PRESS CONFERENCE ON INVESTOR SUMMIT ON CLIMATE RISK

The financial implications and economic effects of climate change were addressed at a Headquarters press conference this afternoon.

Mindy Lubbers, Executive Director of the Coalition for Environmentally Responsible Economies (CERES) moderated the discussion.  She was joined by Denise Nappier, Treasurer of the State of Connecticut, Phil Angelides, Treasurer of the State of California, and Alan Hevesi, Comptroller of the State of New York.  The press conference was sponsored by the United Nations Fund for International Partnerships (UNFIP).

The briefing was held in conjunction with the Institutional Investor Summit on Climate Risk, also held at Headquarters today, which aimed at bringing together major leaders to explore the connection between climate risk and fiduciary responsibility.  It provided a forum for those with responsibility for the preservation of endowments and pension funds to exchange views as peers, to consider the implications of climate risk for long-term asset allocation, and to share best practices for moving forward.  Among the speakers were Secretary-General Kofi Annan and former Vice-President of the United States, Al Gore.

Ms. Lubbers told correspondents a number of State Treasurers from the United States had expressed their support for a courageous 10-point action plan to address climate risk and the economy.  That code of environmental conduct, previously established by the investor-members of CERES, established a set of international corporate-reporting guidelines on environmental, economic, and social performance.

Acknowledging that the financial leaders and investors gathered today did not all agree on a perfect solution to climate risk, she said that it was significant that they were at least discussing the issue and beginning to understand its implications.  Declaring that the risk of climate change affected every portfolio, she said that all firms, especially if they wished to practice good corporate governance, had to consider long-term as well as short-term risks.

Ms. Nappier said that, when she had called for this type of summit last April, the goal had been to develop strategies for institutional investors to protect the long-term value of their portfolios, in light of the risk of climate change.  Recognizing that climate change concerned the entire planet’s future, she also maintained that it entailed specific financial risks to companies and investments.  For example, it had an impact on retirement savings.  The summit, she said, was a wake-up call for companies that were not addressing the potential liabilities associated with climate change.

Addressing the interests of many stakeholders, the action plan was simply a starting point, she said.  It was not an unyielding prescription for change.  She added that the plan focused on three principles:  the need to recognize climate risk as a threat to the economy, as well as the environment; the need for corporations to disclose information on how they are or are not addressing the risk; and the need for financial markets and analysts to be responsive in considering risks in terms of company values.  The plan also called for shareholders to be vigilant and active in influencing policy issues.  She would complement the plan by launching an investor network on climate risk, to harness the energy seen today and build on it.

Mr. Hevesi said all the work seen today had sprung from last decade’s oil spill and subsequent environmental disaster in Alaska.  Lamenting current environmental woes, such as holes in the ozone layers and melting snows on Mount Kilimanjaro, he, nevertheless, said that the potential for damage could be transformed into an opportunity, if people stayed ahead of the curve.  Calling for increased awareness of the economic effects of climate change, he said companies had to start thinking about the issue and disclosing their thoughts.  Change was possible.  After all, 20 years ago, very few people would have envisioned today’s cigarette bans.

Mr. Angelides remarked that it was obvious to everyone, except perhaps United States President George W. Bush, that environmental sustainability needed to be addressed.  Declaring that climate change would affect all sectors of the economy, he stated that corporate denial should be replaced by a process of factoring climate concerns into economic plans and developing environmentally friendly methods of work.  Calling the plan specific and the most significant action that investors had taken with respect to climate change, he stressed that companies needed to abandon the secrecy that had led to the major losses and corruption of the last three years.

Asked whether anyone on the panel had dropped business contacts with any companies because of information proving their lack of concern over climate change, Ms. Nappier responded that, many times, such information was unavailable.  When pressed by the same correspondent, who stated that Japanese auto manufactures were ahead of their United States counterparts when it came to environmentally friendly standards, she merely stressed that it was important to gain access to such information, because it was necessary for companies to adequately address the risk of climate change.

Ms. Lubbers added that already existing rules governing such disclosure practices needed to be enforced.

Mr. Angelides responded that, since United States auto manufacturers turned out good products, shareholders should use their ownership positions to push for company changes.  For its part, California had disposed of its tobacco stocks because the state’s tobacco corporations had been unwilling to change their practices.  California now screened countries and companies to ensure the promotion of practices friendly to sustainable development.

Mr. Hevesi added that divestment was the last thing one wanted to do.  Instead, it was better to stay engaged with companies and, thus, be in a position to persuade and influence change.  In short, divestment would only encourage companies to look elsewhere for customers.  Cracker Barrel, for example, had fired all of its gay and lesbian workers in the past.  If shareholders had merely divested, they never would have been able to change that policy.

Asked if she ever spoke to the people whose money she represented to see if they were wiling to accept her changing priorities on climate risk, Ms. Nappier said she had indeed consulted shareholders when filing shareholder resolutions to change resisting companies.  The resulting increased awareness of such issues in the shareholder community had been shown by the manner in which shareholders had been voting.

Pressed by a correspondent on his views on divestment, since that practice had helped to end apartheid in South Africa, Mr. Hevesi responded that in South Africa divestment had not happened immediately.  Instead, investment in firms that had not supported apartheid had been encouraged.  Acknowledging that divestment was sometimes necessary, he reiterated that, once one divested, one lost the ability to persuade companies to change.

Asked to explain the cause-effect relationship between global warming and financial industries, Mr. Hevesi said dramatic climate changes might require the automobile industry to rethink engine parts, driving methods, and fuel types.  Additionally, the melting of polar ice might lead to flooding, which would affect the housing and development industry.

Ms. Lubbers added that regulations limiting carbon emissions would have billion dollar implications on the automobile and electrical industries, among others.

According to Ms. Nappier, that failure to take global warming effects into account might lead to unforeseen capital costs for companies in the future.  Additionally, litigation costs, such as the ones experienced by tobacco companies, would probably be significant.  Furthermore, ambivalence in the United States to global warming might cause the country’s companies to lose their competitive edge in the future.

Fielding a question about interactions with the United States Securities and Exchange Commission (SEC), Ms. Nappier said she had been battling the SEC to get it to enforce and strengthen its own rules and regulations.  A petition had already been filed in that regard.  She added that, if rules about disclosure were not enforced, shareholders would not be able to make informed decisions.

Ms. Lubbers added that she would be launching a Web page today that would help coordinate the efforts of all parties to put pressure on the SEC.

Asked to elaborate on how companies could profit from addressing climate changes, Ms. Lubbers responded that serious businesspeople, who wanted to make money, realized that billion dollar changes, that might have to be instituted in the future could be avoided through proper planning.  Additional costs, related to health implications on agricultural products, might also be avoided.

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