Investors Demand Info on Carbon Footprints

Investors are paying more attention to "climate risk," that is, the liability a company faces if the government slaps a cap on the amount of carbon dioxide companies can emit. Carbon dioxide is a major culprit in global warming.

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All right. Here's one more thing to think about as your stock portfolio slowly makes its way into the sewer system. Some of the country's biggest investors are starting to look more skeptically at projects that have a heavy carbon footprint. NPR's Christopher Joyce reports on climate risk.

CHRISTOPHER JOYCE: Investors make billions of dollars from financing energy projects. They've been a reliable source of profit. So when a bank like J.P. Morgan Chase recently decided that investing in power plants that burn coal might be getting risky, there was a reason. Bank Vice President Eric Fornell says it's the taint of carbon dioxide.

Mr. ERIC FORNELL (Vice President, J.P. Morgan Chase Bank): It is very likely that Congress will impose some type of system that will raise the cost for those who emit CO2, and we think that that's a significant change in attitude that's taken place in the last two years.

JOYCE: Congress is debating about a dozen bills that would slap some kind of limit on carbon dioxide, the biggest greenhouse gas. And that's one of the reasons J.P. Morgan and other big banks now say they want to know more about how much carbon a new project will emit before they invest in it. What they're trying to get a handle on is climate risk. Several hundred investors met recently in New York City to talk about how to lower their climate risk. The meeting was sponsored by the United Nations Foundation and CERES, the coalition of investors and environmental groups led by Mindy Lubber.

Ms. MINDY LUBBER (CERES): Companies are at risk if they're not looking at what their climate change impact is; they'll get sued or their reputation could easily be harmed, or they'll find huge additional costs, or for that matter unfortunately be in the area where there are huge physical impacts that will cost them billions of dollars.

JOYCE: Physical impacts, she says, like Katrina-sized hurricanes. Now it's CERES' business to ring alarms about climate change. And in fact Congress is still a long way from putting a price on carbon emissions, so this risk isn't imminent. But people who invest are paying attention. Nancy Kopp, for example; she's treasurer of the state of Maryland, which has some $39 billion worth of pension funds to invest.

Ms. NANCY KOPP (Treasurer, State of Maryland): We're gonna continue to invest in companies. What we wanna know is whether they're aware of all of the potential costs and benefits that are facing them, and therefore whether it's priced into our investment.

JOYCE: Costs created by bigger storms, or the availability of water supplies or other consequences of climate change that scientists expect to see. Kopp is one of several state treasurers who along with the CERES coalition have filed a petition with the Securities and Exchange Commission in Washington. They want the SEC to make companies disclose more about their carbon emissions. The SEC so far doesn't agree, and nor do many companies. Some companies do reveal their carbon footprint voluntarily though, such as Pacific Gas and Electric, the California utility. They're also trying to shrink their footprint by encouraging customers to use less electricity. As CEO Peter Darbee points out, that's not just an act of goodwill.

Mr. PETER DARBEE (CEO, Pacific Gas and Electric): We may face some experience 30 or 40 years down the road or maybe less, where people conclude that CO2 was a pollutant and those companies that don't get with the program could very well be held accountable at a later date and face billions of dollars of lawsuits, as has been the case, for example, with asbestos.

JOYCE: Despite the bad rep carbon is getting, investors are still putting plenty of money into carbon heavy projects like coal and gas-fired powered plants. They do make money, and so far alternative energy accounts for only 2% of world energy supply. But green energy projects are growing. Wind power in the U.S., for example, increased by 45% last year, faster than ever. And an economy analysis just out from the McKenzie Global Institute, a green-leaning consulting firm, says investing in ways to save energy could also be a money maker. The world could cut it's energy appetite by half, McKenzie says, if investors put $170 billion into the right mix of projects. That may sound like a lot of money, but the sponsors of the New York meeting claimed their audience controls some $10 trillion in capital. They just have to convince those investors that green energy projects aren't a throw of the dice.

Christopher Joyce, NPR News.

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