s
too much money on the table.”
The fourth wave adds other financial actors to the
driving forces. Insurance premiums look set to rise
due to climate change and may even begin to reflect
an industry or country’s positioning on global warming.
Munich Re, the world’s largest reinsurer, just issued
a warning over escalating insurance costs resulting
from the increased frequency of natural catastrophes.
They’ve been on this beat for a while.
Add to this the potential for litigation. We are
witnessing the first exploratory forays by the legal
profession into the climate change class action
arena. While at this stage the obstacles to mounting
a class action against a particular corporate seem
insurmountable, history suggests that it would be
a brave commentator that would dismiss any future
possibility of legal action against a significant,
high profile greenhouse gas emitter.
Many global companies such as DuPont, Toyota and
BP have recognized they have value at stake on climate
change and are pursuing business strategies to capture
some of that value. From a business perspective
the smart money is analyzing the business implications
of global warming from a very broad perspective
including identifying where shareholder value can
be created through energy savings and new products,
technologies and services in addition to the risks.
The Kyoto Protocol is not dead and buried and it
is certainly not the only game in town. A much broader
pattern of forces is at work putting corporate value
at stake to climate change and it will continue
to grow whether Kyoto is ratified or not.
At Home ...
Our View On Climate Change
Climate change is already altering the way we live and our lives will be altered to a much greater degree in coming years by potentially catastrophic impacts as the climate changes at a rate faster than at any time in known history. June 2001.
Climate And Mobility: An Optimistic 2030 Scenario
The following is an exercise in scenario writing and is is intended to promote debate on the potential global impact of mobility on climate change. June 2001.
CarbonMarket Newsletters
This newsletter provided weekly updates on the latest global developments in carbon trading, international climate change negotiations and corporate action to reduce greenhouse gas emissions. This area is an archive of those newsletters. 1999 - March 2001.
In the Media ...
Blind Targets
On the 14th July, in Germany, the world will gather to hear an appeal from the US for a return to voluntary agreements on reducing greenhouse emissions. Published in The Age. July 2001.
Hot Topic
The US will be stonewalling again at this years climate change summit. But it may be left behind as big business looks at the benefits of emission controls. Published in The Sydney Morning Herald. July 2001.
A Tiger by the Tail
Within 12 months President Bush, Vice President Cheney and all their backers in the oil industry will be begging to revive the Kyoto protocol on climate change, the accord Mr. Bush yanked America out of after taking office. Published in the New York Times. June 2001.
The Business of Saving the Planet
In a series of forums on contemporary issues, four experts debate the best way to protect the environment. Published in the Australian Financial Review. January 2001.
2000 Environmental Leadership Award - Paul Tebo
You've probably never heard of him. But Environmental Leadership Award winner Paul Tebo, Hero of Zero, is stirring up a silent environmental and social revolution in one of America's largest corporations, DuPont. Published in Tomorrow Magazine. November-December 2000.
2000 Environmental Leadership Award - Runner Up Bill Ford
Tomorrow Magazine's Environmental Leadership Award runner-up is a man with a legacy. And ambitious plans for his company Ford Motor Company. Meet the Model Sustainabili-T Crusader, Bill Ford. Published in Tomorrow Magazine. November-December 2000.
Carbon Trading - The Sky's The Limit
Greenhouse gas trading is coming on strong and entrepreneurs are eyeing big profits. Published in Tomorrow Magazine. May-June 2000.
Business Slowly Seeing Greenhouse Light
Business resistance to address climate change is starting to ebb, with major industries and companies beginning to focus on the benefits they can derive from measures to address global warming and the possible new market opportunities. Published in the Australian Financial Review. November 1999.
Climate Change in a Business World
Until just a few months ago, the message coming from business was obfuscation on climate change - the science was unproven, reducing greenhouse emissions could be ruinous to the economy, Australia's trade competitiveness could be damaged by international agreements. Suddenly the tide has turned and industry is beginning to call on the Government to reward it for early action to reduce greenhouse pollution. What happened? Published in The Age. March 1999.
1997 Environmental Leadership Award - Paul Gilding
The climate is changing, says Greenpeace's most successful alumnus and the 1997 Environmental Leadership Award winner, Paul Gilding. Published in Tomorrow Magazine. September-October 1997.
