Global Investors Going Green

February 04, 2008

The increasing consumer demand for cleaner vehicles and green products has turned smart investors into environmental activists. This week, an influential international investing group has asked some of the world’s biggest companies to disclose their greenhouse emissions and report on their strategy for climate change.

The Carbon Disclosure Project (CDP) is composed of 385 major investors (Merrill Lynch, Banco do Brazil, Mitsubishi UFJ, Barclays, and HSBC, among others) with assets of $57 trillion. The CDP’s request for environmental reports focuses on several factors that may affect the value of a company: total greenhouse gas emissions; regulatory risk/opportunity (e.g. limits on emissions; physical risk/opportunity (e.g. changes in weather patterns impacting operations); consumer sentiment risk/opportunity (e.g. reputation); and, steps taken to manage and reduce emissions.

The CDP isn’t alone in asking for environmental accountability. Last week, the coal power industry got a wake-up call from investors, who want assurances that plants will be economically viable when the feds start capping carbon dioxide emissions. Multi-national food companies -- including Nestle, Coca-Cola, PepsiCo., Kraft, and ConAgra Foods – have also been under the gun, and have been publishing regular reports on their efforts to assess and reduce their environmental impact. To reduce carbon dioxide production all along the supply chain, these companies need to find ways to make their production, packaging, and transportation operations more efficient.

Another industry that’s feeling heat from investors is car manufacturers, which represent the fastest growing source of greenhouse emissions. Shareholder groups have asked car makers to forecast the impact of reducing greenhouse emissions in both vehicles and production facilities.

It looks like the day has finally come when green investing is more than just a feel-good trend, and has become a critical measure of how companies will compete in a global, environmentally-aware marketplace.