Tuesday, September 25, 2007

Climate Change and Industrial Restructuring

I am skeptical that concerns over climate change are leading to widespread industrial restructuring but here are the results from a "investor survey". Not particularly convincin but does shed some light on the behavior of large multnationals (a topic we are interested in researching).

Climate Change Spurs Industry Restructuring - Survey [Planet Ark]

OSLO - Climate change is spurring a "worldwide economic and industrial restructuring" as more and more of the world's largest companies seek to confront global warming, an investor survey said on Monday.

Even so, some big firms were still doing far too little to identify risks and opportunities from climate change, according to the Carbon Disclosure Project (CDP), representing 315 institutional investors managing US$41 trillion in assets.

A record 77 percent of the world's top 500 firms, rated by market capitalisation in the FT500, answered a request for information about their responses to global warming, up from 72 percent in 2006, it said.

"One trend above all is becoming increasingly clear: climate change and the various regulatory, policy and business responses to it are driving what amounts to a worldwide economic and industrial restructuring," a 92-page survey said.

"That restructuring has already begun to redefine the very basis of competitive advantage and financial performance for both companies and their investors," it said.

The project, in its fifth year, seeks to guide investors by getting companies to give details of their greenhouse gases and strategies for everything from energy efficiency to recycling.

"Seventy-six percent of responding companies reported implementing a greenhouse gas emissions reduction initiative", up from 48 percent in the previous FT500 survey, it said.

UN climate experts say that warming, blamed mainly on greenhouse gases emitted by burning fossil fuels, will bring more droughts, heatwaves, floods, rising seas.


In a series of examples of change, the survey said brewer Anheuser-Busch was trying to develop crops resistant to extreme weather. Oil group Total aimed to cut flaring of associated gas 50 percent by 2012 compared to 2005.

Alcoa had increased its purchase of recycled aluminum by 20 percent in 2006 while a range of carmakers was working to develop more hybrid electric-petrol vehicles.

"Investors are looking for the next big thing. If the company is part of the problem on climate change it hasn't a clear run at the markets of the 21st century," Paul Dickinson, chief exective officer of the CDP, told Reuters.

The CDP sent requests in total to 2,400 companies around the world and got 1,300 responses. In the FT500, Europe-based companies led in response rates. US-based firms lagged and none of seven Chinese companies replied.

The CDP also published a first index of firms with what it said were best carbon disclosure practices, including mining group Rio Tinto, energy firm Iberdrola, computer firm Hewlett Packard or Westpac Banking.

Still, it said too many firms failed to reply, such as Apple Computer, Bank of China, Berkshire Hathaway, Gazprom or Philips Electronics.

"We find it absolutely incomprehensible why a company will fail to respond to a legitimate request from its shareholders," said Dickinson. "Have they got something to hide? Do they think they operate in a complete vacuum?"

In a linked survey of top US companies in the SP500, response rates were 56 percent -- a majority for a first time and up from 47 percent a year earlier. The United States is outside the UN's Kyoto Protocol for curbing emissions.

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