How Corporate America Is Addressing Climate Change Risks

More than 200 of the biggest global companies report almost a trillion dollars at risk from climate impacts, and many of those effects are likely to hit within five years.

California’s PG&E — one of the nation's largest utilities — filed for bankruptcy protection after the company faced billions in liabilities for its role in two years of massive Northern California wildfires. The company is the nation’s first victim in what’s being called corporate climate change.

For years, corporations have covered up the impacts of climate change. Now, many are realizing transparency is better for their bottom line.

Ready to help companies become aware of environmental urgency are groups like CDP, an international nonprofit that encourages businesses, governments and investors to disclose the risks — and opportunities — that climate change, deforestation and water scarcity could create for them.

So why should companies publicly disclose their corporate carbon footprint?

“Disclosing this information willingly to your investors and your lenders and your customers signals something in and of itself. It is no longer a reasonable choice not to be transparent about this,” Bruno Sarda, president of CDP North America, tells Here & Now’s Robin Young.

“Over 7,000 of the world's largest companies are disclosing,” Sarda says. “525 of the world's largest investors have made it clear that they want this information. Any executive who says, 'I don't want to do it.' The first question you really want to ask them is, 'What are you hiding?' ”

He says that when companies look at two broad risk categories — physical and transition risks — they can better inform themselves, investors and customers of climate-related problems that could impact the business down the road.

But recent environmental policy and climate change setbacks in the U.S. have made the CDP’s job harder, Sarda says, specifically the Trump administration’s move to withdraw from the Paris climate agreement.

“The science is clear. The facts are here,” he says, “This is not a matter of opinion and this kind of obfuscation and denial is unproductive and frankly, it's bad management for [the U.S.].”

Spurred by the U.S. government’s policy rollbacks on climate change, Sarda says many investors and companies have been motivated to “step up” and commit their businesses to the goals outlined in the Paris Climate Agreement.

“There are all kinds of, if you will, shimmers of light and great stories of proactive action and leadership in all kinds of areas from companies and investors in large part because of government and action certainly in the United States,” he says.

On companies getting serious about climate change

“It's been evolving so not only are they taking this seriously, but we're definitely seeing a sophistication in how they are caring. Especially since last year, [there's been] a great interest in, regardless of how these companies are impacting the environment and causing climate change, what will a changing climate cause their businesses, and also incorporating their supply chain, to look at, if you will, their supply risk and clearly the numbers are big and they're just the tip of the iceberg.

On why companies are looking to be transparent about their carbon footprint

“They really want these organizations to get pretty granular in terms of not just, 'We have a big carbon footprint,' but through the CDP disclosure, it's saying where, it's saying what are their means of production, what is the carbon intensity of their various operations both at an operational and functional level, but also geographically, so where are these intensities? How could they be affected? For example, by changing regulation [or] for example, for price on carbon. And actually, many organizations are acknowledging that even a modest price on carbon could significantly affect their financial performance if they are very carbon intensive currently.”

On how the CDP assess climate risks

“There are two broad risk categories. Some are called physical risks and some are called transition risks. Physical risks might be like if you're Coca-Cola and you have a bottling plant on the side of a river where you need to pull a lot of water and maybe that water is not expected to be there within five or 10 years that river might run dry. Or on the contrary, if you have a plant like maybe a power plant or something else also on the side of a river and it's expected to keep flooding because of the increase in extreme weather, these are physical risks that have a very real cost that will affect financial performance. Then transition risks could be anything from new regulation that countries or states might put in place to try to regulate the externality that is, let's say, carbon pollution into the atmosphere. It could also be things like the disruption of new technologies that are coming as a result of the huge demand, for example, for renewable energy from corporate America. Or other examples, where your core business could be disrupted by a transition to a lower carbon economy for example.”

On companies providing false information about their climate impact

“At the end of the day, that's the heart of CDP's mission. What we do is we create transparency and we expose, if you will, what these companies have to say about these topics. And then both through our own analysis and insights as well as what these investors and financial companies do, they can then assess frankly whether they believe it just like any other information that an organization might report on their sales projections or anything else investors will have to decide whether they believe this information is credible. And then they can determine whether they want to own a particular company, whether they want to lend them money, whether they want to insure them, etc.”

On whether publicly traded companies should be mandated to acknowledge potential climate impacts

“CDP is very much on record saying that these are absolutely financially material data. We firmly believe it should be required. But at the same time as long as it's not, it is absolutely financially material, and we will continue to work with investors to help them make decisions as to whether or not they want to continue deploying capital into organizations that are not taking this seriously and that are not being transparent about it.”

Ashley Locke produced and edited this interview for broadcast with Todd Mundt. Serena McMahon adapted it for the web.