Air Date: Week of May 13, 2005

Environmentally conscious investors are starting to use the power of their purses to force corporations and Wall Street to address the issue of climate change. Host Steve Curwood talks with Mindy Lubber, president of the organization Ceres, about efforts to use nearly $3 trillion in assets from large pension funds as a carrot and stick to prompt industry to cut back on greenhouse gas emissions.

Transcript

CURWOOD: Global warming is likely to hurt businesses if they don’t respond and adapt, more and more investors are saying. But they also point to the profits to be made in developing energy-related technologies that ward off the effects of climate disruption. That was the theme of a recent meeting of a recent meeting of investors at the United Nations, as well as the rationale behind recent announcements by Duke Energy and GE pledging to increase efforts to address global warming.

Spearheading the movement are managers of public employee pension funds that represent some three trillion dollars of investor capital. Mindy Lubber is president of Ceres--that’s a coalition of investors, corporations and environmentalists and she joins us. Mindy, your group got involved with this issue at a summit at the UN in 2003. What’s been happening since then?

LUBBER: Well, an enormous amount. When we pulled people together at the United Nations in November of 2003 and included 200 Wall Street money managers and 100 pension funds, not one of them had been thinking about, in a serious way in terms of what they do everyday, why global warming was their responsibility, as well. And since then, not only did they realize it’s time for them to act, but the pension funds have engaged with two dozen companies urging them and in many cases succeeding to change their practices on how much carbon they emit. Since then, those large pension funds have told their money managers, we want you to start understanding and assessing the risk. And since then, those treasurers have gone to Washington, asking for regulatory change and asking the SCC to require that companies disclose this risk in every legal filing. Investors are now engaged. There’s nobody companies are going to listen to more than their own owners. If the government doesn’t act, it’s the marketplace that has to act.

CURWOOD: Mindy Lubber, what are the top two or three financial risks of global climate change?

LUBBER: Let’s give some very specific examples. That’s a good question. Take the electric utility industry. Right now, there’s consideration of building by a number of countries around just the United States--a hundred new coal-fired plants. Now, those plants are the largest emitters of carbon, carbon causing global warming. If, in fact, half of those are built, if, in fact, tens of billions of dollars are put into building new coal-fired plants and a law passes in two years or three years in Congress it can cost the companies who have built the coal-fired plants either hundreds of millions of dollars to retrofit, to put new technology on those plants, or it may make billions of dollars worth of investments obsolete. Well, for an investor, investing in a company today that four years from now may lose or may have to spend hundreds of millions of dollars is just not a smart investment.

CURWOOD: What companies are most at risk of getting dropped from your group’s portfolios and which ones have the good prospects to get included?

LUBBER: Well, it’s not, it’s partially getting dropped and it’s partially just getting a knock on the door by the people who own them. A number of the pension funds who we work with, before they say to a company we’re going to get you out of our portfolio, what they say is, we’re a major owner of you, we’re a shareholder of Duke Energy, American Electric Power, Synergy, General Motors or Ford. We own a large portion of your stock and we are now telling you we want you to begin to assess the risk of your company from not addressing climate risk. And we want to plan for how you’re going to deal with it and I will tell you when large investors speak, companies listen and in many instances they act.

Last year, a group of investors filed 31 shareholder resolutions with some of the largest emitters of carbon--ChevronTexaco, American Electric Power, TXU, Southern Company. And what happened was, in the case of American Electric Power, the second largest emitter of carbon, they sat down with their investors and with a group of environmentalists over a four-month process. They dug in, they did what the investors asked. They studied the risk from carbon. They put out a study articulating what that is and they set out a plan for how they are going to bring their carbon footprint down.

Duke Energy did something similar. Synergy did something similar. The companies listen to their investors.

CURWOOD: What’s next here?

LUBBER: Well, the pension funds are quite serious about staying with this. They believe there’s a risk in their portfolios and they’re going to make sure they get that risk out and what are they going to do, they’re going to engage with 30 or 40 more companies. That’s number one. Number two, they’re going to speak a little bit more loudly to Wall Street money managers. Wall Street money managers somehow think if a problem doesn’t show up in quarterly earnings, it doesn’t exist. Pension funds are one of the largest clients of Wall Street money managers so they get to be listened to. They’re going to say when you evaluate a company for their short-term earnings, their long-term profitability, when you look at all of the risks facing those companies, we want you to factor in the risk from climate, from carbon-emitting pollutants.

CURWOOD: Wall Street’s a pretty tough nut to crack on something like this.

LUBBER: The reason why I think we’ve got a shot and it’s only a shot is because they want the business of these large pension funds. We’ve got a trillion dollars worth of assets being managed by large pension funds who are being extremely responsible, saying to those Wall Street money management firms, ‘if you want our business we want you to do the right evaluation of companies. And somehow thinking you could continue to ignore the risks from global warming in our portfolios isn’t going to cut it any more. If you want to manage our money, we want you to develop the competency for assessing climate risk and that’s the way it’s going to be.’

CURWOOD: Now, on the other side of this equation, with climate change as a need to change how we make energy, that seems to me that there’s a lot of economic opportunity in that. What are the potential investment opportunities to respond to climate change?

LUBBER: Well, as right as you are, I’m going to say it’s an understatement to say there’s a lot of opportunity. I’m going to say it’s a hundred times bigger than that. The world is changing. One of the largest problems we face that being global warming which is the envelope in which all other environmental issues fit is bringing us to a new question. Can we continue to produce energy in the same way we can? Can we continue to keep going the same direction we’ve been going and I think every major scientist has said the answer is very definitely not. That doesn’t mean we need to change our lifestyle, it doesn’t need to be negative. We just need to be conscious that we need to move to a different mix of energy not only here in the United States but around the entire world.

CURWOOD: Mindy Lubber is the president of the organization Ceres. Thanks for taking this time with me, today.

LUBBER: Thank you, Steve.

CURWOOD: Coming up: how to help consumers navigate the waters of organic marketing at the seafood counter. Keep listening to Living on Earth.

 

Links

Ceres