Climate and the Bottom Line
Air Date: Week of October 25, 2013
The Securities and Exchange Commission requires that publicly traded companies file annual reports that disclose potential risks to the company’s bottom line. Yet more than 70% of businesses fail to mention the possible effects of climate change. Lawrence Taylor, a citizen researcher who compiled the data, lays out the details to host Steve Curwood.
CURWOOD: It’s Living on Earth, I’m Steve Curwood. When Superstorm Sandy hit, Wall Street shut down as lower Manhattan was flooded, and billions of dollars of value was lost in the fires and floods related to the storm. But comparatively few businesses tell their investors the risks that climate disruption poses for their enterprises.
In fact, according to Lawrence Taylor, more than 70 percent of the required annual reports of publicly traded companies ignore such climate risks. Taylor is a retired data base developer and now an indefatigable citizen researcher. He combed through all the annual reports listed on the major stock exchanges to see how well they were informing their shareholders of these risks, not just the prospects of physical danger but also the potential financial impacts of climate protection laws in the future.
TAYLOR: The bottom line is there's cost of the laws if they had put additional controls on the things they did, or if it shifted the prices and therefore their product would be more expensive. Separate from the cost of the laws are the possible physical impacts, and think how oil wells in the Gulf of Mexico, if a hurricane comes and clobbers it hard, that’s a physical impact. So there’s two different things, cost of laws, and possible physical impacts that would cost them, them as a company.
CURWOOD: Now tell me what you found overall in your analysis. Of the percentage of U.S. companies that acknowledge climate change and their assessments, what exactly did they say?
TAYLOR: It varied. There’s a little over 3,900 companies and their annual reports that we went through...I went through. And about 762 are looking at the cost of new laws that might take place because if there are climate change laws, a carbon tax or something like that, or what EPA is trying to put into place, then those particular companies would have some costs affected. Think of a utility that might have to put additional pollution controls on. The others, even less, 466 of this 3,900 talked about possible impacts, and they ranged all over from property management companies to you name it, who have recognized that there may be some impact.
CURWOOD: So, Lawrence, let’s talk about these individual sectors of the economy. What about the fossil fuel industry? How often do the oil, gas and coal companies mention climate change?
TAYLOR: First of all, they are about six percent of all the businesses, and 88 percent of that six percent mention climate change, 84 of them mention the cost of laws, but only 22 percent of them mention possible physical impacts, and when you stop to think about it, some of these with offshore oil wells are going to have physical impacts. Some of them are kind of fuzzy, for example, they’ll use a word like - this is paraphrasing it - some scientists think there might be climate change being impacted by carbon, as opposed to 97 percent of the scientists...that kind of fuzziness.
CURWOOD: To what extent do these companies talk about the carbon bubble, that is this notion that regulation will likely choke off the extraction of all the various fossil fuel reserves that are out there at some point or another?
TAYLOR: I didn’t see any reference to that in their comments, nor even the more politicized war on coal or any of those kinds of things. I didn’t see any mentions of that kind of discussion in the annual reports.
CURWOOD: Lawrence, when you went through this, what sectors of our economy did best in making the assessment of climate risks?
TAYLOR: In terms of the physical impacts, agriculture is high, mining is 50 percent, for example, many utillities, about 42 percent of the utilities have that. Insurance, which is a broad category, does very high, and particularly insurance that does property, and casualty insurance. They’re acknowledging climate change is real.
CURWOOD: Why do you suppose climate change is generally ignored by so many companies?
TAYLOR: That’s a good question, and the truth is I can only speculate, and I came up with four reasons: maybe they haven’t even considered climate change, I mean, the economy in the last five, six years has brought a lot of challenges to companies, and they’ve just had a lot of stuff on their plate, maybe they haven’t even been thinking about it.
Another possibility is maybe they accept the reality of climate change, but they don’t think climate change is a financial threat to their business. In other words, to be in an annual report, you’ve really got to be dealing with the economics of the business. They may accept the science, but they don’t think they’re going to be impacted. I’m sure there’s a few that would like to believe the propaganda of climate deniers, they just don’t want to look at the science.
And finally, I think a few might be concerned about possible lawsuits if they admit climate change is real. Some carbon companies have actually been sued and the lawsuits have been thrown out to my knowledge, but they’ve been sued admitting that if climate change is real, and they might be contributing to it, then they might have a responsibility - that was the basis of the lawsuits. But I suspect that some of them are really concerned that if they’re really responsible they might have some financial things so they would rather ignore putting climate change in the report at all.
CURWOOD: How long did it take you to do all this work?
TAYLOR: I’m up to about 2,000 hours. And it’s a continuing project. I’ll continue to do it until I can’t any more and pass it on to somebody else.
CURWOOD: Why do you do this? What’s your motivation?
TAYLOR: Well, I can give you big generalities, but the bottom line is, I got to thinking about my children and my grandchildren, and the kind of world they will be experiencing if you accept what the vast majority of scientists are saying. And I said, “How could I not do this?”
CURWOOD: Lawrence Taylor is a citizen researcher who compiled data of the climate risk disclosure of all the companies listed on major stock exchanges here in the U.S. Thanks so much.
TAYLOR: Thank you.
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